AC-2024-LON-001976 - [2025] EWHC 2479 (Admin)

The Claimant, represented by Ben Elliott, submits that there is a good reason for the Court to extend time to pursue the judicial review claim, and that permission should be granted. Mr Elliott claims that throughout the period following the conclusion of the statutory review, the Claimant has been pursuing an alternative remedy: the complaints procedure and then the referral to the AO, as well as Alternative Dispute Resolution (“ADR”). The referral to the AO was said by Mr Elliott to be a suitable alternative remedy as the SLA indicated that matters similar to a complaint about legitimate expectation could be considered and, in any event, the alternative remedy need not be co-extensive with the issues that could be considered by the Administrative Court or the remedies available to that court, relying on R (Zahid) v University of Manchester [2017] EWHC 188 (Admin), and R (Cowl) v Plymouth City Council [2002] 1 WLR 803.

Mr Elliott contends that even though the Claimant had not explicitly indicated an intention to bring judicial review proceedings against HMRC, HMRC were on notice at all times that the decisions in question were under challenge, and that the Claimant was raising the question of legitimate expectation.

Mr Elliott acknowledged that the Claimant had not chased up the AO to see what was happening to his complaint, but contended that there was no obligation on him to do so. Mr Elliott also noted that the Claimant had suffered from ill health during this time. Mr Elliott recognised that the Claimant was thereby taking a risk that any subsequent judicial review claim might be faced with the argument that he had not acted promptly, but he submitted that there was no prejudice to HMRC nor was there any detriment to good administration. First, HMRC was always aware of the legitimate expectation point. Second, the judicial review proceedings would always have been stayed behind the appeal to the FTT as that appeal concerned not only the period covered by the legitimate expectation, but also a number of further tax years.

Mr Elliott submitted that the legitimate expectation claim was at least arguable and merited investigation at a substantive hearing. The purpose of the DOM1 procedure was for a taxpayer to seek a ruling from HMRC so as to provide them with assurance as to their domicile so that they could plan their affairs accordingly. It was not contemplated that a taxpayer would be required to submit a DOM1 every year, unless there had been a material change of circumstances, and so reliance could be placed on the DOM1 ruling for subsequent years. It was recognised, however, that the value of the ruling would diminish over time.

Mr Elliott further submitted that in addition to the fact that the DOM1 amounted to HMRC giving the Claimant a clear unambiguous and unqualified ruling as to his domicile, HMRC subsequently confirmed that this ruling was being abided by. For instance, when inquiries were opened by HMRC, they focused on remittances, and that would only arise if the Claimant was regarded as domiciled outside of the United Kingdom. In 2009, having been referred to the DOM1, HMRC accepted that they had no further enquiries in relation to the Claimant’s domicile for the tax year 2007/08. In 2009, HMRC stated that the Claimant’s son’s domicile was Israel (and not the United Kingdom) for the years under enquiry on the basis of the Claimant’s domicile.

Mr Elliott also referred to the detriment that the Claimant had suffered because he had, based on HMRC’s assurance and subsequent conduct, chosen to hold funds offshore on the basis that he could generate interest free of United Kingdom tax. Had the Claimant understood that his domicile was being questioned he would have been able to bring the funds onshore and generate higher returns. The Claimant had also incurred fees by keeping his funds offshore, and had also been deprived of the opportunity to make charitable contributions to offset tax liabilities. The evidence before the Court is that the Claimant has made substantial charitable contributions.

Mr Elliott dismissed the suggestion that the legitimate expectation could be frustrated by the fact that the FTT had found that tax was payable by the Claimant (the decision of the FTT was not being appealed): legitimate expectation was relied upon in circumstances where tax would otherwise be payable. Furthermore, there was nothing in the FTT’s decision that indicated the Claimant had not completed the DOM1 application in good faith. Whilst it was accepted that additional information could have been provided, that was not deliberately omitted by the Claimant.

HMRC were represented by Christopher Stone KC. He submitted that the Court should follow the approach of Jay J when considering the application for permission on the papers. There was no good reason to extend time and there was no arguable case to justify permission in any event. There was prejudice to HMRC as a result of the very long delay in bringing the claim. Further, Mr Stone KC submitted that had the judicial review proceedings been lodged they would have taken precedence over the FTT process and would have been dealt with some time ago.

Mr Stone KC contended that no satisfactory explanation had been provided for the very substantial delay. Indeed, there were substantial periods of time when no alternative remedy was being pursued by the Claimant: two years between the issue of the closure notices and the tier 1 complaint; three months between the response by HMRC to the tier 2 complaint and the submission to the AO; and then the 11 month period between the mediator’s email saying that the dispute was not in ADR and the letter from Farrer & Co LLP to the AO. No explanation had been provided for the inactivity.

Furthermore, Mr Stone KC submitted that the referral to the AO was not a suitable alternative remedy for the Claimant to be pursuing as the AO could not consider a complaint about legitimate expectation. This was reflected in the SLA, and also in the AO’s guidance. Case study 4 of the AO’s guidance refers to a complaint made by a taxpayer that they were entitled to recover professional costs (for accountants and lawyers) incurred after HMRC had concluded that the taxpayer had incorrectly reported whether VAT was payable on some projects that they had undertaken. HMRC had accepted on review that the taxpayer could rely on a legitimate expectation based on HMRC’s previous written advice and agreed to reimburse around £44,000 in costs. The taxpayer referred the matter to the AO on the basis that the reimbursement was far too low: over £300,000 of costs had been incurred. The AO concluded that HMRC had made a mistake in their response to the earlier complaint by the taxpayer and that additional costs should have been reimbursed. In the guidance, the AO expressly stated that:

“We have no remit to consider the merits of a claim of legitimate expectation as that is a matter for the Court. Our role was to consider whether HMRC addressed the claim for costs in a reasonable way”.

Mr Stone KC also contended that the issues raised in the judicial review were not of importance for the public at large and did not require consideration of fundamental rights. Further, that the claim for legitimate expectation was a weak one. The letter from HMRC in 2000 was not clear, unambiguous and devoid of relevant qualification, referring to R v IRC, ex parte MFK Underwriting Agents Ltd [1990] 1 WLR 1545, at 1569. In any event, it only related to the tax year in question and not subsequent years. Furthermore, to establish a legitimate expectation, the Claimant had to have placed all his cards upwards on the table when completing the DOM1 form and he had not done so. Reliance was placed on a number of findings by the FTT as to what had taken place.

For example, Mr Stone KC referred to the Claimant’s answer to question 15 in the DOM1 form, which asked the Claimant to state what periods he had spent in the United Kingdom during each of the past 10 years, to which he replied: “Majority of time in United Kingdom due to business connections”. What the Claimant did not mention, however, was that in the early 1990s, the Claimant had founded a religious community which was located in the property next to his (which he had purchased for that purpose), and of which he was the leader, and that this role took up a significant amount of his time.