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Case Study – successfully challenging a Freezing Order

This Commercial Litigation case study shows how we successfully challenged a Freezing Order from HMRC.

HMRC do, sometimes, get things wrong, and when they do, their conduct can be successfully challenged, even in the most serious of cases, as demonstrated by this case study with one of our clients.

Our client was made the subject of a Freezing Order through an application by HMRC

In 2000, our client (known here as ‘G’) was made the subject of a Freezing Order following an application against him to the High Court by HMRC. G did not receive any notice of this application, and only became aware of it when he was served with the Freezing Order, which is often the way with these things. A freezing order (or injunction) is a court order that can be obtained to restrain a party (in this case our client) from disposing of or dealing with its assets in any way, with the aim, perhaps, of removing money out of reach of the authorities, that might otherwise have to be used to pay HMRC’s Tax Assessments, as detailed below. HMRC’s evidence that was submitted to the Court alleged that G had participated in a VAT and Excise Duty Fraud involving sums of up to £21 million, and Tax Assessments (‘the Assessments’) were raised against G’s company for those amounts. Put simply, HMRC’s allegations were of the utmost seriousness.

The Freezing Order resulted in our client’s company ceasing to trade

The making of the Freezing Order and the publicity surrounding it, resulted in G’s business, a limited company trading in volume alcohol sales, losing all credibility with its customers and suppliers in its trade sector, which caused it to cease trading. The result of this was that G lost his sole source of income at a critical time when he needed to find money to: – Fund solicitors and Counsel to oppose the Tax Assessments that had been raised against the company. – Fund solicitors and Counsel to defend the High Court proceedings issued by HMRC against G as part of the Freezing Order procedure. In the event, G was able to persuade his solicitors (NDP) and barrister to act on a ‘no win no fee’ basis so that he could oppose the Tax Assessments and defend the High Court proceedings against him. HMRC vehemently opposed G at every stage of the process, in one instance failing to agree to conduct out of time Reviews of the Tax Assessments, which caused G to have to apply to the High Court in order to seek a Judicial Review of HMRC’s position. HMRC finally relented and agreed to conduct these out of time Reviews, after initially opposing G’s application for a Judicial Review. To further complicate and aggravate matters, HMRC delayed the hearing of G’s application to challenge the Tax Assessments by many months, because their appointed computer expert had been prosecuted for benefit fraud! This delayed the final hearing of G’s Appeal to the Tax Tribunal, where he was finally able to challenge the Assessment.

A Miscarriage of Justice was avoided

At the final hearing, G’s legal team were able to demonstrate that the evidence produced by  HMRC’s appointed computer expert on their behalf to the Tribunal, included ‘deliberately falsified’ documents that were relied upon against G by HMRC. As a result, the Tribunal acknowledged that had G’s legal team not successfully challenged the evidence of HMRC’s computer expert, a miscarriage of justice to G and his company would have occurred. The outcome of the case? HMRC were ordered to pay our client’s legal costs The Tax Assessments against G were successfully challenged by G and G’s legal team and overturned by G after an eleven day Tribunal hearing in July 2012. HMRC were subsequently ordered in 2013 to pay G’s legal costs, running into hundreds of thousands of pounds for the work undertaken since 2007. What’s happening now? This case demonstrates that it is possible to challenge HMRC and achieve a positive result, for, in this instance, the Freezing Order that our client was served with. As G’s solicitors, NDP are now pursuing a Damages claim against HMRC, for the financial losses suffered by G over the six year ordeal he was forced to endure. We are well used to fighting cases against HMRC and other statutory organisations. Our head of team represented and acted for HMRC for a number of years, and knows how they work, meaning e are well placed to advise clients in such situations. Our solicitors include: David Hanman, a solicitor with a Tax qualification; Stephen Chinnery who has carried a regular case load of Tax Litigation cases for many years, and Neil Davies, our Head of Team, who has historically acted for HMRC. Contact us, or call us on 0121 200 704 for an initial free of charge consultation if you find yourself in a similar position with HMRC as our client G did. The earlier you contact us, the more we can do to help.