Allpay Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 21 May 2018 |
| Neutral Citation | [2018] UKFTT 273 (TC) |
| Date | 21 May 2018 |
| Court | First-tier Tribunal (Tax Chamber) |
[2018] UKFTT 0273 (TC)
Judge Barbara Mosedale
Mr C Bradley, Counsel, appeared for the appellant
Mr B McGurk, Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Procedure – Whether HMRC required to plead an issue the burden of proof resting on appellant – Yes – Whether HMRC had pleaded the issue – No – Whether HMRC should be permitted to amend statement of case – No – As amendment unparticularised.
The FTT considered whether to allow HMRC to amend their statement of case.
Allpay provided “bill payment services” and had treated its income as exempt from VAT. HMRC ruled that the services were not exempt from VAT and issued various assessments against which Allpay appealed. As this appeal concerned a matter of Tribunal procedure it did not address whether the services were or were not exempt.
When HMRC prepared its statement of case it argued that Allpay was providing debt collection services (which are taxable) but, after the parties had exchanged statements of case, HMRC wrote to Allpay requesting that the appeal be withdrawn because it was supplying “payment services” which were exempt from VAT following the ECJ decision in the Bookit Ltd v R & C Commrs (Case C-607/14) [2016] BVC 21 and the FFT decision in Paypoint Collections Ltd [2017] TC 05888. Allpay responded that HMRC could not rely on the Bookit and Paypoint decisions because the “payment services” issue had not been included in the statement of case.
Having considered argument from each party, the FFT concluded that it would not ensure a “just outcome” to the dispute to permit HMRC to amend its statement of case. The FFT makes the point that the rules governing the exchange of statements of case are intended to avoid “trial by ambush”.
This decision confirms that each party in a dispute is expected to adhere to the Tribunal's Rules and that, when preparing a statement of case, care is needed to ensure that any point relevant to the case is explicitly addressed.
[1] On 21 January 2016, HMRC issued the appellant with a decision that its “bill payment” services were subject to VAT, and not exempt as they had been treated by the appellant in the past. That decision and various assessments were upheld on review by letter of 23 May 2016. On 17 June 2016, the appellant appealed the decision letter and assessments to this Tribunal.
[2] HMRC provided their statement of case on 6 December 2016 and the parties proceeded to exchange evidence in accordance with case management directions: lists of documents were provided by both parties and the appellant served two witness statements. HMRC chose not to rely on witness evidence, but they did ask for further and better particulars of the appellant's case. By agreement between the parties, this application was dealt with by additional evidence being inserted by the witnesses into their witness statements.
[3] On 17 November 2017, HMRC wrote to the appellant and asked whether it would withdraw its appeal on the basis of the 2016 decision by the CJEU in Bookit Ltd v R & C Commrs (Case C-607/14) [2016] BVC 21 and the application of that decision by the FTT in May 2017 in the decision in Paypoint Collections Ltd [2017] TC 05888.
[4] On 30 November 2017, the appellant replied to state that not only would it not withdraw its appeal, but it did not consider that HMRC could rely on the issue (I will refer to it as the “payments services” issue) at the root of the Bookit/Paypoint decisions because it was not pleaded in HMRC's statement of case.
[5] HMRC did not accept that the payments services issue was not pleaded or that it required pleading but (they said) “out of an abundance of caution” they applied to amend their statement of case. The application was opposed and today's hearing was called to resolve the issue. So I have to decide:
- Is the payments services question at issue in this appeal without any amendment to the statement of case being necessary; and if not
- Should I permit the amendment to the statement of case?
[6] I'll start this decision by explaining what I mean by the “payments services” issue. Both parties were agreed that, so far as this appeal was concerned, UK law was in accordance with the binding Principle VAT Directive 2006/112/EC (“PVD”) and in particular that the UK provisions on exemption for financial services reflected those contained in art 135(1)(d). Therefore, for the sake of simplicity, I will refer only to art 135(1)(d) which provided exemption from VAT for:
transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments, but excluding debt collection
[7] The appellant claimed its bill payment services were exempt under this provision. To be right, that meant that its services would have to meet two conditions and those were that
- the services would have to be transactions … concerning … payments, transfers, debts, cheques; and
- the services must not be debt collection.
[8] I refer to the question whether the appellant's services were “transactions … concerning … payments, transfers, debts, cheques …”, which was also referred to by the parties as being the question of whether the appellant's services were “prima facie” within art 135(1)(d), as the “payments services issue”. I will refer to the question whether they amounted to debt collection as the “debt collection” issue.
[9] The starting point seems to be to ask and answer the question of what is in issue in this appeal on the basis of the existing notice of appeal and statement of case, before moving onto the question of whether HMRC need to and should be allowed to amend their statement of case.
[10] HMRC's position was:
- They did not need to plead that the appellant's services were not payments services within the meaning of art 135(1)(d) because the burden of proof in this appeal was on the appellant; and
- In any event, they had pleaded it.
[11] Mr Bradley relied on the Tribunal's Rules (Tribunal Procedure (FTT) (Tax Chamber) Rules 2009/273) which provided as follows:
…
(2) A statement of case must–
- in any appeal, state the legislative provision under which the decision under appeal was made, and
- set out the respondent's position in relation to the case.
[12] He also referred me to what I had said in BPP University College of Professional Studies [2014] TC 03768, which was a case concerning the adequacy of HMRC's statement of case:
[73] There is very clear prejudice to the appellant in not knowing HMRC's case. Litigation is not to be conducted by ambush. The appellant has the right to be put in the position so that it can properly prepare its case: it needs to know HMRC's case not only before it gets to the hearing but before it prepares its witness statements and really before it prepares its list of documents.
[13] I was not referred to it but the authorities on the CPR on this say as follows:
[185] It is important to appreciate that there are two principles in play. The first is a matter of pleading. The function of pleadings is to give the party opposite sufficient notice of the case which is being made against him.
Lord Millett in Three Rivers District Council v Governor and Company of the Bank of England [2003] 2 AC 1:
The need for extensive pleadings including particulars should be reduced by the requirement that witness statements are now exchanged. … This does not mean that pleadings are now superfluous. Pleadings are still required to mark out the parameters of the case that is being advanced by each party. In particular they are still critical to identify the issues and the extent of the dispute between the parties. What is important is that the pleadings should make clear the general nature of the case of the pleader. This is true both under the old rules and the new rules.
Lord Woolf MR in McPhilemy v Times Newspapers Ltd [1999] 3 All ER 775, 792J–793A
[14] While the rules governing the courts are not directly applicable in the Tribunal, I consider that they are a guide to what is appropriate in a tribunal, particularly when dealing with issues of procedural fairness, which is as important in a tribunal as in a court. The Tribunal's rules require HMRC to set out its position in respect of a case; what that means is that HMRC should explain its position in sufficient detail to enable the appellant to properly prepare its case for hearing. Anything less may lead to injustice.
[15] HMRC's position was that their statement of case did not need to specifically plead their case in relation to, nor even refer to, the payments services issue, but that nevertheless the issue was in dispute between the parties, and HMRC would be entitled (a) to make submissions at the hearing to the effect that the appellant's services were not payments services and (b) to cross examine the appellant's witnesses on the matter. As I understood it, HMRC took this stance because they did not have the burden of proof in this appeal.
[16] Mr McGurk referred me to the cases of Brady (HMIT) v Lotus Car Companies [1987] 3 All ER 1050 at 1065, T Haythornthwaite and Sons, Ltd vKelly (HMIT) (1927) 11 TC 657, Khan (t/a Greyhound Dry Cleaners) v R & C Commrs [2006] BVC 336 at [70] and Ingenious Games LLP v R & C Commrs [2015] BTC 508 at [15]. All these cases state that the burden of proof is on the taxpayer to prove that the assessment and/or decision is wrong. I did not find these cases helpful: the proposition that the burden of proof lies on the appellant to prove that its supplies were exempt is not in dispute but it is also not really relevant to the question of what the statement of case must contain.
[17] Firstly, if HMRC were right, the above citations from Three Rivers and McPhilemy would...
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Boston Consulting Group UK LLP and Others
...the level of complexity of issues allowing the taxpayer to participate in the hearing fully. He relied upon the case of Allpay Ltd[2018] TC 06503 as well as the Court of Appeal decision in BPP confirming Judge Mosedale's decision that HMRC's case must be put in its Statement of Case and not......
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G4s Corporate Services Ltd and Another
...the Appellants submit are new issues that were not contained in the Statement of Case. The Appellants cite the authority of Allpay Ltd [2018] TC 06503 (“Allpay”) in support of its argument that HMRC should not be allowed to raise new issues without permission. HMRC have not sought to argue ......
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Roulette V2 Charters LLP
...section 66(2) of the ITA had been satisfied by the Appellant in this case is unsustainable. This is certainly not a case like Allpay Ltd [2018] TC 06503, where the payment services issue (as it was described by the First-tier Tribunal in that case) was not mentioned at all in the relevant S......
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Tevfik
...that the point was not raised by the appellant, this was, initially at least, clearly not an issue between the parties. In Allpay Ltd [2018] TC 06503 Judge Barbara Mosedale said that HMRC did not have to plead matters which are not in issue and we agree with that principle. [77] The appella......