Caracavi Utility Cables Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 14 May 2021 |
| Neutral Citation | [2021] UKFTT 153 (TC) |
| Court | First-tier Tribunal (Tax Chamber) |
[2021] UKFTT 153 (TC)
Judge Aleksander
Value added tax – Striking out – Intra-EU supplies – Failure to charge output VAT – Entitlement to VAT refund – Rule 8(c), Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.
[1] This is an application by HMRC to strike-out Caracavi Utility Cables Limited's (“CUC”) appeal against the review of HMRC's decision to deny part of the VAT credit claimed by their VAT return for period 12/17.
[2] On 12 June 2018, HMRC issued their decision that the amount of a VAT refund claimed by CUC be reduced because it failed to charge VAT on supplies to its customer, BMCC Energy Limited (trading as Enersol) (“BEL”).
[3] On 10 February 2020, the decision was upheld following a statutory review, and on 23 April 2020, CUC filed its appeal against that decision with the Tribunal.
[4] The grounds of appeal as set out in the Notice of Appeal are as follows:
CUC originally and incorrectly expected the supplies to be zero VAT rated and so charged the end client BMCC/Enersol at VAT 0% on the goods invoices. Later, discovering the error, CUC raised an invoice to BMCC/Enersol for the UK VAT of 20%. BMCC/Enersol, to date, refuse to pay this invoice (see supporting documents, emails). CUC have requested HMRC, in this exceptional circumstance, to repay the UK VAT, on the original goods invoices from Prysmian to CUC, directly back to CUC.
[5] At the hearing of the application, Mr Dolan represented CUC, and Ms Clinton represented HMRC. In addition to the hearing bundle of 480 pages and the skeleton arguments of the parties, Mr Dolan filed two lengthy written submissions, and Ms Clinton filed a skeleton argument.
[6] HMRC apply to strike out the appeal on the grounds that it has no reasonable prospect of success.
[7] The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (“the Rules”) gives the Tribunal discretion to strike out an appellant's case if it has no reasonable prospect of success. Rule 8(3)(c) states as follows:
8(3) The Tribunal may strike out the whole or a part of the proceedings
if–
[…]
- (c) the Tribunal considers there is no reasonable prospect of the appellant's case, or part of it, succeeding.
[8] The approach to be taken by the courts in relation to striking-out was considered by the Upper Tribunal in First de Sales Ltd Partnership v R & C Commrs [2018] BTC 531, which cited with approval the seven steps set out by Lewinson J in Easyair Ltd (t/a Openair) v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15]:
- The court must consider whether the claimant has a realistic as opposed to a fanciful prospect of success: Swain v Hillman [2001] 1 All ER 91 ;
- A realistic claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8]
- In reaching its conclusion the court must not conduct a mini-trial: Swain v Hillman
- This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10]
- However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;
- Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Company 100 Ltd [2006] EWCA Civ 661, [2007] FSR 3;
- On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725.
[9] Although not cited to me, Floyd LJ in his judgment in the Court of Appeal in TFL Management Services Ltd v Lloyds TSB Bank plc [2013] EWCA Civ 1415, [2014] 1 WLR 2006 said the following at [27]:
I would add that the court should still consider very carefully before accepting an invitation to deal with single issues in cases where there will need to be a full trial on liability involving evidence and cross examination in any event, or where summary disposal of the single issue may well delay, because of appeals, the ultimate trial of the action: see Potter LJ in Wragg v Partco Group Ltd [2002] EWCA Civ 594, [2002] 2 Lloyd's Rep 343 at 27(3) and cases there cited. Removing road blocks to compromise is of course one consideration, but no more than that. Moreover, it does not follow from Lewison J's seventh principle that difficult points of law, particularly those in developing areas, should be grappled with on summary applications; see Partco at 28(7). Such questions are better decided against actual rather than assumed facts. On the other hand it may be possible to say that the trajectory of the law will never on any view afford a remedy: see for example Hudson v HM Treasury [2003] EWCA Civ 1612.
[10] Ms Clinton referred me to the decision of the Upper Tribunal in R & C Commrs v Fairford Group plc (in liquidation) [2014] BVC 529, which addressed the approach that should be taken in the First-tier Tribunal when dealing with an application to strike out. The Fairford Group appeal related to an MTIC fraud, and Judge Brooks in the First-tier Tribunal declined to strike-out the appeal as he could not conclude that the taxpayers had no reasonable prospect of challenging HMRC's evidence without a detailed examination of that evidence:
[41] In our judgment an application to strike out in the FTT under r 8(3)(c) should be considered in a similar way to an application under CPR 3.4 in civil proceedings (whilst recognising that there is no equivalent jurisdiction in the FTT Rules to summary judgment under Pt 24). The tribunal must consider whether there is a realistic, as opposed to a fanciful (in the sense of it being entirely without substance), prospect of succeeding on the issue at a full hearing, see Swain v Hillman [2001] 1 All ER 91 and Three Rivers District Council v Governor and Company of the Bank of England [2003] 2 AC 1per Lord Hope of Craighead. A “realistic” prospect of success is one that carries some degree of conviction and not one that is merely arguable, see ED & F Man Liquid Products Ltd v Patel [2003] EWCA Civ 472, [2003] 24 LS Gaz R 37. The tribunal must avoid conducting a “mini-trial”. As Lord Hope observed in Three Rivers, the strike-out procedure is to deal with cases that are not fit for a full hearing at all.
[11] The background facts are not in dispute and can be summarised as follows.
[12] CUC is a company incorporated in the Republic of Ireland, which sells underground cables and overhead conductors. Its only business establishment is located in the Republic of Ireland.
[13] In 2016, CUC received an order for cables from BMCC Energy Limited (trading as Enersol) (“BEL”). BEL is incorporated in the Republic of Ireland and used to be registered for VAT in the UK (presumably on the basis that it had a business establishment in the UK). The cables were to be delivered to three different sites in Northern Ireland. The cables were to be used in connection with wind farms being constructed by BEL in Northern Ireland.
[14] CUC ordered the cables from Prysmian Cables and Systems Limited (“PCSL”) in the UK, directing that they be delivered to BEL's locations in Northern Ireland. As PCSL did not have the cables in stock, PCSL ordered them from an associated company in Spain, instructing the associated company to deliver the goods directly to BEL in Northern Ireland.
[15] The supply chains in this appeal therefore involved three successive supplies of the cables:
- Supply from Spanish associate company (Spain) to PCSL (UK)
- Supply from PCSL (UK) to CUC (Republic of Ireland)
- Supply from CUC (ROI) to BEL (UK)
[16] Whilst there were three supplies of goods, there was only one physical movement of goods from PCSL's associate in Spain directly to BEL's locations in Northern Ireland (Spain to Northern Ireland). The...
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