Commissioners for HM Revenue and Customs v Smart Price Midlands Ltd
| Jurisdiction | England & Wales |
| Judge | Lady Justice Rose,Lord Justice Newey,Lord Justice McCombe |
| Judgment Date | 16 May 2019 |
| Neutral Citation | [2019] EWCA Civ 841 |
| Docket Number | Case No: A3/2018/0617 |
| Court | Court of Appeal (Civil Division) |
| Date | 16 May 2019 |
[2019] EWCA Civ 841
Royal Courts of Justice
Strand, London, WC2A 2LL
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (TAX AND CHANCERY CHAMBER)
(Henry Carr J and Judge Hellier)
[2017] UKUT 0465 (TCC)
(Fancourt J and Judge Hellier)
Lord Justice McCombe
Lord Justice Newey
and
Lady Justice Rose
Case No: A3/2018/0617
Case No: A3/2019/0415
Jonathan Hall QC and Will Hays (instructed by General Counsel and Solicitor to HM Revenue and Customs) for the Appellants
David Bedenham (instructed by Rainer Hughes) for the Respondents
Hearing date: 27 March 2019
Approved Judgment
These two appeals raise the issue of the extent of disclosure of documents that should be provided by the Appellants (‘HMRC’) when a trader who has been refused approval for the operation of a wholesale alcohol supply business challenges that refusal before the First-tier Tribunal. The Respondents in these appeals (‘the Traders’) have all been refused approval on the grounds that they are not fit and proper persons to operate a business selling alcohol. As the proceedings in which these appeals arise currently stand, the disclosure ordered is in terms that:
“HMRC shall send or deliver to the Tribunal and the Traders a list of all documents which were considered by HMRC's officer when reaching the decision at issue in this appeal and indicating which, if any, of those documents HMRC do not rely on in this appeal, together with any other documents which HMRC intend to rely on in this appeal.”
I shall refer to that disclosure direction as the “global disclosure direction”.
The Traders argue that the global disclosure direction is necessary to give them a real chance of understanding why their applications were refused and so to be able to prove that the refusal was wrong. HMRC complain that the global disclosure direction is too broad and imposes an onerous burden on them to supply documents many of which are irrelevant to the issues likely to be raised in the appeals.
Two judgments of the Upper Tribunal have upheld the global disclosure direction as an appropriate first step in the management of these appeals. In the first judgment, the Upper Tribunal dismissed HMRC's appeal against a refusal to vary the FTT's order. I shall refer to those proceedings as the Hare Wines appeal. In the second judgment, the Upper Tribunal allowed the Traders' appeal against a decision of the FTT acceding to an application by HMRC to narrow the global disclosure direction. I shall refer to those proceedings as the Gardner Shaw appeal.
The Alcohol Wholesale Registration Scheme
The registration regime for wholesale suppliers of alcohol (‘AWRS’) was introduced by the insertion of Part 6A into the Alcoholic Liquor Duties Act 1979 (‘ALDA’) by section 54 of the Finance Act 2015. The history and operation of the AWRS were described in detail by this court in R (ABC Ltd) v Revenue and Customs Commissioners [2017] EWCA Civ 956, [2018] 1 WLR 1205. Part 6A makes the selling of liquor wholesale on or after the point at which excise duty is payable a controlled activity. Section 88C ALDA prohibits a business with a UK establishment from carrying on a controlled activity otherwise than in accordance with an approval given by the Commissioners under that section. Section 88C(2) provides:
“(2) The Commissioners may approve a person under this section to carry on a controlled activity only if they are satisfied that the person is a fit and proper person to carry on the activity.”
An approval may be made subject to conditions or restrictions and can be revoked at any time for reasonable cause: see section 88C(3) and (5) ALDA. It is a criminal offence to trade without approval. HMRC maintain a register of approved wholesalers and as from 1 April 2017, anyone purchasing alcohol from a wholesaler who is not approved commits a criminal offence if he knows or ought to have known of the absence of approval.
The Wholesaling of Controlled Liquor Regulations 2015 (SI 2015/1516) made under ALDA provide by regulation 4(4) that:
“If the Commissioners refuse an application for approval they must notify the person who made the application of that fact and give the reasons for the refusal.”
There is no requirement in the Regulations that the Commissioners provide the trader with any documents supporting the decision to refuse approval. An appeal to the tribunal against a refusal of approval lies under section 16(4) of the Finance Act 1994:
“(4) In relation to any decision as to an ancillary matter, or any decision on the review of such a decision, the powers of an appeal tribunal on an appeal under this section shall be confined to a power, where the tribunal are satisfied that the Commissioners or other person making that decision could not reasonably have arrived at it, to do one or more of the following, that is to say—
(a) to direct that the decision, so far as it remains in force, is to cease to have effect from such time as the tribunal may direct;
(b) to require the Commissioners to conduct, in accordance with the directions of the tribunal, a review or further review as appropriate of the original decision;
(c) in the case of a decision which has already been acted on or taken effect and cannot be remedied by a review or further review as appropriate, to declare the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in future.”
Section 16(6) of the Finance Act 1994 provides that it is for the appellant to show that the grounds on which any such appeal is brought have been established. Subsection (8) defines a “decision as to an ancillary matter” for the purposes of subsection (4) and that includes refusals of approval under section 88C ALDA.
The AWRS came into effect on 1 April 2016 and required both existing and new alcohol wholesaling businesses to apply for approval. HMRC published guidance in the form of Excise Notice 2002: Alcohol Wholesaler Registration Scheme, the latest version of which is dated 22 November 2018 (the ‘Excise Notice’). Section 6 of the Excise Notice describes the test applied by HMRC for granting AWRS approval:
“This means HMRC must be satisfied the business is genuine and that all persons with an important role or interest in it are law-abiding, responsible, and do not pose any significant threat in terms of potential revenue non-compliance or fraud.”
The process described in the Excise Notice shows that HMRC's investigation of the applicant business will be extensive and wide ranging. It will involve checks of HMRC's records to ascertain whether the applicant has been compliant with its tax obligations and, in the case of a corporate body, is likely to include checks with Companies House. HMRC may consult other government departments and agencies and credit reference agencies. HMRC will also check the criminal records of applicants for any relevant convictions. They may visit the applicants' premises to examine the trading activities and ask for details about suppliers, customers, business plans, accounting and stock control systems, premises and financial viability. The Excise Notice sets out a long list of criteria against which HMRC will assess all applicants, covering not just the legal entity of the business but all partners, directors and other ‘key persons’, defined as those who “can be seen as one of its ‘guiding minds’”. The criteria include evidence of illicit trading on the part of key persons involved in the business, for example where a person has been assessed for underdeclaration of tax or has been subject to penalties for wrongdoing or has had previous approvals revoked or refused or has been subject to confiscation orders and recovery proceedings under the Proceeds of Crime Act 2002. HMRC will also consider whether key persons involved in the business have any criminal convictions which are relevant, for example offences involving any dishonesty or links to organised criminal activity. It states: “HMRC will normally disregard convictions that are spent provided there are no wider indications that the person in question continues to pose a serious threat to the revenue”. An unspent conviction is one that has not expired under the terms of the Rehabilitation of Offenders Act 1974. The list of criteria is described as non-exhaustive and the guidance indicates that HMRC may refuse to approve an applicant for reasons other than those listed, if they have justifiable concerns about suitability.
Although this is not mentioned in the Excise Notice, HMRC will send a “minded to refuse” letter to an applicant, giving the applicant an opportunity to respond to the matters set out there before a final decision is taken.
Section 9 of the Excise Notice sets out what happens if the application for approval is refused. A dissatisfied applicant can tell the person who issued the decision if he has further information or can show that HMRC have missed something. The applicant has 30 days in which he can ask for the decision to be reviewed by an HMRC officer not previously involved in the matter or he can appeal to the FTT without requesting an internal review. The right to an internal review...
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