Ecko Ltd (t/a Subway)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 02 December 2019 |
| Neutral Citation | [2019] UKFTT 715 (TC) |
| Date | 02 December 2019 |
| Court | First-tier Tribunal (Tax Chamber) |
[2019] UKFTT 715 (TC)
Judge Barbara Mosedale
Procedure – Application for further and better particulars – Principles – Application allowed in part – Directions made.
[1] HMRC applied for further and better particulars of the appellant's grounds of appeal on 18 June 2019; the appellant gave a partial response on 9 July 2019 but in large part took the stance that it had already provided sufficient detail and HMRC should now provide its statement of case. HMRC amended its application to take account of the limited response and re-submitted it on 21 August 2019. The Tribunal indicated it would call a hearing to decide the matter but the parties preferred the determination to be on the papers. The Tribunal agreed and I now determine the matter on the papers.
[2] The parties were given the opportunity to make further submissions in order that the Tribunal could determine the matter on the papers; and on 25 October 2019 HMRC elected to do so and provided more detailed objections and a bundle of papers; the appellant elected to provide no further submissions on the basis, in its view, that HMRC's October submissions added nothing to what had already been said.
[3] The appellant has appealed a number of assessments made in respect of periods going back to 2006 and its various appeals, save this one, have been consolidated under number LON/09/713. I am not concerned with that appeal in this application. This application relates solely to its appeal TC/2014/6668 which is an appeal against an assessment to VAT from 1/1/11 to 31/3/14 for just under £1million and a related penalty.
[4] Without wishing to make findings of fact which must be left to the substantive hearing, it appears to be the case that at least some of the appellant's supplies at the relevant time were of hot takeaway food and in particular toasted sandwiches. Back in 2011–2014, it appears it did not consider such supplies to be subject to VAT and did not account for VAT on them. It appears to have adopted this view because of the CJEU's decision in Finanzamt Burgdorf v Bog (Case C-497/09); CinemaxX Entertainment GmbH Co KG v Finanzamt Hamburg-Barmbek-Uhlenhorst (Case C-499/09); Lohmeyer v Finanzamt Minden (Case C-501/09); Fleischerei Nier GmbH Co KG v Finanzamt Detmold (Case C-502/09)[2012] BVC 277. HMRC's position at that time and now was that such supplies of hot takeaway food were standard rated. After a visit from HMRC, in 2014 the appellant, at HMRC's request, supplied HMRC with computations period by period of the value of certain supplies from 1/1/11 to 31/3/14. The supplies covered by this computation were intended to be its hot takeaway food supplies which it had treated as zero rated but which HMRC considered were standard rated.
[5] On 1 December 2014, HMRC assessed the appellant to VAT on the basis of these figures and on 27 February 2015 the appellant was also assessed to a penalty. While the original appeal against that assessment was lodged on 12 December 2014 it appears that the Tribunal may have permitted the appellant to amend its appeal on 25 March 2015 to include an appeal against the penalty: properly the appellant should have lodged a new appeal. In June 2015, HMRC consented to the appeal progressing without payment of the tax on the basis of hardship. It seems the appeal was then repeatedly stayed as the parties then sought to negotiate a settlement of it but by June 2016 it was clear ADR had failed.
[6] In September 2016, HMRC applied for further and better particulars of the appellant's grounds of appeal. It is not surprising that they did so. The appellant's original grounds of appeal in December 2014 and March 2015 were that its hot takeaway food was properly zero rated in line with the decision of the Court of Appeal in John Pimblett & Sons Ltd v C & E Commrs (1987) 3 BVC 161. As the Court of Appeal had not followed that decision in its June 2014 decision in Sub One Ltd (t/a Subway) (in liquidation) v R & C Commrs [2014] BVC 29, but on the contrary clearly stated it was inconsistent with EU law (see paragraph 74), it was perhaps surprising the Pimblett case had been the basis of the appellant's appeal.
[7] By 2016 the appellant had new advisers. It did not fully comply with the order for further and better particulars, although, however deficient its attempt, it was by then clear that the appellant no longer pursued a case based on Pimblett but was pursuing the appeal on the basis the quantum of the assessment was wrong. In the next year or so, there were various orders by the Tribunal and two hearings, the object of which was to get the appellant to state why it was appealing the quantum of an assessment which was based on figures the appellant itself had provided. The Tribunal did not succeed in getting the appellant to clarify its grounds of appeal.
[8] Instead, by the end of 2017, the appellant changed its advisers again and the appeal was once more stayed for ADR. Negotiations had failed by the start of 2019. Agreed directions were issued for the appellant to file its new, amended grounds of appeal. I mention in passing that this appeal, which had been joined with the 713 appeal, was at this point separated on the basis the appeals were legally and factually distinct in that 713 was a best judgement challenge to assessments raised in earlier periods while 6668 was only a challenge on quantum relating to later periods.
[9] The appellant filed its grounds of appeal on 6668 on 26 April 2019 but on 18 June 2019, instead of filing its statement of case, HMRC made the application the subject of this hearing, and I have summarised at paragraphs 1 and 2 above what happened then.
[10] As I have said, it appears accepted by the appellant that the assessment was raised on the basis of figures provided to HMRC by the appellant. Its new grounds of appeal stated that part of that assessment related to five items which the appellant considers were properly zero rated. Those items were: cookies, bear yoyo, extras for cold subs, Doritos chips and donuts. (I note in passing that I do not know with respect to this last item whether “donuts” is a tradename for a particular product or whether, like “cookies”, it is simply a description of a type of food, and therefore that it should actually be spelt as “doughnuts”. I will refer to it as “donuts” on the assumption it is a tradename for a particular packaged product as it makes no difference to this application although the exact nature of the product might well be relevant to the substantive dispute and should be explained in its grounds of appeal).
[11] The appellant's understanding was that HMRC now accept that cookies and Doritos crisps were correctly zero rated so it considered that the dispute on quantum fell into two parts:
- What is the correct VAT liability of the 3 remaining items (bear yoyo, extras for cold subs and donuts;
- Quantification of the VAT on the 5 items in order to correct the assessment.
The appellant went on to say that it would disclose in its evidence its workings and computations, but that it did not understand the computation on which HMRC's assessment was based and wanted it explained in their statement of case.
[12] In response to this, HMRC made the application the subject of the appeal. They sought further and better particulars of the new grounds of appeal in four respects which were:
- A statement of whether VAT on those 5 items had been accounted for by the appellant or was said to be included in HMRC's assessment;
- An explanation of the circumstances which led to the sales of these items being treated as standard rated;
- Computation of the amount which the appellant considered was over- declared or over-assessed; and
- The appellant's business records to support any claim that VAT on these items were over-declared
HMRC's narrative stated that the appellant had told HMRC on 2 July 2018 that it had made errors in respect of its VAT accounting on cookies and Doritos chips but had failed to explain the errors; and that HMRC had been unaware of any claimed error in respect of the other three items until received the amended grounds of appeal.
[13] It seems apparent that at this stage HMRC was uncertain whether the appellant was challenging the quantum of the assessment on the basis it wrongly included (claimed) zero rated items, or whether the appellant was saying VAT wrongly accounted for on other (claimed) zero rated items should be off-set against the assessment in respect of hot takeaway food.
[14] On 9 July 2019, the appellant responded by answering HMRC's first question. The appellant stated that output tax on the five items was a part of HMRC's assessments. In other words, it became clear at that point that the appellant was not seeking an off-set against the assessment based on other errors, but was saying that the assessment incorrectly assessed some zero rated items. The appellant's narrative put its case that even though the assessment was based on the appellant's own figures, that did not prevent the appellant appealing the assessment on the basis the quantum was wrong.
[15] The appellant went on to say that they considered it was now for HMRC to state its case; in particular, HMRC had not said what it considered the correct VAT treatment of those five items was; the appellant refused to provide the information on computation which it thought irrelevant at the stage of pleadings; it thought the application for its computations amount to asking for disclosure before the appropriate time. The appellant also...
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