Embiricos
| Jurisdiction | UK Non-devolved |
| Judgment Date | 07 December 2022 |
| Neutral Citation | [2022] UKFTT 464 (TC) |
| Court | First Tier Tribunal (Tax Chamber) |
[2022] UKFTT 464 (TC)
Tribunal Judge Nicholas Aleksander
First-tier Tribunal
Procedure – Application for an issue to be determined at preliminary hearing – Wrottesley v R & C Commrs considered – Application refused – Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 5(3)(e).
In Embiricos [2023] TC 08664, the First-tier Tribunal (FTT) refused a taxpayer’s application for the issue of his domicile to be determined at a preliminary hearing.
HMRC had opened enquiries into whether the appellant (Mr Embiricos) was entitled to be taxed on the remittance basis in 2014–15 and 2015–16. HMRC’s position was that Mr Embiricos had acquired a domicile of choice in the UK and was therefore not entitled to use the remittance basis. In previous litigation Mr Embiricos had applied to the tribunal for a partial closure notice (PCN) in respect of his domicile status and had appealed against an information notice requiring him to supply details of his foreign income and gains. Following decisions in the FTT and the Upper Tribunal (UT), in Embiricos v R & C Commrs, the Court of Appeal rejected the application for a PCN. As a consequence the appeal against the information notice also failed.
HMRC subsequently issued Mr Embiricos with a discovery assessment for 2013–14 of almost £10m on the basis that he was not eligible to claim the remittance basis. The assessment was made on a “best-judgment” basis as Mr Embiricos had not provided HMRC with details of non-UK income. Mr Embiricos appealed against the assessment. HMRC applied for the appeal to be stayed and in a counter-application, Mr Embiricos applied for the domicile issue to be treated as a preliminary issue.
The FTT approached Mr Embiricos’ application by considering the eight key principles set out by the UT in Wrottesley v R & C Commrs. It decided that:
- The power to order the hearing of a preliminary issue should be exercised with caution and sparingly, with it being out of the ordinary course for the tribunal to make such a direction.
- The domicile issue was potentially a knockout point, as if it was resolved in Mr Embiricos’ favour the appeal would be fully disposed of. However it was not a succinct or relatively succinct knockout point when considering a five to seven day preliminary hearing (rejecting Mr Embiricos’ estimate of two days) as compared to an 11 to 13 day full hearing.
- The preliminary hearing would not have been relatively short and if the issues were determined in one hearing it would probably have been listed towards the end of 2024, whereas if there was a preliminary hearing and a subsequent hearing required to consider the liability issue it would probably not have been until the middle of 2025.
- There was no reason not to have a preliminary hearing on the basis of the criterion that a separate determination on the domicile issue would have adversely affected determination of the liability issue.
- There was a material risk that directing a preliminary hearing could significantly delay the resolution of the appeal.
- A preliminary hearing could mean that no further hearing would be required.
- Resolving the domicile issue as a preliminary issue was unlikely to reduce the time required in relation to the liability issue and increased the risk of increased costs and delay.
- The requirements of the tribunal’s overall objective favoured not holding a preliminary hearing.
Having weighed up the factors, Judge Aleksander considered that criteria supporting having a preliminary hearing on domicile were outweighed by the contrary factors and he accordingly dismissed Mr Embiricos’ application.
At the hearing HMRC applied to amend their stay application, so that the stay would only apply until 60 days after Mr Embiricos had supplied the information required by the information notice. Judge Aleksander allowed HMRC’s amended application.
The FTT accepted that hearing the domicile issue at a preliminary hearing could have meant that no further hearing would have been required. However, having considered all the factors set out by in Wrottesley v R & C Commrs, including the likelihood of such action increasing costs and delay, it decided not to grant the application.
For commentary on when the tribunal can direct that a matter be dealt with as a preliminary issue, and other case management issues, see In-Depth at .
Comment by Meg Wilson, Lead Tax Writer, Croner-i Ltd.
[1] By way of background, HMRC opened enquiries into Mr Embiricos' UK tax returns for 2014/15 (opened on 1 December 2016) and 2015/16 (opened on 28 November 2017). The principal focus of HMRC's enquiries has been whether Mr Embiricos was entitled to be taxed on the remittance basis. It is not disputed that Mr Embiricos has a Greek domicile of origin, however HMRC assert that he has acquired a domicile of choice within the UK and is therefore ineligible to use the remittance basis of taxation.
[2] On 13 June 2018 Mr Embiricos applied to this Tribunal for a final closure notice in respect of the 2014/15 enquiry. This application was subsequently amended to an application for a partial closure notice (“PCN”) in respect of Mr Embiricos' domicile status.
[3] On 1 March 2019, HMRC issued an information notice requiring Mr Embiricos to provide information regarding the amount and source of his foreign income and gains received anywhere in the world during 2014/15 and 2015/16. Mr Embiricos appealed against the information notice on the basis that the information requested was not reasonably required for the purposes of checking his tax position because (i) HMRC could and should issue a partial closure notice under s28A Taxes Management Act 1970 (“TMA”) on the issue of domicile only, or (ii) HMRC could and should refer the issue of domicile to the Tribunal under s28ZA TMA.
[4] The application for a PCN and the appeal against the information notice have been the subject of extensive litigation. At first instance, this Tribunal allowed both the application for a PCN and the appeal against the information notice. As the Tribunal had granted the application for a PCN, it held that it followed that the appeal against the information notice must also succeed. But the Tribunal decided that if HMRC were to successfully appeal the decision on the PCN, then the appeal against the information notice would automatically be refused (decisions of this Tribunal on appeals against information notices cannot be appealed to the Upper Tribunal). The Upper Tribunal subsequently overturned this Tribunal's decision in respect of the PCN, and the Court of Appeal upheld the decision of the Upper Tribunal (reported at [2022] BTC 1). An application by Mr Embiricos for permission to appeal to the Supreme Court was refused shortly before the hearing of the applications that are the subject of this decision.
[5] No enquiry was ever opened by HMRC into Mr Embiricos' 2013/14 return. However, on 29 March 2021. HMRC issued a discovery assessment in respect of that year pursuant to the extended timeframe for assessment in Schedule 18, Finance (No. 2) Act 2017. The assessment was made on the basis that Mr Embiricos had acquired a domicile of choice within the UK by 2013/14 and was not eligible to be taxed on the remittance basis. The amount assessed is £9,924,960. The assessment was made on a “best judgment” basis as Mr Embiricos has not provided HMRC with any details relating to his non-UK income.
[6] Mr Embiricos has appealed against the assessment, on the grounds that:
- he has not acquired a domicile of choice within the UK (the domicile issue); and
- even if he has, the amount assessed is excessive (the liability issue) because his overseas income in that year was approximately £50,000.
The notice of appeal had raised other ground which are no longer being pursued.
[7] HMRC's enquiries into the 2014/15 and 2015/16 returns remain open and are not before this Tribunal.
[8] By application dated 21 June 2022, HMRC applied for Mr Embiricos' appeal to be stayed pending the determination of his application for permission to appeal to the Supreme Court. As the Supreme Court has now refused permission to appeal, that application has become otiose.
[9] One of the consequences of the decision of the Supreme Court is that Mr Embiricos' appeal against HMRC's March 2019 information notice is now treated as having been dismissed. The information notice (which had effectively been in abeyance until that decision) is now “live”, and Mr Embiricos has agreed to provide the information required to HMRC by 28 February 2023.
[10] At the hearing, HMRC applied to amend their application. The amended application was for a stay to Mr Embiricos' appeal until 2 May 2023 (namely, 60 days after receipt of the information required by the information notice). Mr Embiricos' representatives, whilst opposing the substance of HMRC's amended application, raised no procedural objection to the amendment being made at the hearing.
[11] Also before me is a counter-application made by Mr Embiricos that the liability issue be stayed, or alternatively the domicile issue be determined as a preliminary issue. At the hearing this was (in my view, correctly) pursued solely as an application for the domicile issue to be treated as a preliminary issue, and not as a stay of the liability issue.
[12] The Tribunal has power to direct that an issue in proceedings can be dealt with as a preliminary issue by rule 5(3)(e) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (“FTT Rules”). Rule 5 also includes powers to extend time limits and to stay proceedings.
[13] The relevant parts of rule 5 are as follows:
(1) Subject to the provisions of the [Tribunals, Courts and Enforcement Act 2007] and any other enactment, the Tribunal may regulate its own procedure.
(2) The Tribunal may give a direction in relation to the conduct or...
To continue reading
Request your trial