Europcar Group UK Ltd

JurisdictionUK Non-devolved
Judgment Date07 October 2021
Neutral Citation[2021] UKFTT 359 (TC)
CourtFirst Tier Tribunal (Tax Chamber)

[2021] UKFTT 359 (TC)

Judge Jane Bailey

Europcar Group UK Ltd

Corporation tax – Claims for cross border group relief – Expert evidence required as to the law in two other jurisdictions – Whether joint experts to be appointed against the wishes of one party – Yes – Procedure – Expert evidence required as to the law in two other jurisdictions re corporation tax claims for cross border group relief – Whether joint experts to be appointed against the wishes of one party – Yes – Pt. 35 of the Civil Procedure Rules (CPR), Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 15.


[1] The application before the Tribunal is an application by the Appellants for directions regarding the use of expert witnesses. The parties are agreed that expert evidence is required and agreed in principle about the two issues upon which it is required. The Appellants' position is that jointly instructed experts should be appointed, leading to two experts being instructed, whereas the Respondents contend that the parties should each appoint separate expert witnesses, leading to four experts being instructed.

Relevant background

[2] The factual background to these appeals can be set out briefly. The Appellants are claiming cross border group relief on the trading losses suffered by two subsidiaries, P1 Holland and P1 Germany. In the Netherlands, P1 Holland sold its trade and some assets, and then ceased to trade. P1 Holland subsequently became UK resident for tax purposes and was then liquidated. In Germany, P1 Germany was the sole limited partner of a loss-making partnership. The partnership was dissolved with all assets and liabilities passed to P1 Germany. P1 Germany was subsequently liquidated. The Appellants' position is that P1 Holland's pre-sale losses could not be utilised under Dutch law, and that P1 Germany's losses could not be utilised under German law. The Respondents put the Appellants to proof of the Dutch and German tax law treatment of losses, and to proof of the computation of the losses claimed.

[3] A number of accounting periods are in dispute. There are also procedural issues surrounding the claims made by the Appellants. The Respondents' position on the substantive issues is that none of the claims for any of the accounting periods satisfy the “no possibilities test” set down by the CJEU in Marks & Spencer plc v Halsey (HMIT) (Case C-446/03) [2006] BTC 318. The parties are at odds over whether the date on which the no possibilities test should be applied is the end of the relevant accounting period or the date on which the claim was filed. In respect of this issue, the Appellant relies upon R & C Commrs v Marks and Spencer plc [2014] BTC 7 which they say is decisive in respect of claims for periods prior to the coming into force of the Finance Act 2006. The Respondents preferred date comes from their analysis of EC Commission v United Kingdom (Case C-172/13) [2015] BTC 9.

[4] From this brief background it is clear that there are a number of issues between the parties for the Tribunal to determine at a substantive hearing. The Appellants cannot be successful unless they establish that there was no possibility of the losses that arose in the Netherlands and Germany being utilised in those respective countries. It is this issue that both parties agree will require expert evidence, to set out the relevant tax law in the Netherlands and in Germany at the (yet to be determined) relevant times (the “local law issues”). Neither party has yet instructed an expert, and so neither has yet provided argument setting out their construction of the relevant Dutch or German law. In addition to putting the Appellants to proof that there was no possibility of the losses being utilised, the Respondents argue that the Appellants have yet to make a positive case so they (the Respondents) do not know what case they are required to meet.

This application

[5] The current application is made by the Appellants. They seek directions permitting expert evidence in respect of the local law issues but on condition that a joint expert is instructed for each jurisdiction, and for the partis to have permission to apply for further directions in the event that further matters relating to the expert evidence cannot be agreed. In response, the Respondents seek directions requiring the sequential exchange of expert evidence.

[6] The parties are agreed that the Tribunal has the power to make directions permitting expert evidence and that it has the power to require the joint appointment of experts. Both parties refer to Part 35 of the Civil Procedure Rules (“CPR”) and rules 15 of the First-tier Tribunal (Tax Chamber) Rules (the “Tribunal Rules”). Although there is some agreement on the relevance of certain factors to be taken into account, the parties differ on the conclusions to be drawn. The Respondents argue that the relevant factors do not provide any obvious grounds for instruction of joint experts in this case, and that it would be inappropriate for joint experts to be appointed. The Appellants argue that it would be unnecessarily time consuming and costly for both experts to instruct their own experts.

Discussion and decision

[7] The direction of travel of the courts over the past twenty years has been the increasing requirement that jointly instructed experts be appointed rather than parties being permitted to instruct and rely upon their own experts. As stated in the introduction to the Practice Direction that supplements Part 35:

… where possible, matters requiring expert evidence should be dealt with by only one expert.

[8] This preference for one expert is in order to save resources and time as, in addition to the obvious cost-saving in respect of the witness instruction, it is generally possible for a hearing to be listed and concluded more quickly when there is only one expert witness in respect of each issue, rather than two. Where there is a single expert, the parties are permitted to put written questions to the joint expert, and (exceptionally) can also cross-examine a joint expert. This is, generally, still more efficient than each party appointing their own expert and those experts being examined and cross-examined at the hearing. There are, of course, some exceptions, and the reported authorities show the difficulties that can arise when, after a joint expert has provided an expert report, one party seeks permission to appoint their own expert to further examine issues or to challenge the joint expert's conclusions. This can lead to losing the hearing date, and/or both parties eventually starting afresh by instructing their own experts.

[9] As the Respondents correctly note, the CPR do not apply in the Tax...

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