Evans
| Jurisdiction | UK Non-devolved |
| Judgment Date | 06 December 2022 |
| Neutral Citation | [2022] UKFTT 458 (TC) |
| Court | First Tier Tribunal (Tax Chamber) |
[2022] UKFTT 458 (TC)
Tribunal Judge Vimal Tilakapala
First-tier Tribunal (Tax Chamber)
Application to strike out – Application granted – Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 8(3)(c), TMA 1970, s. 28A and 30.
In Evans [2023] TC 08663, the First-tier Tribunal (FTT) struck out a taxpayer’s appeal against a closure notice, finding that his case had no reasonable prospect of success.
The appellant (Mr Evans) had participated in a failed tax avoidance scheme. He had made a claim for loss relief in his tax return, which resulted in HMRC issuing him with a repayment of over £240k. HMRC later opened an enquiry into Mr Evans’ tax return, and following the defeat of the scheme in the FTT issued a closure notice under TMA 1970, s. 28A amending the tax return. Mr Evans appealed against the notice. HMRC applied to the tribunal for a direction under the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 8(3)(c) striking out Mr Evans’ appeal on the grounds that his case had no reasonable prospect of success.
At the hearing it was confirmed that Mr Evans’ only ground of appeal was that HMRC should have assessed him under TMA 1970, s. 30 (which concerns the recovery of overpayments of tax) and not s. 28A. Mr Evans accepted that the tax avoidance scheme had failed. But if HMRC had been wrong in the way they had tried to recover the over-repaid tax he would not have to pay interest or HMRC might not be able to assess the tax at all.
The FTT rejected Mr Evans’ view and considered that his appeal had no reasonable prospect of success. Judge Tilakapala accordingly struck out Mr Evans’ case.
The FTT did find an error in the closure notice, but found that it was minor and did not affect the validity of the closure notice.
The tribunal considered that the matter at issue in the appeal involved a short point of law or construction and that it had the necessary evidence to determine the question properly and that the parties had been given adequate opportunity to address the issue. It therefore considered that in line with the guidance provided by the Upper Tribunal in The First de Sales Ltd Partnership v R & C Commrs it was able to strike out the case.
For commentary on when the tribunal can strike out a party’s case, see In-Depth at .
Comment by Meg Wilson, Lead Tax Writer, Croner-i Ltd.
[1] With the consent of the parties, this was a remote hearing by video with both parties participating via the Tribunal video hearing system.
[2] Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.
[3] This decision concerns an application by the Respondents (HMRC) for a direction under rule 8(3)(c) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) rules 2009 (the FTT Rules) striking out the proceedings brought by the Appellant (Matthew Evans) on the ground that his case has no reasonable prospect of success.
[4] Rule 8(3) of the FTT Rules provides, so far as material;
(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.
[5] When considering an application to strike out proceedings under rule 8, it is necessary to bear in mind the overriding objective of the FTT Rules. Rule 2 provides:
(1) The overriding objective of these Rules is to enable the Tribunal to deal with cases fairly and justly
(2) Dealing with a case fairly and justly includes –
…
- (c) ensuring, so far as practicable, that the parties are able to participate fully in the proceedings;
- (d) using any special expertise of the Tribunal effectively; and
- (e) avoiding delay, so far as compatible with proper consideration of the issues.
(3) The Tribunal must seek to give effect to the overriding objective when it –
- exercises any power under these Rules; or
- interprets any rule or practice direction.
[6] The Upper Tribunal (Carr J and Judge Sinfield) in First De Sales Ltd Partnership & Ors v R & C Commrs [2018] BTC 531 (“First De Sales”) (at [33]) provides helpful guidance in relation to strike out applications:
Although the summary in Fairford Group Plc2 is very helpful, we prefer to apply the more detailed statement of principles in respect of application for summary judgment set out by Lewison J, as he then was, in Easyair Ltd (t/a Openair) v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15]. This was subsequently approved by the Court of Appeal in AC Ward & Sons v Caitlin Five Limited [2009] EWCA Civ 1098. The parties to this appeal did not suggest that any of these principles were inapplicable to strike out applications.
- 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 Co 100 Ltd [2007] FSR 63
- 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.
[7] The Upper Tribunal continued at [74]:
The issue concerning section 225 ITEPA 2003 gave rise to a short point of construction. The FTT, correctly in our judgment, was satisfied that it had before it all the evidence necessary for the proper determination of the question and that the parties had an adequate opportunity to address it in argument. The Appellants' evidential case was, in our view, hopeless, based on the evidence before the FTT. The FTT was right to conclude 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.
[8] On the basis of the documents provided I find the material facts to be as follows.
[9] At some point during the 2006/07 tax year Mr Evans entered into a tax avoidance scheme known as “Excalibur” (the Excalibur Scheme). The scheme fell within the Disclosure of Tax Avoidance Schemes (DOTAS) provisions in Schedule 7 Finance Act 2014 (and related secondary legislation), and a scheme reference number (SRN) was allocated to it. The scheme was, in broad terms, designed to create a relievable loss for tax purposes with no corresponding economic loss.
[10] In his self assessment tax return for 2006/07 filed on 31 January 2008 (the 2006/07 Tax Return), Mr Evans claimed a capital loss of £604,446 arising from the disposal of shares pursuant to the Excalibur Scheme and sought relief for that capital loss under section 574 of the Income and Corporation Taxes Act 1988 (now repealed) by way of set-off against his income for the 2006/07 tax year. This was on the basis that the company was a “qualifying trading company”. His claim for relief was intended to result in a refund of overpaid tax. As required under the DOTAS provisions, Mr Evans included the Excalibur Scheme SRN in the 2006/07 Return.
[11] A tax repayment of £241,501.88 (the Tax Repayment) was paid to Mr Evans by HMRC on 31 January...
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