GB Fleet Hire Ltd v R & C Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 17 November 2022 |
| Neutral Citation | [2022] UKUT 307 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2022] UKUT 307 (TCC)
Judge Thomas Scott, Judge Julian Ghosh KC
Upper Tribunal (Tax and Chancery Chamber)
VAT – Procedure – Cancellation of VAT registration – Risk of abuse – Cancellation not appealled – Subsequent VAT registration application – VAT registration refused – Appeal against refusal struck out as abuse of process – Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, r. 8(3)(c) – Whether substantive appeal required – Yes – Appeal allowed.
In GB Fleet Hire Ltd v R & C Commrs [2022] BVC 511, the Upper Tribunal (UT) reinstated an appeal by the taxpayer against HMRC’s decision to refuse to register them for VAT. The FTT had previously struck out their appeal as an abuse of process.
GBFH had been registered for VAT but, in 2017, they were subject to VAT assessments alleging their involvement in fraud and their VAT registration was cancelled on Ablessio principles (Valsts ieņēmumu dienests v Ablessio SIA (Case C-527/11) ). They appealed the VAT assessments but, due to a legal misunderstanding, failed to appeal the compulsory deregistration. In 2020 they applied to register for VAT on the basis of two taxable transactions that exceeded the VAT registration threshld; the sale of a Ford Transit minibus in the UK, and the sale of a Lamborghini that was exported to Malaysia. HMRC did not dispute the validity of either transaction but refused the application citing the previous cancellation.
On appeal the First-tier Tribunal (FTT) found the need to protect the revenue from abuse ‘trumped’ any entitlement to be registered for VAT. To re-register GBFH would have to show either the risk of abuse had never existed, or the risk of future abuse had been addressed and mitigated. The FTT had inferred from the lack of any appeal on the deregistration issue, that the appellant accepted the cancellation was necessary to prevent abuse, and therefore could not now argue the abuse had never existed. But they had not provided any evidence the risk of future abuse had been either addressed or mitigated. It was irrelevant HMRC had mistakenly suggested, in the grounds given for the rejection of the VAT registration application, that the compulsory cancellation was under appeal. HMRC’s application to strike out the appeal was therefore successful.
The UT concluded that although the FTT had correctly directed itself as to the applicable principles, in the case, it had erred in applying those principles to the facts before it.
It was not irrelevant that one of the two reasons for rejecting the registration application was agreed to be wrong. The FTT had taken into account irrelevant factors such as the reference to GBFH’s original grounds of appeal. That explained why HMRC had made the error but did not mean it was not an error. The FTT had also erred in drawing the conclusion it had from GBFH’s failure to appeal the 2017 cancellation of registration. The fact they now accepted the deregistration was binding, did not mean they accepted the reasons advanced by HMRC. The appellant had expressly denied the correctness of the original proposition of abuse. It was irrational to conclude that a failure to appeal the 2017 cancellation, in the facts and circumstances of the case, gave rise to an inference that GBFH accepted it was abusing its VAT registration. Finally, while the UT agreed Ablessio was prospective in nature, the principle of proportionality also had to be considered and it required an ongoing scrutiny of the circumstances rather than a presumption of continuity. It didn't necessarily follow that the circumstances in 2017 would ‘trump’ the supplies in 2020. These were matters to be properly argued and weighed before a substantive appeal and it was for HMRC to explain whether or why the risks identified in 2017 were said to persist. The strike out application was refused and the original appeal in relation to registration was reinstated.
The procedural rules can sometimes appear, as in the Telent case (Telent Technology Services Ltd or in York Burton Lane Club and Institute Ltd & Ors to result in harsh or even absurd consequences when taxpayers are caught out by them. This decision, however, represents a victory for common sense. It also provides a useful clarification of the legal and evidential requirements in Ablessio cases, which is particularly welcome in light of HMRC’s increased use of this principle to compulsorily deregister businesses.
Comment by Angela Bedi, Senior Tax Writer, Croner-i Ltd.
Kieron Beal KC, instructed by VC Law Ltd appeared for the appellant
Howard Watkinson, instructed by the General Counsel and Solicitor to His Majesty's Revenue and Customs appeared for the respondents
[1] In a decision dated 5 August 2020 (“the 2020 registration rejection”), the Respondents (“HMRC”) refused to register the Appellant (“GBFH”) for VAT. GBFH appealed to the FTT against that refusal. HMRC applied to the FTT to strike out the appeal. The FTT, in a decision released on 30 April 2021 (“the Decision”), granted HMRCs' application and struck out GBFH's appeal. This is the decision on GBFH's appeal against the Decision.
[2] References below to paragraphs in the form [*] are, unless stated otherwise, to paragraphs in the Decision.
[3] The material background facts, including those as found in the Decision at [4]–[17], are as follows:–
- In September 2017, HMRC notified GBFH of their decision to assess GBFH to VAT for the periods 01/16 to 03/17 on the grounds that supplies made by GBFH did not qualify for zero- rating as exports.
- By a decision letter dated 18 October 2017 (the 2017 notification), HMRC notified GBFH of HMRC's decision to cancel GBFH's VAT registration with effect from 31 October 2017. HMRC's sole ground for de-registering GBFH in the 2017 notification was that GBFH was using its VAT registration principally or solely for abusive purposes.: [6]. The 2017 notification specified that … The following factors indicate that [GBFH] are principally or solely registered for VAT for abusive purposes: [GBFH] seems to be registered to facilitate fraud. DVLA check shows vehicles still registered in the UK. No credible evidence of export. Failure to apply for road tax refunds. No evidence of vehicles being insured when transporting. Refusal to provide bank statements. Checks found no credible evidence of customers in Far East. Payments were not made until car has been shipped.: [6].
- The 2017 notification set out GBFH's right to seek from HMRC a statutory review and to appeal against HMRC's decision to the FTT.
- GBFH did not exercise its right of appeal to the FTT against the decision to de-register GBFH in the 2017 notification.
- However, GBFH did appeal against the resultant VAT assessments. GBFH's grounds of appeal included the statement that [GBFH] does not make a free-standing appeal against [HMRC's decision communicated by the 2017 notification], to de-register [GBFH] for VAT as of 31 August 2017. That is because if the conclusions [in the 2017 notification] were correct, [HMRC] was left with no alternative as a matter of law but to de-register [GBFH] … However since [the] conclusions [in the 2017 notification] are the subject of strenuous challenge, it follows that, if GBFH's appeal [against the assessment to VAT] is allowed … the de-registration decision [i.e. the decision communicated in the 2017 notification] must also fall away.: [8].
- GBFH's appeal against the assessment to VAT was partially struck out in a direction by Judge Poole dated 5 August 2019 and struck out altogether by Judge Brooks in 2020 in a decision reported at [2020] TC 07843. We note that the Upper Tribunal has allowed an appeal against Judge Brooks' decision and GBFH's appeal against the VAT assessments has been reinstated: see [2021] BVC 514.
- Judge Poole, in his direction dated 5 August 2019 which partially struck out GBFH's appeal against the VAT assessments, correctly observed that GBFH was wrong to say, in their grounds of appeal against the VAT assessments, that if GBFH successfully appealed against the VAT assessments, HMRC's decision to de-register GBFH in the 2017 notification would automatically fall away. HMRC's decision to de-register GBFH in the 2017 notification was a separate matter from any assessment to VAT which stood alone as an appealable matter and since GBFH had specifically stated it did not wish to appeal against the de-registration decision in the 2017 notification, the 2017 notification of HMRC's decision to de-register GBFH remained good. This meant that certain grounds of appeal raised by GBFH against the assessments to VAT had no reasonable prospect of success and were thus struck out by Judge Poole.
- On 3 July 2020, GBFH applied to register for VAT on the basis that GBFH's supplies in May 2020 exceeded the VAT registration threshold (the 2020 registration application): [12]. GBFH had made two supplies (the 2020 supplies) in May 2020: (1) the sale of a Ford Transit minibus on 6 May 2020 to the West Lancashire Freemasons Charity, which was donated by the charity to a scout group in Blackpool and (2) the sale of a Lamborghini on 21 May 2020 to Autobell, whose address on the invoice was in Japan, which was exported to Kuala Lumpur in Malaysia. Documentary evidence of the 2020 supplies was included in the bundle before the FTT and HMRC did not dispute that the 2020 supplies were actually made: [12].
- HMRC rejected the 2020 registration application in the 2020 registration rejection, stating as follows:We are unable to proceed with your VAT registration application as G B Fleet Hire Ltd has previously been registered for VAT under number 106 9706 10 which has been cancelled by HMRC on the basis that the VAT registration was being utilised solely or principally for abusive purposes. The letter issued to you by Stephen Mills dated 18 October 2017 refers ( A copy of which can be forwarded on...
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