GLL BVK Internationaler Immobilien Spezialfonds and Another v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 23 January 2019 |
| Neutral Citation | [2019] UKUT 17 (TCC) |
| Date | 23 January 2019 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
Upper Tribunal (Tax and Chancery Chamber)
Judge Jonathan Richards, Judge Thomas Scott
Nicola Shaw QC appeared for the appellants
Ravi Mehta and Celia Rooney, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Income tax – Claims for repayment of tax paid by German real estate investment funds under the Non-Resident Landlord scheme – Whether original claim for all income tax or only a proportion – If not, whether claim could be amended under TMA 1970, s. 114 – Application to amend claim under Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 5(3)(c) – Whether FTT could direct repayment of a greater sum than was claimed under TMA 1970, s. 50 or Sch. 1A – Appeal dismissed.
The Upper Tribunal (UT) upheld the First-tier Tribunal (FTT) decision in [2018] TC 06551, finding that the FTT had correctly interpreted an income tax repayment claim and that the claim could not be amended and nor could the FTT direct a greater repayment than that claimed.
GLL BVK Internationaler Immobilien Spezialfonds and iii-BVK Europa Immobilien Spezialfonds (together the appellants) held interests in UK real estate. Rent on the properties was paid under deduction of income tax under the Non-Resident Landlord (NRL) scheme. The ultimate owners of the appellants were German pension funds.
On 28 February 2014 the appellants wrote to HMRC claiming repayments of income tax paid under the NRL scheme on the basis that the ultimate investor was comparable to a UK pension fund. HMRC understood the letter of 28 February 2014 to relate only to tax attributable to the proportionate interest of one of the ultimate owners, Bayerische Architektenversorgung (Bayerische) and not to tax attributable to the interests of the other German entities which ultimately owned the appellants. HMRC refused the claim on the basis that Bayerische had not registered as a pension scheme in the UK under FA 2004, Pt. 4, Ch. 2.
The appellants appealed to the FTT against HMRC's refusal, on the grounds that it was a breach of the EU principles of equal treatment and the free movement of capital.
The appellants also applied to the FTT on the following four alternative grounds to treat the claim made on 28 February 2014 as a claim for repayment of all income tax suffered by the appellants ultimate owners and not just Bayerische's share of that income tax:
- To amend their grounds of appeal so as to particularise the quantum of their claims for repayment of tax on the basis that the claims as originally made were for a repayment of the tax relating to the other beneficial owners, as well as for that relating to Bayerische (the First Application).
- For a ruling that TMA 1970, s. 114 permitted the appellants to amend their claims so as to encompass the other beneficial owners (the Second Application).
- For the tribunal to direct under the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, r. 5(3)(c) (the FTT Rules) that the claim be amended in that way (the Third Application).
- For a ruling that TMA 1970, s. 50 and/or Sch. 1A, para. 9(5) gave the FTT power to direct HMRC to repay all the tax deducted from the rental income of all beneficial owners, and not only from Bayerische's income (the Fourth Application).
The applications were refused, because the FTT agreed with HMRC that:
- the claims were originally made for the repayment of tax deducted only from income relating to Bayerische;
- the claims could not be amended in reliance on TMA 1970, s. 114;
- r. 5(3)(c) of the Tribunal Rules could not be used to enlarge the scope of a claim; and in any event, it would not be fair and just to do so; and
- TMA 1970, s. 50(6) only applied where an assessment was under appeal, and the applicants had not appealed their self-assessment; instead they made repayment claims and appealed the closure notices issued following those claims. The relevant provision was instead Sch. 1A, para. 9(3) and that provision did not permit the tribunal to direct that HMRC refund the tax borne by the other investors.
The appellants appealed to the UT, which dismissed the appeals.
On the first application, the UT found that as the claim letter was sent to HMRC it should be construed as having the meaning that, in the light of all relevant circumstances, a reasonable HMRC officer would give it. The UT entirely agreed with the FTT's conclusion that a reasonable HMRC officer would interpret the claim letter as a claim for repayment of only Bayerische's share of the income tax. The mere fact that a total amount of income tax was specified in the first paragraph of the letter did not, when the claim letter was read as a whole, compel the conclusion that the appellants were claiming repayment of that total sum. The UT said that it followed that the FTT was correct to refuse the First Application since it could not permit the appellants to amend their grounds of appeal so as to deal with a claim for repayment of all income tax that had never been made.
On the second application, the UT found that the claim letter did not fall within the definition of documents that would not be invalidated through want of form or errors under TMA 1970, s. 114. This was because it did not constitute “other proceedings” as it was not a document required to be used in assessing, charging, collecting and levying tax. However, in case this conclusion was wrong it found that there was no “mistake, defect or omission” and therefore the FTT made no error of law when it found that the claims could not be amended under TMA 1970, s. 114.
The UT considered the third application to be fundamentally misconceived. It found that neither Reed Employment Ltd v R & C Commrs [2013] BVC 1,593 nor R & C Commrs v Vodafone Group Services Ltd [2016] BVC 506 were authority for the proposition that the FTT rules conferred any discretion on the FTT to permit claims already made by a taxpayer to HMRC to be altered. Moreover, the powers given to the FTT to determine disputes on income tax repayment claims and the fact that the FTT (and UT) were “creatures of statute” without any inherent jurisdiction, there was plainly no room for the discretion which the appellants argued should be exercised in their favour.
Even if the UT was wrong in that conclusion, it ruled that the FTT was plainly correct to characterise the third application as involving the making of a completely new claim, and not merely an amendment to an existing claim. Finally, even if the FTT did have a discretion to permit an amendment to the claim, it was not bound to exercise its discretion in the appellants' favour, and it was entitled not to, given the lack of explanation of the four year delay between the claim letter being submitted and the application for the claim to be amended.
On the fourth application, the UT found that the FTT was limited to considering the claims for repayment that the appellants had actually made, and HMRC's conclusions that those claims should be rejected. Therefore, in this appeal, the FTT would not be entitled to award the appellants an income tax repayment that they had not claimed.
This case shows how important it is to ensure claims are made correctly. By not doing so, and not being able to amend the claims, the potential repayments have been reduced from £6.4m to £1m.
[1] This is the decision on the appeal by GLL BVK Internationaler Immobilien Spezialfonds (“GLL”) and iii-BVK Europa Immobilien Spezialfonds (“iii-BVK”) (together “the Appellants”) against the decision of the First-tier Tribunal (“FTT”) released on 21 May 2018 and reported at [2018] TC 06551 (“the Decision”).
[2] The Appellants are German real estate investment funds. Since their precise characteristics may be relevant in the ongoing FTT proceedings, and since we had no evidence as to those characteristics, we will simply recite the Appellants' contentions as to relevant characteristics without making any findings. As a matter of German law, it is said that the Appellants have no separate legal personality and they are therefore managed by separate management companies. At all material times, both Appellants held interests in UK real estate (the legal title to which was vested in their respective management companies) and rent on those properties was paid under deduction of income tax under the Non-Resident Landlord (“NRL”) scheme. Each of the Appellants was said to be fiscally transparent.
[3] One of the fifteen ultimate owners of the Appellants was a German pension fund, Bayerische Architektenversorgung (“Bayerische”). Bayerische held approximately 14% of iii-BVK and 17% of GLL, through its 100% holding in BARCHV-Masterfund (“Masterfund”), another German fund which was said to be fiscally transparent. The other ultimate owners of the Appellants were also German pension funds who also held interests in the Appellants through separate “masterfunds” that were also said to be fiscally transparent.
[4] On 28 February 2014 the Appellants wrote to HMRC claiming repayments of income tax paid under the NRL scheme for the four years ending 5 April 2010 through to 2013.1
[5] HMRC understood the letter of 28 February 2014 to relate only to tax attributable to the proportionate interest of Bayerische in the Appellants (which we will refer to throughout this decision as “Bayerische's share” of that income tax), and not to tax attributable to the interests of the other German entities which ultimately owned the Appellants. They refused the claim on the basis that Bayerische was not registered as UK tax law required under the Finance Act 2004.
[6] On 4 August 2017 the Appellants appealed to the FTT against HMRC's refusal, on the grounds that it was a breach of the EU principles of equal treatment and the free movement of capital.
[7] The position of...
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HMRC v The Applicants/Appellants in the Post-Prudential Closure Notice Application Group Litigation/ Appeals Group Litigation
...114 applied to taxpayer documents that was tacitly approved by the Court of Appeal. HMRC rely on GLL BVK in the Upper Tribunal ([2019] UKUT 17 (TCC)) which concerned a claim to repayment of tax pursuant to Schedule 1AB TMA 1970. The Upper Tribunal did not have to decide whether section 114 ......
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(1) GLL BVK International Immobilien Spezialfonds (2) iii-BVK Europa Immobilien Spezialfonds v The Commissioners for HM Revenue and Customs
...[2019] UKUT 0017 (TCC) Appeal numbers: UT/2018/0119 UT/2018/0120 INCOME TAX – claims for repayment of tax paid by German real estate investment funds under the Non-Resident Landlord scheme – whether original claim for all income tax or only a proportion – if not, whether claim could be amen......