HBOS Plc and Another v R & C Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 19 May 2022 |
| Neutral Citation | [2022] UKUT 139 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2022] UKUT 139 (TCC)
Mr Justice Edwin Johnson, Judge Jonathan Richards
Upper Tribunal (Tax and Chancery Chamber)
Procedure – Whether HMRC needed permission to raise issues before the Upper Tribunal – No – VATA 1994, s. 78 – Tribunal Procedure (Upper Tribunal) Rules 2008 (SI 2008/2698), r. 24.
In HBOS Plc & Anor v R & C Commrs [2022] BTC 514, the Upper Tribunal (UT) decided that HMRC were not required to seek permission from the First-tier Tribunal (FTT) to raise two issues before the UT in respect of the appellants’ appeal against the FTT’s decision.
In the earlier decision of HBOS plc [2021] TC 08249, the FTT had dismissed an appeal made by HBOS plc and Lloyds Banking Group plc (the appellants), finding that they were not entitled to further interest from HMRC under VATA 1994, s. 78 (interest in certain cases of official error) in respect of VAT bad debt relief claims.
The appellants appealed against the FTT’s decision. In HMRC’s response to the appeal, made under the Tribunal Procedure (Upper Tribunal) Rules 2008 (SI 2008/2698), r. 24, they:
- alleged that the FTT had erred in law in their interpretation of VATA 1994, s. 78(1)(d); and
- argued that alternatively a further issue they raised at the FTT (which the FTT did not determine), meant the interest should not start from the dates put forward by the appellants.
The appellants applied to the UT objecting to HMRC raising these two issues, submitting that HMRC ought to have sought permission to appeal from the FTT for these issues.
Based on case law the UT summarised the principles concerning appeals from the FTT.
- Appeals lie against the decision.
- To identify the decision, one needs to look at the tribunal’s jurisdiction and issues put before the tribunal.
- A party can only appeal against the decision when it is unsuccessful.
- A party who was successful in the decision cannot appeal reasons in that decision that went against it.
- It follows from (3) and (4) that a successful party to the decision, as properly identified, cannot appeal other findings or reasoning which were not even part of the reasons in that decision. This includes views of the tribunal on how it would have concluded the decision on the hypothesis that it was wrong in the decision it did make. By definition those are not part of the decision so it does not matter the party was unsuccessful on those.
The UT then applied the principles to the facts of this case.
As conceded by the appellants, HMRC did not need permission to raise the first issue. The relevant decision was that the appellants were not entitled to any further interest under s. 78 and the reasoning on s. 78(1)(d) was not part of the relevant decision and in pursuing that issue HMRC, the successful party in the decision, did not seek to change the decision of the FTT that no further interest was due.
As the FTT reached no determination on the further issue, there was nothing HMRC could have appealed against. To conclude that HMRC, the wholly successful party in the decision, and who did not seek to ‘do better’ than their success in FTT, required permission to appeal if they wanted to advance it as a ground, would have gone against the principle that only persons who are unsuccessful in the decision can appeal.
The UT accordingly dismissed the appellants’ application.
Following this decision, the hearing of the appellants’ substantive appeal against the FTT’s decision concerning interest in respect of bad debt relief claims should go ahead in late October 2022.
Comment by Meg Wilson, Lead Technical Writer at Croner-i.
Amanda Brown QC, instructed by KPMG Law appeared for the appellant
Eleni Mitrophanous QC, instructed by the General Counsel and Solicitor for Her Majesty's Revenue and Customs appeared for the respondents
[1] This decision deals with the appellants' objection to HMRC raising two particular issues in its rule 241 Response to the appellants' notice of appeal. The appellants argue HMRC ought to have sought permission to appeal from the FTT for these issues, whereas HMRC maintain no such permission is required. The substantive appeal hearing in this matter is listed for October this year.
[2] The full FTT decision under appeal is published as HBOS plc [2021] TC 08249. The appeal related to HMRC's liability for interest under s78 Value Added Tax Act 1994 (“VATA 1994”) (Interest in certain cases of official error) on VAT bad debt relief (“BDR”) claims arising out of the appellants' car hire purchase business supplies in a period during which claims for BDR had to comply with certain conditions. One of these, (“the property condition”) was subsequently found to be unlawful under EU law and disapplied in R & C Commrs v GMAC (UK) plc [2016] BVC 39.
[3] HMRC paid the appellants interest from the dates the appellant claimed BDR, up until the dates HMRC paid the BDR, on the basis the appellants had suffered delay in receiving the BDR due to HMRC's error in insisting the property condition had to be fulfilled. The appellants argued they were entitled to interest from dates based on return dates linked to a statutory waiting period, or if later, the dates the debts were written off, which were many years before any claim for BDR had been made (“the earlier dates”). The agreed issue put to the FTT was whether interest arose from the claim dates (as HMRC argued) or the earlier dates (as the appellants argued).
[4] Section 78 VATA 1994 provides, so far as relevant, as follows:
(1) Where, due to an error on the part of the Commissioners, a person has–
- accounted to them for an amount by way of output tax which was not output tax due from him and, as a result, they are liable under section 80(2A) to pay (or repay) an amount to him, or
- failed to claim credit under section 25 for an amount for which he was entitled so to claim credit and which they are in consequence liable to pay to him, or
- (otherwise than in a case falling within paragraph (a) or (b) above) paid to them by way of VAT an amount that was not VAT due and which they are in consequence liable to repay to him, or
- suffered delay in receiving payment of an amount due to him from them in connection with VAT,
then, if and to the extent that they would not be liable to do so apart from this section, they shall pay interest to him on that amount for the applicable period, but subject to the following provisions of this section.
[5] The appellants' claim for interest from the earlier dates was based on s78(1)(c) or (d), it being common ground that a) or b) in that section did not apply. The FTT considered the enactment of the property condition was not an “error on the part of the Commissioners” for the purposes of s78(1) because it was an act of Parliament rather than of HMRC. It also found the reason the appellants did not claim BDR earlier was their belief that the property condition was legally valid. section 78 was not engaged on the facts as there was not a causal connection between an “error on the part of the Commissioners” and one of the outcomes in 78(1)(c) or (d) (the “due to …” requirement in s78(1)) ([88] to [100]). The FTT went on (at [101]–[103]) to consider the other aspects of s78 that were argued at the hearing on the “hypothetical basis” that the “due to” requirement was satisfied, rejecting the appellants' case on 78(1)(c) but accepting it on 78(1)(d). The FTT, having satisfied itself its interpretation and application of s78 was in keeping with the relevant EU law principles, and that no settlement agreement had arisen dismissed the appellants' appeal against HMRC's decision to pay interest from the dates of claim (and not earlier).
[6] HMRC had also raised an alternative argument that, even if s78(1)(d) was satisfied, the applicable period would begin later than the earlier dates because it was likely the appellants would have delayed claiming while discussing attribution of consideration issues regarding the finance and goods elements of the hire purchase supplies (“the Further Issue”). The FTT indicated that it did not determine the Further Issue as it had determined the agreed issue in HMRC's favour (although it is part of the appellants' case in the current application, that the FTT nevertheless did make an implicit determination rejecting the Further Issue).
[7] In December 2021, the appellants filed a notice of appeal in the Upper Tribunal setting out five grounds in relation to which the FTT had granted permission. These included that the FTT erred in law in its conclusions regarding the enactment of the property condition not being an error of the Commissioners, consistency with the EU law principles, and accordingly that 78(1)(d) did not apply, and also in its conclusion that 78(1)(c) did not apply.
[8] On 11 January 2022, HMRC filed its rule 24 Response which included:
- points alleging the FTT erred in law in its interpretation of s78(1)(d), and
- arguments, made in the alternative, based on the Further Issue, that claims for interest should start from dates later than the earlier dates.
[9] These are the two points which the appellants submit HMRC ought to have first sought permission from the FTT for, in accordance with the principles discussed further below.
To continue reading
Request your trial
-
HBOS PLC and Lloyds Banking Group PLC v The Commissioners of HM Revenue and Customs [2023] UKUT 00013 (TCC)
...Tribunal also rejected the appellants’ argument that the FTT had implicitly determined the attribution issue: HBOS & Lloyds v HMRC [2022] UKUT 00139 (TCC). The result was that the attribution issue was not something that needed permission from the FTT but could be contained within HMRC’s 10......
-
HBOS PLC & Lloyds Banking Group PLC v The Commissioners for HM Revenue and Customs [2022] UKUT 00139 (TCC)
...citation number: [2022] UKUT 00139 (TCC) UT (Tax & Chancery) Case Number: UT/2021/000197 Upper (Tax and Chancery Chamber) Hearing venue: Remote video hearing (treated as taking place in London) Judgment given on 18 May 2022 Before UPPER TRIBUNAL JUDGE SWAMI RAGHAVAN Between HBOS PLC & LLOYD......