Hull City AFC (Tigers) Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 14 August 2017 |
| Neutral Citation | [2017] UKFTT 629 (TC) |
| Date | 14 August 2017 |
| Court | First Tier Tribunal (Tax Chamber) |
[2017] UKFTT 0629 (TC)
Judge Malcolm Gammie CBE QC
Keith Gordon (counsel) instructed by Jacksons appeared for the appellant
Akash Nawbatt QC (counsel) instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Procedure – Application to vary directions – Payments made to third party in respect of footballer's image rights – HMRC alleging that image rights agreements uncommercial and payments excessive – Payments alleged to be footballer's earnings – Whether HMRC effectively alleging sham – Burden of proof in relation to an allegation of sham – Whether HMRC should be directed to serve their witness evidence and skeleton argument first – Whether HMRC should prepare hearing bundles.
Introduction............................................................................................................... |
3 |
The Appellant's submissions ..................................................................................... |
9 |
HMRC's submissions .............................................................................................. |
12 |
The Appellant's reply .............................................................................................. |
13 |
Hilden Park ............................................................................................................. |
14 |
Discussion ............................................................................................................... |
15 |
The statutory basis for the Directions and Decisions ............................................ |
16 |
The significance of an assessment “standing good” .............................................. |
16 |
The obligation on HMRC to validate the assessment............................................ |
17 |
The burden of satisfying the statutory conditions for raising an assessment.......... |
20 |
Application of the above principles to the Appellant's case.................................. |
23 |
The power to bar HMRC from continued participation in proceedings................. |
24 |
Occasions on which the burden of proof is on or shifts to HMRC ........................ |
26 |
HMRC's obligation to state its case ..................................................................... |
31 |
Sham and abuse ................................................................................................... |
35 |
The Hilden Park Decisions................................................................................... |
44 |
Conclusions on the burden of proof for sham and abuse....................................... |
47 |
What do HMRC allege in their statement of case? ............................................... |
51 |
The appropriate directions in the Appellant's case ............................................... |
57 |
Conclusion .............................................................................................................. |
59 |
[1] This is an application by Hull City AFC (Tigers) Limited (“the Appellant”) to vary the directions that have been made in its appeal. The current directions are those previously agreed between the parties and endorsed by the Tribunal on 20 September 2016. I shall refer to the Respondents as “HMRC”. At the hearing, the Appellant was represented by Mr Keith Gordon and HMRC by Mr Akash Nawbatt QC.
[2] The appeal arises from three Directions under regulation 80 of the Income Tax (Pay As You Earn) Regulations 2003 and three Decisions under section 8 of the Social Security Contributions (Transfer of Functions) Act 1999 in respect of the tax years 2008/2009, 2009/2010 and 2010/2011. The Directions and Decisions were made in respect of payments made by the Appellant to a British Virgin Islands' service company (Joniere Limited) in respect of the image rights of Geovanni Deiberson Mauricio Gómez (who evidently is known simply as Geovanni but who will be referred to in this decision as “Mr Gómez”). I understand that Mr Gómez is an attacking midfield player who played once for Brazil in 2001 and was contracted to the Appellant between 2008 and 2010 after playing in previous years for Cruzeiro, Barcelona, Benfica and Manchester City. I believe that he made 60 appearances for the Appellant and scored 11 goals.
[3] The agreements with which the appeal is concerned are two Premier League contracts between the Appellant and Mr Gómez of 7 July 2008 and 23 September 2009 and two contracts between the Appellant and Joniere Ltd of 3 November 2008 and 24 March 2010. The latter contracts are those in respect of Mr Gómez's image rights (evidently granting the Appellant a licence to exploit for commercial purposes his name, image, signature and other characteristics). These contracts were not produced for the purposes of the hearing although certain terms in the agreements are referred to or reproduced in HMRC's statement of case.
[4] The Appellant appealed the Directions and Decisions and, following a review upholding them on 1 April 2015, the Appellant notified its appeal to the Tribunal on 14 April 2015. The appeal was allocated to the standard category on 12 May 2015. HMRC served their statement of case on 9 July 2015 and at the same time they submitted to the Appellant's representative, Jacksons, a set of draft directions for his agreement. These proposed that the appeal be allocated to the complex category and that (so far as relevant to the present application) the Appellant's witness evidence should be served first.
[5] On 10 July 2015 Mark Jackson of Jacksons replied that he did not agree HMRC's proposed directions and responded with alternative proposals. These proposed that the appeal be allocated to the standard category and that (so far as relevant to the present application) HMRC should serve their witness evidence first.
[6] On 15 July 2015 HMRC objected to the Appellant's proposed directions because that they were predicated on the basis that HMRC bore the burden of proof. Instead it was said that it was incumbent on the Appellant to produce sufficient evidence to prove their case i.e. that on the balance of probabilities HMRC's Directions and Decisions were wrong. In particular, it was said regarding the proposal that HMRC should serve their witness evidence first that:
The Appellant's Directions provide for the Commissioners to serve witness statements before the Appellant. As explained above, the burden in this appeal is on your client and as such it is for them to prove their case. This sequence is therefore illogical. The Commissioners are entitled to be aware of your client's witness evidence before they provide their witness evidence in reply (if any such evidence is required).
[7] A similar comment was made in relation to the proposal that HMRC should serve their skeleton argument first.
[8] Mr Jackson responded on 18 July 2015 to explain that he had not checked the draft directions before they had been sent out and that the typist had transposed the references to appellant and respondent. So, in fact, he had no intention of suggesting that HMRC should serve their witness statements or skeleton argument first.
[9] HMRC then submitted to the Tribunal on 24 July 2015 an application for directions and draft directions, together with the previous correspondence with Jacksons. HMRC's original draft directions and those submitted with its application envisaged that the Appellant should serve a statement of case on the basis that the Appellant's grounds of appeal were brief and formed bare assertions unsupported by legislation, authority or reference to evidence. In summary, the grounds were that, “the amounts [assessed] relate to image rights payments made under a bona fide commercial arrangement” and that no NIC or PAYE was payable on such payments.
[10] Mr Jackson communicated with the Tribunal on 28 July 2015 pointing out that HMRC's directions were not yet agreed and making various points (including his unfamiliarity with Tribunal procedure). Mr Jackson objected to HMRC's request that the Appellant provide a statement of case but he did not raise any issue about the order of service of witness statements.
[11] On 17 August 2015, the Tribunal allocated the appeal to the standard category and issued its usual directions (although mistakenly dated 2016) rather than those proposed by HMRC. On 15 September 2015, following further correspondence between the parties and the Tribunal, the judge to whom the papers had been referred confirmed the categorisation as a standard case and on 22 October 2015 the Tribunal wrote to the parties indicating that it was now listing a case management hearing in the appeal to determine the directions that should be made pursuant to HMRC's application. This was listed for 12 January 2016.
[12] On 8 January 2016 HMRC indicated that directions had been agreed between the parties and submitted the draft for the Tribunal's approval. HMRC requested that the case management hearing listed for 12 January 2016 be vacated. The Tribunal issued the directions with one slight amendment (being the period for the dates to avoid) on 11 January 2016. Those directions envisaged that the Appellant would serve a statement of its case by 1 March 2016 and serve its witness evidence first.
[13] On 1 April 2016, the Appellant served its statement of case as envisaged by the directions (a month later than originally set) and on 20 April 2016 it served its list of documents (just over a month later than originally set). A reason for the delay may have been due to a change of representation for the Appellant from Jacksons to IPS Law LLP. On 8 June 2016 HMRC served their list of documents (over two months later than originally set) and indicated that HMRC proposed to apply for new directions resetting the timetable to take account of the delay.
[14] The Tribunal issued revised directions on 20 September 2016 with an updated timetable. These envisaged that by 26 October 2016 the parties should agree a statement of facts...
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Wildin
...significance of an assessment “standing good” in relation to burden of proof is explicated by Judge Gammie in Hull City AFC (Tigers) Ltd [2017] TC 06065 at [58]: This “stand good” language has been part of the Management Acts since at least section 57 of the Taxes Management Act 1880. It is......
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Bhikhi
...by virtue of s 50(6) TMA. The significance of an assessment standing good is given judicial explication in Hull City AFC (Tigers) Ltd [2017] TC 06065 at [58]: This “stand good” language has been part of the Management Act since at least section 57 of the Taxes Management Act 1880. It is the......
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Malcolm
...Appellant that the assessments were excessive and did not accord with the information provided to HMRC. In Hull City AFC (Tigers) Ltd [2017] TC 06065, the tribunal explained the burden of proof in an assessment following an enquiry, as follows, at [57]–[58]: [57] In the case of an appeal wi......
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Contractor
...of the Finance Act 2008, s 118(1), Sch 39, paras 1, 7(1) R & C Commrs v Tower MCashback LLP 1 [2011] BTC 294 Hull City AFC (Tigers) Ltd [2017] TC 06065 Wisniewski (a minor) v Central Manchester Health Authority [1998] EWCA Civ 596 Nicholson v Morris (HMIT) (1977) 51 TC 95 ...