McEnroe and Another v R & C Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 23 October 2023 |
| Neutral Citation | [2023] UKUT 255 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2023] UKUT 255 (TCC)
Judge Greg Sinfield, Judge Vinesh Mandalia
Upper Tribunal (Tax and Chancery Chamber)
Value added tax – Procedure – Jurisdiction of FTT – Whether a request to retrospectively amend date on which a body corporate became a group member was an application under VATA 1994, s.43(2) – Whether right of appeal against refusal – VATA 1994, s. 83(1) – Appeal dismissed.
In Dollar Financial UK Ltd v R & C Commrs [2023] BVC 512, the Upper Tribunal (UT) upheld the decision of the First-tier Tribunal (FTT) in Dollar Financial UK Ltd to strike out an appeal, there having been no valid application under VATA94, s. 43B or decision made by HMRC relating to registration, meaning the FTT lacked jurisdiction. Appeal dismissed.
DFUK was the representative member of the DFUK VAT group. In June 2013 an application was made, on their behalf, to include their US parent company, Dollar Financial Group Inc (DFGI) in the VAT group. HMRC approved that application and DFGI joined the VAT group with effect from the date of application.
In September 2016 an amendment was requested, by letter, to the date on which DFGI was included in the group. The appellant claimed that, following a review, it considered DFGI to have had a fixed establishment in the UK since 2012 when it should have registered for VAT due to the level of management services provided to DFUK (which they had previously accounted for under the reverse charge). They were therefore seeking immediate inclusion in the VAT group from this earlier date in 2012 and recovery of VAT they claimed had been overpaid under the reverse charge.
HMRC refused the request. A decision that was maintained on statutory review. DFUK therefore lodged an appeal. HMRC claimed their decision had no legal consequence, DFUK had no right of appeal, and the appeal should be struck out. At a preliminary hearing, the FTT concluded there had been no valid application under VATA 1994, s. 43B and there was no appealable issue in respect of registration so that VATA 1994, s. 83(1)(k) was not engaged, and since HMRC had made no decision on the repayment of VAT overpaid, s. 83(1)(t) was also not engaged. Accordingly, they had no jurisdiction and the appeal had to be struck out. DFUK were granted permission to appeal to the UT.
DFUK submitted three grounds of appeal:
- The FTT were wrong to hold DFUK had no right of appeal under s. 83(1)(a);
- The FTT were wrong to hold DFUK did not make a valid application under s. 43B;
- The FTT were wrong to hold that if DFUK did make a valid application it was deemed granted from the date of application and was of no legal effect with no right of appeal under s. 83(1)(k).
The UT addressed grounds 2, 3 and then 1.
Applying the plain and ordinary language of the provision in s. 43B at the time of the application, it applied where an application was made for two or more corporate bodies to be treated as members of a VAT group. It also applied when two or more corporate bodies are already treated as members of a VAT group, and a valid application is made for one of the four purposes identified in s. 43B(2)(a)–(d) which at that time included an application for another body corporate to join the group. The word ‘another’ referred to an additional entity that was not already a member of the VAT group. The FTT was therefore correct to say that no valid application had been made under s. 43B(1) or (2).
It was not disputed HMRC did not respond within ninety days and therefore, if a valid application had been made, it would be deemed to take effect from the date of application. The FTT concluded this would have had no legal affect because at the time of application DFGI was already a member of the VAT group. This appeared to assume the application was to become a member of the VAT group and ignore that it was, in fact, an application to amend the date on which it had become a member. As an application to amend the date, the issue then was what ‘with effect from ‘ meant. The UT did not consider an application under s.43B(4)(a) could have retrospective effect. HMRC could only allow it to have effect from an earlier time under s. 43B(4)(b). Accordingly the application could only take effect from the date of application when DFGI was already a member of the VAT group.
If that was wrong the appeal would still fall to be struck out because, if a valid application had been made and not refused within 90 days, it would have been taken to be granted and there would be no refusal capable of giving rise to an appeal.
Section 83(1)(a) provided a right of appeal against a decision relating to registration or cancellation of registration. Liability to register for VAT and eligibility to join a VAT group were two separate matters. The application made was for an amendment to the date on which DFGI became a member of the VAT group, and that was the only issue on which HMRC had made a decision. There was no decision made by HMRC relating to the registration of DFGI.
The FTT was right to decide that it lacked jurisdiction and to strike out the appeal. There was no valid application under s. 43B and there was no decision relating to the registration of DFGI.
The appeal was therefore dismissed.
It was pointed out by Judge Sinfield, in this decision, that although it had been found no valid application had been made and the FTT lacked jurisdiction that did not mean there was no legal remedy. A decision in the exercise of HMRC’s discretionary care and management responsibilities could not give rise to a right of appeal to the FTT but could be challenged by applying for judicial review.
Comment by Angela Bedi, Senior Tax Writer, Croner-i Ltd.
James Rivett KC and Calypso Blaj, counsel, instructed by PricewaterhouseCoopers LLP appeared for the appellant
Hui Ling McCarthy KC and Michael Ripley, counsel, instructed by the General Counsel and Solicitor to His Majesty's Revenue and Customs appeared for the respondents
In a decision released on 8 July 2021 with neutral citation [2021] UKFTT 253 (TC) [[2021] TC 08199] (“the Decision”), the First-tier Tribunal (Tax Chamber) (“the FtT”) struck out an appeal by Dollar Financial UK Limited (“DFUK”). DFUK had appealed against the rejection by the Respondents (“HMRC”) of DFUK's application of 29 September 2016 to amend the date on which its USA parent company, Dollar Financial Group Inc (“DFGI”), joined the DFUK VAT group from 27 June 2013 to 1 July 2012 with retrospective effect. The FtT struck out DFUK's appeal under rule 8(2)(a) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (“FtT Rules”) on the ground that the FtT did not have jurisdiction in relation to the proceedings because there was no valid application by DFUK under section 43B of the VAT Act 1994 (“VATA 1994”) and thus no appealable decision under section 83 VATA 1994.
The Decision was amended and re-issued on 10 January 2022 with amendments pursuant to rule 37 of the FtT Rules to correct clerical mistakes, accidental slips and omissions but nothing turns on that. All references to the Decision in this decision are to the amended Decision.
There was no challenge by either party to the facts set out by the FtT in [10] to [21] of the Decision. The material facts for the purposes of this appeal may be summarised as follows.
DFUK was the representative member of the DFUK VAT Group which included other members from the same corporate group. On 27 June 2013, PwC, acting on behalf of DFGI, applied for DFGI to be added to the DFUK VAT Group with immediate effect. On 12 August 2013, HMRC issued a letter approving DFGI's inclusion with effect from 27 June 2013.
On 29 September 2016, the Tax Director of DFUK wrote to HMRC requesting an amendment to the date on which DFGI was included in the DFUK VAT Group. The letter included the following:
I am writing to you to request an amendment to the date on which Dollar Financial Group Inc (via its UK branch – Dollar Financial Group Inc UK branch), hereinafter collectively referred to as “DFG” , was included in the DFUK VAT group.
… My initial review of the group's activities highlighted the potential for DFG to have had a fixed establishment for VAT purposes prior to the point at which it registered its UK branch with Companies House and became registered for VAT as part of the DFUK VAT group.
…
… DFG registered its UK branch, DFG – UK branch, with Companies House on 25 June 2013. DFG – UK branch was included in the DFUK VAT group with effect from 27 June 2013.
…
Prior to the date on which DFG registered its branch in the UK and became a member of the DFUK VAT group, DFG maintained its involvement in the growth strategy of the UK businesses from its establishment in Philadelphia … a decision was made to increase the level of support provided by DFG in terms of growth strategy and management of the UK business to ensure that the group realised the potential of its recent acquisitions
The result of this decision was that a number of DFG employees were seconded to the UK during 2011 and 2012 … The bulk of the DFG employees arrived in the UK during August 2011 and November 2011 with the remaining individuals arriving during 2012.
It is worthwhile noting at this stage, that whilst the employees were seconded to the UK businesses and occupied UK office space, the individuals concerned were all senior members of staff with ability to act independently on behalf of DFG. The direction and control of the activities undertaken by the relevant employees remained with DFG. It is my opinion (for the reasons set out below) that the secondment of these individuals created a fixed establishment for VAT, earlier than DFG's actual registration date in the VAT group on 27 June 2013.
Whilst I do not consider DFG's activities...
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