Mitchell and Bell v R & C Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 08 October 2021 |
| Neutral Citation | [2021] UKUT 250 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
Judge Jonathan Richards, Judge Jonathan Cannan
Upper Tribunal (Tax and Chancery Chamber)
Procedure – Disclosure of documents by HMRC relating to the tax affairs of one appellant to an appellant in a related appeal – HMRC's duty of confidentially – Relevance of the documents – Case management decision of the FTT – Appeals dismissed – Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 5(3)(a), 15(2)(b), Commissioners for Revenue and Customs Act 2005, s. 18.
The Upper Tribunal (UT) upheld the First-tier Tribunal (FTT) decision in Mitchell and Bell [2020] TC 07598, concerning the disclosure of documents about one taxpayer to another taxpayer where their appeals had been joined but where the taxpayers had competing interests.
The first appellant (Mr Mitchell) and the second appellant (Mr Bell) were both shareholders of two companies, Universal Payroll Services Ltd and Universal Project Services Ltd, referred to together as the Universal Companies. HMRC assessed both companies to recover overpaid input tax and penalties on the basis that the companies deliberately reclaimed input tax to which they were not entitled. The Universal Companies subsequently went into liquidation and have not appealed the assessments or penalties.
Personal liability notices (PLNs) were given to Mr Mitchell and Mr Bell, making each liable to 50% of the penalties charged on the companies, as HMRC considered them both to be shadow or de-facto directors. The liability for each appellant was approximately £6m.
The appellants separately appealed against the PLNs on the basis that they were not de facto or shadow directors. The Tribunal had directed that both appeals should be heard together. The appellants were separately represented and their interests were not aligned, with Mr Bell's case being that Mr Mitchell ran the companies, while Mr Mitchell's case was that he did not run the companies.
In preparation for the case:
- HMRC applied for them to be permitted to disclose to Mr Bell certain documents relating to the tax affairs of Mr Mitchell and companies connected with him; and
- Mr Mitchell applied for the same documents to be excluded from evidence at the hearing of the two appeals.
In Mitchell and Bell [2020] TC 07598, the FTT considered the applications in light of its power to exclude documents pursuant to the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 15(2)(b), its power to order disclosure under r. 5(3)(d) and the Commissioners for Revenue and Customs Act 2005, s. 18.
The FTT grouped the documents into generic levels and considered which should be admitted into evidence and accordingly copied to Mr Bell.
| Generic level of documents | Description of documents | Status |
| Level 1 | A section of any document which directly refers to the Universal Companies or either of them (other than simply a bare mention of their name) | Relevant and admissible |
| Level 2 | A section of any document which shows interaction between the Universal Companies and/or either Mr Mitchell or Mr Bell. Sub-divided as follows: | |
| (a) | Any mention of direct interaction by either Mr Mitchell and/or Mr Bell with either or both of the Universal Companies; | Relevant and admissible, and to be admitted even if duplicated elsewhere |
| (b) | Any mention of interaction between the Universal Companies or either of them with other companies controlled or allegedly controlled by Mr Mitchell and/or Mr Bell; | Only relevant and admissible on the current pleadings to extent refers to companies mentioned in HMRC’s statement of case |
| (c) | Any mention of interaction between Mr Mitchell and Mr Bell even if in a context outside the Universal Companies | Relevant and admissible |
| Level 3 | Any mention in a document which goes to show Mr Mitchell’s interactions with other companies which he controlled or allegedly controlled, and in particular his interactions with companies which had dealings with the Universal Companies. | Only relevant and admissible on the current pleadings to extent refers to companies mentioned in HMRC’s statement of case |
| Level 3 | Anything which went to Mr Mitchell’s or Mr Bell’s credibility generally and in particular the credibility with which they presented the affairs of companies which they controlled or allegedly controlled | Not relevant on the present pleadings |
Mr Mitchell and Mr Bell both appealed to the UT, which dismissed their appeals.
In reaching this decision the UT rejected Mr Mitchell's submissions that:
- the FTT applied too broad an interpretation as to the relevance of documents, and in relation to Level 2C, no reasonable tribunal could have decided that HMRC should be entitled to rely on documents for factual propositions that had not been in HMRC's statement of case; and
- the FTT failed to recognise the inherent prejudice to Mr Mitchell in admitting the documents in Level 2C and Level 3.
The UT also rejected Mr Bell's submissions that:
- the FTT was wrong to restrict the documents to be disclosed falling within Level 2B or Level 3 by reference to those relating to companies referred to in HMRC's statement of case; and
- the FTT adopted an unduly restrictive approach to the relevance of Level 4 documents.
The UT accepted that the FTT had not been wrong in their decisions concerning which generic levels of documents relating to one of the taxpayers were relevant and admissible in the case and therefore should be copied to the other taxpayer.
In respect of the documents which were found not to be relevant the UT pointed out that even though this meant that documents would not be copied to the other taxpayer, that taxpayer could apply to the FTT for a direction that HMRC or the taxpayer must disclose the documents to him.
Julian Hickey, counsel, instructed by Levy & Levy Solicitors appeared for the First Appellant
Barrie Akin, counsel, instructed by Hill Dickinson Solicitors appeared for the Second Appellant
Jenny Goldring and Aparna Rao, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
[1] The first appellant (“Mr Mitchell”) and the second appellant (“Mr Bell”) separately appeal against a decision of the FTT released on 30 October 2019 (“the Decision”). Mr Mitchell and Mr Bell have separate appeals before the FTT which are due to be heard together by the same tribunal. The FTT had two applications before it, which it dealt with in the course of a case management hearing:
- an application by HMRC dated 21 December 2018 that HMRC should be permitted to disclose to Mr Bell certain documents relating to the tax affairs of Mr Mitchell and companies connected with him;
- an application by Mr Mitchell dated 18 January 2019 that the same documents should be excluded from evidence at the hearing of the two appeals.
[2] Mr Mitchell and Mr Bell are both shareholders in two companies, Universal Payroll Services Ltd (“Payroll”) and Universal Project Services Ltd (“Project” and together with Payroll the “Universal Companies”). HMRC considered that there were inaccuracies in the Universal Companies' VAT returns submitted between 2010 and 2014 involving claims for input tax credit that was not due. HMRC assessed the Universal Companies to recover that input tax, and also assessed them to penalties determined on the basis that the inaccuracies were deliberate. The Universal Companies subsequently went into liquidation and have not appealed the assessments or the penalties.
[3] HMRC also used their power under paragraph 19(1) of Schedule 24 to the Finance Act 2007 to give personal liability notices (“PLNs”) to Mr Mitchell and Mr Bell, making each liable to 50% of the penalties charged on the companies. Paragraph 19(1) provides as follows:
Where a penalty under paragraph 1 is payable by a company for a deliberate inaccuracy which was attributable to an officer of the company, the officer is liable to pay such portion of the penalty (which may be 100%) as HMRC may specify by written notice to the officer.
[4] An “officer” for these purposes is defined by paragraph 19(3) as referring to a director, which includes by virtue of ss250 and 251 Companies Act 2006, a de facto director and a shadow director.
[5] Thus paragraph 19(1) imposes two preconditions to the imposition of a PLN: first a PLN can only be imposed on an “officer” of the company concerned; second, the deliberate inaccuracy that led to the company being charged a penalty must be “attributable to” that officer. The PLNs relevant in these proceedings were given on the basis that both appellants were de facto or shadow directors of both Payroll and Project, and so were “officers” and that each company's deliberate inaccuracy was “attributable to” both appellants. The liability of each appellant is approximately £6m. Both appellants deny that they were de facto or shadow directors.
[6] On 9 May 2018, the FTT directed that the appellants' appeals should proceed together and be heard together. It also directed HMRC to serve a combined statement of case which they did on 9 July 2018. In that statement of case, HMRC referred to investigations under Code of Practice 9 (“COP 9”) that they had made into the tax position both of Mr Mitchell and of companies that he controlled and to information that Mr Mitchell provided to them in the course of those investigations. Mr Bell wrote to HMRC to request early disclosure of some of the documents that HMRC had referred to in their statement of case, including some of the material relating to HMRC's COP 9 investigation. On making enquiries with Mr Mitchell, HMRC ascertained that he objected to disclosure of some of these documents.
[7] Meanwhile, HMRC served their list of documents on 31 October 2018. That contained references to a number of documents connected with HMRC's COP 9 investigations...
To continue reading
Request your trial
-
Mark Mitchell v The Commissioners for HM Revenue and Customs
...ON APPEAL FROM UPPER TRIBUNAL TAX AND CHANCERY CHAMBER UPPER TRIBUNAL JUDGE JONATHAN RICHARDS UPPER TRIBUNAL JUDGE JONATHAN CANNAN [2021] UKUT 0250 (TCC) Royal Courts of Justice Strand, London, WC2A 2LL Barrie Akin (instructed by Hill Dickinson LLP) for the Appellant (Mr Julian Hickey and R......