Mithras (Wine Bars) Ltd v HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judgment Date | 05 March 2010 |
| Neutral Citation | [2010] UKUT 115 (TCC) |
| Date | 05 March 2010 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2010] UKUT 115 (TCC).
Upper Tribunal (Tax and Chancery Chamber).
Sir Stephen Oliver QC.
Tim Brown (instructed by Weightmans) for the taxpayer.
Sarabjit Singh (instructed by the general counsel for HMRC) for the Crown.
The following cases were referred to in the judgment:
C & E Commrs v Pegasus Birds LtdUNKVAT [2004] EWCA Civ 1015; [2004] BVC 788
Georgiou (t/a Marios Chippery) v C & E CommrsVAT [1996] BVC 236
Koca v C & E CommrsVAT [1996] BVC 35
Murat v C & E CommrsVAT [1998] BVC 343
Rahman (t/a Khayam Restaurant) v C & E CommrsVAT [1998] BVC 323
Rahman (t/a Khayam Restaurant) v C & E Commrs (No. 2)UNKVAT [2002] EWCA Civ 1881; [2003] BVC 170
Van Boeckel v C & E CommrsVAT (1981) 1 BVC 378
Value added tax - Assessment - Appeal - Restaurants and takeaways - Best judgment - Amount of assessment - Jurisdiction of First-tier Tribunal - Supervisory jurisdiction of tribunal in respect of best judgment wrongly applied to amount of assessment - Appeal allowed - Matter remitted to tribunal to determine correct amount of assessment - Value Added Tax Act 1994, Value Added Tax Act 1994 section 73 subsec-or-para 1s. 73(1).
This was an appeal by the taxpayer against a decision of the First-tier Tribunal ([2009] UKFTT 83 (TC); [2009] TC 00051) that certain VAT assessments had been made to best judgment and were accordingly correct.
The taxpayer operated six delicatessens and two bars in London. The decision appealed against concerned the taxpayer's appeal against three assessments for VAT. In respect of three of the delicatessens, the FTT decided that there was a binding agreement between the taxpayer and HMRC for the purposes of reg. 67(1) of the Value Added Tax Regulations 1995 that 30 per cent of the sales at those establishments would be treated as standard-rated for VAT purposes, and 70 per cent would be treated as zero-rated. HMRC did not appeal against that finding and had agreed revised assessments with the taxpayer on the basis of the FTT's decision. The FTT upheld the assessments relating to the other establishments on the basis that they were made to best judgment and were accordingly correct. The taxpayer appealed against that part of the decision on grounds that the FTT erred in law by restricting itself to having a supervisory jurisdiction instead of an appellate jurisdiction in respect of the amount of the assessments, and that, in deciding the issue on whether the assessments were made to best judgment, it failed to address the primary task of finding the correct amount of tax based on the material placed before it.
Held, allowing the appeal and remitting the matter to the tribunal for reconsideration:
1. The FTT had a quasi-supervisory function when considering whether an assessment was raised to the best of HMRC's judgment, but when considering the correct amount of the assessment, the FTT had a full appellate jurisdiction. (Van Boeckel v C & E Commrs (1981) 1 BVC 378, Rahman v C & E Commrs [1998] BVC 323, Koca v C & E Commrs [1996] BVC 35, Georgiou (t/a Marios Chippery) v C & E Commrs [1996] BVC 236, Murat v C & E Commrs [1998] BVC 343, Rahman v C & E Commrs (No. 2) [2003] BVC 170 and C & E Commrs v Pegasus Birds Ltd [2004] BVC 788 considered.)
2. The taxpayer had raised but not pursued a "best judgment" challenge. However, the FTT appeared to have applied, erroneously, the Van Boeckel/Rahman principles to its assessment of quantum, when those principles were reserved for best judgment challenges. It was not appropriate for the FTT to exercise merely a quasi-supervisory function over the taxpayer's challenge to the amount of the assessments. The FTT should have exercised a full appellate jurisdiction.
3. It was not impossible that even though the FTT concluded that the assessments were made to best judgment and were accordingly correct, it nevertheless considered for itself whether the amounts of the assessments were correct on the basis of the evidence and arguments it heard in the course of the appeal. However, it could not be said that if the FTT had appreciated the true nature of its functions it would inevitably have reached the same decision. Accordingly, the appellant was entitled to have the matter considered afresh in the light of the correct approach. It was appropriate to remit the case to the same panel of the FTT that originally heard the appeal.
1. This is an appeal against a decision of the Tax Chamber of the First-tier Tribunal ("the FTT") released on 1 May 2009 ([2009] UKFTT 83 (TC); [2009] TC 00051). The decision appealed against concerns the Appellant's appeal against three assessments for VAT. The assessments were concerned with sales at six establishments operated by the Appellant. These were known as "Chapter Delicatessens" (referred to by the FTT as "Delis 1-6") and two further establishments operated by the Appellant named "Bar Capitale" ("Bar Capitale 1 and 2").
2. In respect of Delis 1, 2 and 3, the FTT decided that there was a binding agreement between the Appellant and the Respondents that 30% of the sales at those establishments would be treated as standard-rated for VAT purposes, and 70% would be treated as zero-rated. The Respondents do not appeal against that finding and have agreed revised assessments with the Appellant on the basis of the FTT's decision.
3. The FTT upheld the Respondents' assessments relating to Delis 4, 5 and 6 and Bar Capitale 1 and 2. The Appellant applied for permission to appeal against this part of the FTT's decision on 23 June 2009. The Appellant's grounds of appeal are that the FTT erred in law in that:
(a) In addressing the quantum of the assessments, the Tribunal restricted itself to having a supervisory jurisdiction instead of an appellate jurisdiction.
(b) It decided the issue on whether the assessments were made to best judgment.
(c) It failed to address the primary task of finding the correct amount of tax based on the material placed before it.
The Appellant also contends that:
the Tribunal clearly misdirected itself that it had only supervisory jurisdiction in respect of assessments and concentrated on deciding whether the assessments were made to best judgment, i.e. were they reasonable? Instead it should have followed the guidance of the Court of Appeal in C & E Commrs v Pegasus Birds LtdUNK [2004] EWCA Civ 1015; [2004] BVC 788, and decided what was the correct amount of tax on the material properly before it.
4. HMRC recognised that there is substance in the Appellant's case. Both sides are at one on the legal background to the appeal. What follows is a non-controversial summary of the current state of the law. I will then apply it to the present circumstances.
5. The Appellant's appeal to the FTT was against assessments raised by the Respondents under section 73(1) of the Value Added Tax Act 1994 ("VATA"). Section 73(1) of VATA provides that:
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