Owd Ltd (t/a Birmingham Cash & Carry ((in Liquidation)))
| Jurisdiction | UK Non-devolved |
| Judgment Date | 22 August 2018 |
| Neutral Citation | [2018] UKFTT 497 (TC) |
| Date | 22 August 2018 |
| Court | First Tier Tribunal (Tax Chamber) |
[2018] UKFTT 0497 (TC)
Judge Sarah Falk
David Bedenham, instructed by Rainer Hughes, appeared for the appellant
Howard Watkinson, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Procedure – Withdrawal of appeals against VAT and excise duty assessments, associated penalties and refusal of AWRS approval – Late applications for reinstatement – Whether power to reinstate under r. 17 FTT rules was precluded by VATA 1994, s. 85(4) – Yes – Whether (if power existed) extension of time should be permitted – Yes – Whether appeals should be reinstated on the facts – No.
[1] The appellant OWD Limited (“OWD”), a company now in insolvent liquidation, made numerous appeals to the Tribunal during 2016 and 2017. Ten of the appeals were subsequently consolidated under appeal reference TC/2016/00217, and HMRC produced a detailed consolidated Statement of Case in respect of those appeals. Appeal reference TC/2017/03105 covers a single further appeal. This decision relates to the withdrawal of the appeals by OWD's liquidator following his appointment and a subsequent late application to reinstate the appeals under rule 17 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the “Tribunal Rules”). HMRC challenged the reinstatement of the appeals on the basis that a reinstatement was statute barred by s 85 Value Added Tax Act 1994 (“VATA”), or alternatively the reinstatement was an abuse of process, and in any event an extension of time should not be permitted. Even if an extension was allowed, HMRC's case was that reinstatement should in any event not be permitted on the facts.
[2] In summary, the appeals related to the following:
- three excise duty assessments in the amounts of approximately £660,000, £627,000 and £479,000 respectively, raised on the grounds that OWD was holding alcohol products on which excise duty had not been paid;
- three penalty assessments arising out of the excise duty assessments and made under Schedule 41 Finance Act 2008 (FA 2008), of around £138,000, £132,000 and £168,000 respectively (the third of the penalties being levied on the grounds of deliberate behaviour);
- four VAT assessment appeals, the first in respect of two assessments totalling around £152,000 and relating to disallowance of input tax recovery on property rents, the second in respect of an assessment of around £10,000 relating to the same subject matter, the third for about £320,000 of under declared output tax (essentially, suppression of sales), and the fourth being the appeal under reference TC/2017/03105 and relating to an assessment of around £38,000 issued to recover input tax; and
- HMRC's refusal of OWD's application for approval to carry on the wholesale of alcohol under the Alcohol Wholesaler Registration Scheme (AWRS), pursuant to s 88C Alcohol Liquor Duties Act 1979.
[3] In addition, OWD has another appeal before the Tribunal relating to the denial of input tax recovery under the Kittel1 principle. This appeal is ongoing and is not affected by this decision. Finally, OWD is a party to High Court proceedings relating to the refusal of AWRS approval. The current status of these proceedings is that the Court of Appeal have granted temporary relief, in the form of temporary approval under the scheme pending the outcome of Tribunal proceedings challenging the refusal, but permission to appeal that decision to the Supreme Court has been obtained.
[4] A witness statement was provided on behalf of OWD by Sanjay Panesar, the senior partner of Rainer Hughes. Mr Panesar was not called to give oral evidence. I agree with HMRC that, overall, the witness statement is of limited assistance. Mr Panesar was not authorised to waive legal privilege and therefore provided little information about the position of the liquidator and the background to the decision to withdraw the appeals and the subsequent application to reinstate them. However, the statement does exhibit some relevant correspondence.
[5] Documentary evidence primarily comprised details of the appeals, Mr Panesar's witness statement and exhibits, and correspondence relating to the withdrawal and application to reinstate.
[6] So far as relevant, s 85 VATA provides as follows:
(1) Subject to the provisions of this section, where a person gives notice of appeal under section 83 and, before the appeal is determined by a tribunal, HMRC and the appellant come to an agreement (whether in writing or otherwise) under the terms of which the decision under appeal is to be treated–
- as upheld without variation, or
- as varied in a particular manner, or
- as discharged or cancelled,
the like consequences shall ensue for all purposes as would have ensued if, at the time when the agreement was come to, a tribunal had determined the appeal in accordance with the terms of the agreement.
(2) Subsection (1) above shall not apply where, within 30 days from the date when the agreement was come to, the appellant gives notice in writing to HMRC that he desires to repudiate or resile for the agreement.
…
(4) Where–
- a person who has given a notice of appeal notifies HMRC, whether orally or in writing, that he desires not to proceed with the appeal; and
- 30 days have elapsed since the giving of the notification without HMRC giving to the appellant notice in writing indicating that they are unwilling that the appeal should be treated as withdrawn,
the preceding provisions of this section shall have effect as if, at the date of the appellant's notification, the appellant and HMRC had come to an agreement, orally or in writing, as the case may be, that the decision under appeal should be upheld without variation.
(5) References in this section to an agreement being come to with an appellant and the giving of notice or notification to or by an appellant include references to an agreement being come to with, and the giving of notice or notification to or by, a person acting on behalf of the appellant in relation to the appeal.
[7] Rule 17 of the Tribunal Rules provides:
(1) Subject to any provision in an enactment relating to withdrawal or settlement of particular proceedings, a party may give notice to the Tribunal of the withdrawal of the case made by it in the Tribunal proceedings, or any part of that case–
- by sending or delivering to the Tribunal a written notice of withdrawal; or
- orally at a hearing.
(2) The Tribunal must notify each party in writing of its receipt of a withdrawal under this rule.
(3) A party who has withdrawn their case may apply to the Tribunal for the case to be reinstated.
(4) An application under paragraph (3) must be made in writing and be received by the Tribunal within 28 days after–
- the date that the Tribunal received the notice under paragraph (1)(a); or
- the date of the hearing at which the case was withdrawn orally under paragraph (1)(b).
Rule 5(3)(a) of the Tribunal Rules also permits the Tribunal to “extend or shorten the time for complying with any rule …, unless such extension or shortening would conflict with a provision of another enactment setting down a time limit”.
[8] OWD Limited's sole director and shareholder is Mrs Kuldip Bachra. On 15 August 2017 OWD passed a resolution to enter Creditors' Voluntary Liquidation. Mr Tauseef Rashid of Kingsland Business Recovery was appointed as liquidator. The statement of affairs produced as at that date and filed at Companies House shows the only assets as being cash at bank of £5,600. Total creditors are estimated at nearly £3.2 million, of which HMRC is shown as owed around £2.6 million and Mrs Bachra is shown as owed around £274,000, with the balance being made up of what appear to be trade creditors.
[9] OWD did not immediately inform HMRC or the Tribunal, or its solicitors Rainer Hughes, that it had entered liquidation. HMRC became aware and emailed the Tribunal and Rainer Hughes on 22 August to advise them of the fact. On the same day Rainer Hughes spoke to Mr Rashid to ask for instructions about the appeals, and were told that he would consider the matter and speak with his legal advisers.
[10] On 30 August the Tribunal contacted Mr Rashid by email attaching a letter requesting confirmation of whether the appeals consolidated under TC/2016/00217 would be continued or withdrawn. A copy was sent to Rainer Hughes under cover of a further letter. Mr Rashid replied to the Tribunal by email on the same day, under reference TC/2016/00217. Mr Rashid's email stated that, by virtue of its insolvency, OWD was no longer in a position to be represented in the proceedings and, consequently, the liquidator did not intend to continue with them. On the following day, 31 August, Mr Rashid forwarded this email to the relevant contact at HMRC's Solicitor's Office, Jessica Patrick, simply saying “FYI”. He also sent a copy to Rainer Hughes.
[11] Mr Panesar's evidence was that Mr Rashid did not obtain advice from Rainer Hughes about how to respond to the Tribunal's enquiry of 30 August, but instead took independent legal advice. I accept this. I also accept Mr Panesar's evidence that he spoke to Mr Rashid after finding out that he had withdrawn the appeals. Mr Panesar's evidence was that Mr Rashid said he had withdrawn the appeals because he thought that the result of doing so would be that the assessments would stand and would simply be taken into account in the liquidation, but that he “did not … appreciate that there is a risk that the assessments could lead to an attempt by HMRC to hold the former Directors personally liable, and accordingly it might have been appropriate to discuss the appeals with the directors before withdrawing them”. This evidence is discussed further below.
[12] On 6 September Rainer Hughes responded by...
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