R & C Commissioners v Breen

JurisdictionUK Non-devolved
Judgment Date16 October 2023
Neutral Citation[2023] UKUT 252 (TCC)
CourtUpper Tribunal (Tax and Chancery Chamber)
R & C Commrs
and
Breen

Judge Thomas Scott, Judge Guy Brannan

Upper Tribunal (Tax and Chancery Chamber)

Income Tax – Procedure – Reinstatement by First-tier Tribunal of appeal against discovery assessments raised under TMA 1970, s. 29, after automatic strike out for failure to comply with ‘unless directions’ – Martland test – Whether FTT decision perverse in failing to take account of relevant factors – Whether FTT misdirected itself in law by taking account of an irrelevant factor (the burden of proof) in deciding whether to reinstate – Yes on both grounds – Appeal allowed.

Abstract

In R & C Commrs v Breen [2023] BTC 532, the Upper Tribunal (UT) overturned the unpublished decision of the First-tier Tribunal (FTT) to reinstate the taxpayer’s appeal which had been automatically struck out following failure to comply with an ‘unless directions’ order. The UT decided that the FTT was wrong in concluding the period of delay was short, and had erred in taking account of the burden of proof on the underlying appeal, concluding the application for reinstatement of the appeal should be refused.

Summary

Mr Breen had appealed against discovery assessments raised under TMA 1970, s. 29 following HMRC investigation. Following failure by Mr Breen to provide the list of documents for the appeal to proceed, the FTT under the direction of Judge Popplewell issued a first ‘Unless Order’ and following extremely belated compliance by Mr Breen, a further ‘Unless Order’ for the definitive list of documents was made by Judge Bailey. The appellant was four days out of time in submitting this information and the appeal was automatically struck off. The respondent applied to the FTT for reinstatement of the appeal, which ‘by the finest of margins’ was granted, and HMRC appealed against this reinstatement.

The tests applied by the FTT in reaching their decision, provided under Martland v R & C Commrs were:

  • was the delay serious;
  • what was the reason for the delay; and
  • consideration of all the relevant circumstances.

The UT concluded the FTT were wrong in their conclusion the delay was short and should have taken account of the failure to comply with the original ‘Unless Order’ under stage 3 of the tests. The UT also concluded the burden of proof on the underlying appeal should not have been taken as a material factor under that stage of the test, and that the application for reinstatement should have been refused. The appeal therefore remained struck out.

Comment

While the UT would generally not interfere with FTT management decisions, it was clearly concluded that matters that should have been taken into account were not, and matters not relevant were not left out of account. It is interesting the judge commented that both the ‘Unless Order’ and the Reinstatement decision of the FTT merited publication, with their analysis of the balancing factors, in order that judges and the public may understand the decision-making process involved.

Comment by Andy Richens, Senior Tax Writer, Croner-i Ltd.

Christopher Stone, Counsel, instructed by the General Counsel and Solicitor to His Majesty's Revenue and Customs appeared for the appellant

Ross Birkbeck, Counsel appeared for the respondents

DECISION
Introduction

[1] This is an appeal by the Appellants (“HMRC”) against the decision of the First-tier Tribunal (the “FTT”) (Judge Amanda Brown QC) released on 29 March 2022 (“the Reinstatement Decision”). This decision reinstated the appeal of the Respondent (“Mr Breen”) which had been automatically struck out following the failure to comply with an (unpublished) “unless direction” given by Judge Jane Bailey (“the Unless Order”) issued on 10 November 2020.

[2] HMRC appeal on two grounds. In summary, the first ground is that the Reinstatement Decision was perverse because the FTT held, contrary to the evidence, that there had been no requirement for Mr Breen to provide a list of objections and a list of witnesses prior to the Unless Order. The result was that the FTT failed to take full account of Mr Breen's previous non-compliance. The second ground of appeal is that the FTT erred in taking into account an irrelevant factor and/or misdirected itself in law, by deciding to allow the application because the burden of proof in the underlying appeal lay upon HMRC.

[3] HMRC appeal with the permission of the FTT.

[4] For the reasons given below, we allow HMRC's appeal, set aside the Reinstatement Decision and remake that decision.

Application to admit manuscript notes of ex tempore decision

[5] The FTT at the conclusion of its hearing gave an ex tempore decision. Mr Birkbeck, who appeared for Mr Breen before the FTT and before us, applied for his contemporaneous manuscript note of the ex tempore decision to be admitted. Mr Birkbeck submitted that even if the Reinstatement Decision contained an error of law as contended by HMRC, the manuscript note would show that the error was not a material reason for the FTT's decision.

[6] Mr Stone, who appeared for HMRC before the FTT and before us, opposed the application. He submitted that it was necessary to look at the written decision of the FTT which set out its final reasons. He was not contending that Mr Birkbeck's manuscript note was inaccurate but rather that it was not appropriate to look to look at manuscript notes of an ex tempore decision when there was a subsequent fully reasoned written decision.

[7] We refused Mr Birkbeck's application. In our view, an ex tempore judgment or decision is binding in terms of the result but not as regards the detailed reasons. It is the final fully reasoned written decision of the FTT that is the appealable decision and will be a decision prepared by the FTT having had the opportunity to reflect on the evidence and the law relevant to the issue in question. Moreover, there will be cases in which it is necessary or appropriate for the FTT to give an ex tempore decision (e.g. cases of urgency) and it is undesirable that the FTT should be deterred from doing so lest what is said by the FTT in the course of a less than complete ex tempore decision should be used to construe or call into question its more carefully reasoned written decision.

The factual background

[8] The procedural history which underlies this appeal is quite involved. It is fully set out in the Unless Order and is summarised in the Reinstatement Decision. For the purposes of this appeal, and because both of these decisions are unpublished, we have described in greater detail than would usually be necessary the main features of the history, in order to set out the background to our decision.

[9] Mr Breen's appeal concerned income tax assessments for the tax years from 1996/97 to 2011/12. Following a statutory review the amount of tax in dispute was £942,131.68. The assessments followed an HMRC investigation into Mr Breen's tax affairs in 2012. In short, HMRC considered that Mr Breen was liable to tax on undeclared income and gains. Mr Breen's contention was that there was no UK tax liability because he had an Irish domicile and because the relevant work giving rise to the disputed income had been undertaken outside the UK.

[10] In the Reinstatement Decision the FTT stated that the assessments mentioned above were issued under section 29 Taxes Management Act 1970 on the basis that Mr Breen had deliberately failed to bring relevant income into account in the relevant tax years. In the course of the hearing before us, Mr Stone pointed out, and we did not understand it to be in dispute, that some of the assessments (for the years ended 5 April 2009, 2010, 2011 and 2012) had been issued on the basis that Mr Breen had been careless in failing to bring his income into account.

[11] During HMRC's investigation, Mr Breen had failed to comply with an information notice issued in 2014 resulting in penalties for non-compliance. Also in 2014, Mr Breen informed HMRC that much of the relevant documentation was no longer available.

[12] In 2016, Mr Breen failed to provide answers to HMRC's questions about his family and background that were designed to clarify his domicile status. In other words, there was a history of non-compliance by Mr Breen in the course of the investigation.

[13] HMRC's review decision was issued on 29 September 2017 and the deadline for appealing to the FTT was 29 October 2017.

Appeal to the FTT

[14] Mr Breen's appeal was received by the FTT on 3 November 2017. Mr Breen said that he did not consider the tax assessed was due and indicated that he would “provide further detail/explanation once I have appointed a representative.”

[15] A resubmitted appeal was received by the FTT on 27 November 2017. The Appellant indicated that the appeal was not late because he had incorrectly understood the date from which the time for appealing ran. He also explained that he had been working in the United States for much of October 2017 and this had contributed to his delay in appealing.

FTT's request for grounds of appeal

[16] The FTT acknowledged receipt of the late appeal and assigned it to proceed under the Standard Category. However, the FTT wrote to Mr Breen and requested that he provide the grounds for his appeal (as required by rule 20 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009).

[17] On 19 January 2018, the FTT received a letter from Mr Breen dated 18 January 2018 in which he provided a further explanation of why his appeal was late.

[18] However, on 15 February, the FTT wrote to Mr Breen seeking clarification of the grounds on which he was appealing in order that HMRC could produce a Statement of Case. The FTT requested a reply within 14 days. That deadline expired on 1 March 2018. By an email dated 27 February 2018, Mr Breen sought a further 14 days to provide his grounds of appeal. He said that bad weather on 27 February 2018 had prevented him from attending a meeting with his adviser and that the meeting had been postponed to...

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2 cases
  • Edwards
    • United Kingdom
    • First-tier Tribunal (Tax Chamber)
    • 27 March 2024
    ...BTC 525 but with relevant revisions. This approach has recently been re-approved by the Upper Tribunal in R & C Commrs v Breen[2023] BTC 532. [31] I remind myself that the three stage approach of Martland is as follows: Establish the length of the delay. If it was very short (which would, i......
  • 99P Recycling Ltd
    • United Kingdom
    • First-tier Tribunal (Tax Chamber)
    • 4 January 2024
    ...to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected. [32] In R & C Commrs v Breen[2023] BTC 532 the Upper Tribunal summarised the test to be applied when considering an application for reinstatement (assuming that I decide to admit the Reinst......

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