R & C Commissioners v Tasca Tankers Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 18 March 2022 |
| Neutral Citation | [2022] UKUT 88 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2022] UKUT 88 (TCC)
Mr Justice Edwin Johnson, Judge Andrew Scott
Upper Tribunal (Tax and Chancery Chamber)
Procedure – Application to strike out – Whether FTT wrong to conclude that appellants had no reasonable prospect of success – Yes – Whether to remit proceedings to a differently constituted tribunal – Yes.
[1] This is the hearing of an appeal against the refusal of Judge Brannan, in the First-tier Tribunal (“the FTT”), to strike out an appeal of the Respondent against a decision of the Appellants, dated 13th October 2016, to deny input tax of £214,386.38, on the basis that the Respondent knew or should have known that the relevant transactions were connected with the fraudulent evasion of VAT.
[2] At the outset it is convenient, given the changing roles of the parties as appellant and respondent in the proceedings, to refer to the Appellants in this appeal as HMRC, and to refer to the Respondent in this appeal as Tasca.
[3] The proceedings in the FTT are concerned with two decisions notified by HMRC to Tasca.
[4] The first decision, dated 29th June 2016, was that Tasca had failed to hold sufficient evidence of dispatch to the Republic of Ireland to entitle it to a zero-rate on its supplies, rather than charging output tax at the standard rate, for VAT periods 03/15–03/16. This was extended by a further decision dated 23 August 2016 to include sales made in the VAT period 06/16.
[5] The second decision was dated 13th October 2016 and related to Tasca's input tax for VAT periods 12/14–06/16. The input tax was denied on the basis that Tasca knew or should have known that its transactions were connected with the fraudulent evasion of VAT in accordance with the Kittel principle (Kittel v Belgium; Belgium v Recolta Recycling SPRL (Joined Cases C-439/04 and C-440/04) [2008] BVC 559). In other words, the second decision involved what is commonly known as an “MTIC” denial of input tax (we have added italics to quotations in this decision). The total amount of input tax involved in the second decision is, as we have said, £214,386.38.
[6] On 22nd February 2017 Tasca filed notices of appeal to the FTT against both of these decisions. HMRC applied to strike out the appeal against the second of the above decisions. This application (“the Strike Out Application”) was made, on 17th July 2019, pursuant to rule 8(3)(c) of The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. There was no application to strike out the appeal against the first of the above decisions. Accordingly, the appeal to the FTT which was the subject of the Strike Out Application (the appeal against the second of the above decisions) will be referred to as “the Second Appeal”.
[7] Rule 8(3)(c) permits the FTT to strike out the whole or part of proceedings in the FTT if the FTT considers that there is no reasonable prospect of the appellant's case, or part of it, succeeding.
[8] The Strike Out Application was heard on 7th December 2020. Both HMRC and Tasca were represented by counsel. By a decision (“the Decision”) released on 29th January 2021 Judge Brannan (“the Judge”) refused the Strike Out Application and declined to strike out the Second Appeal. The Judge also, by the Decision, refused an application by Tasca to adduce additional evidence.
[9] The application of HMRC for permission to appeal against the Decision, so far as it refused the Strike Out Application, was refused by the Judge, but granted by the Upper Tribunal.
[10] At the hearing of this appeal (“the Strike Out Appeal”) the parties were represented by the same counsel as appeared at the hearing of the Strike Out Application in the FTT (“the FTT Hearing”). HMRC was represented by Joshua Carey. Tasca was represented by Tim Brown.
[11] For convenience, the paragraphs of the Decision are referred to as [FTT1], and so on.
[12] What follows is only a very brief summary of the factual background to this case, sufficient to set the scene for the Strike Out Appeal and no more. The full factual background to the case can be found in the witness statements and documentary evidence filed in the proceedings in the FTT.
[13] Tasca was incorporated in September 1994 and was registered for VAT in February 1995. Its main business was the manufacture, sale (new and second-hand) and repair of road tankers.
[14] At the relevant time, Tasca had three directors, Alwyn Bowering, Thomas Patrick McDonnell, and Andrew Stokes. An additional individual, Shaun Harte, was described as the CEO of the Appellant and owned 25% of the shares. It appears that Mr Harte was not an employee of Tasca but provided management services to Tasca, and was listed as a creditor of Tasca. Mr Harte was solely in charge of the financial side of the business and the directors were solely involved in the manufacturing and repair side of the business. Tasca's accounts administrator was Vicki Wood.
[15] In or around 2014 Tasca, in addition to its tanker business, commenced to trade in second-hand cars, which were largely purchased in Northern Ireland and then dispatched for sale to the Republic of Ireland. Tasca did not inform HMRC that it had commenced trading in second-hand cars. However, HMRC received mutual assistance requests from the Republic of Ireland's tax authorities, and this prompted HMRC to make a visit to the Appellant on 20 April 2016.
[16] This second hand car business, which was effectively a sideline business for Tasca, was dealt with by Mr Harte, without oversight by the directors of Tasca. The actual transactions were dealt with by a contact of Mr. Harte and Mr Paul Donnelly. Mr. Paul Donnelly was not an employee of Tasca, but describes himself, in his evidence in these proceedings, as having previously been involved with his family business, Donnelly Motor Group, which is said to employ 700 people and to be the third largest motor retailer in Northern Ireland.
[17] The case of HMRC is that these transactions were connected with the fraudulent evasion of VAT by various traders. By its relevant decision, now the subject of the Second Appeal, HMRC denied Tasca the relevant input tax on the basis that Tasca knew, or should have known that the relevant transactions were connected with the fraudulent evasion of VAT.
[18] The procedural background is relevant to the arguments in the Strike Out Appeal, as it was in the FTT Hearing. The relevant procedural background is summarised in the Decision, and we adopt that summary.
[19] On 3rd May 2018 the FTT issued directions (“the Directions”) in respect of the appeals to the FTT. So far as material, the Directions provided as follows:
3. That by no later than 5.00 p.m. on 26 June 2018 the Respondents [HMRC] shall file with the Tribunal all witness statements on which they intend to rely, without exhibits, and serve that same evidence, with exhibits, on the Appellant.
4. That by no later than 5.00 p.m. two (2) months from the date of compliance with direction three (3) being the 26 August 2018, the Appellant shall file with the Tribunal all witness statements on which it intends to rely, without exhibits, and serve that same evidence, with exhibits, on the Respondents.
5. That by no later than 5.00 p.m. one (1) month from the date of compliance with direction four (4), the Respondents shall file and serve any further evidence upon which they intend to rely.
6. That to the extent that the Respondents do not seek to adduce any further evidence in compliance with direction five (5), they shall advise the Appellants by no later than the time for compliance with direction five (5).
7. That the witness statements shall stand as evidence in chief of the witness subject to such further questions as the Tribunal may allow.
8. That by no later than 5.00 p.m. one (1) month from the date of compliance with direction six (6), the Appellant shall specify by way of written document its position on the following issues:
- Whether the Appellant accepts that the transaction chains, as set out in the deal sheets produced by the Respondents in relation to the Appellant's purchases on which the Respondents have denied input tax recovery, accurately reflect the trading history of the goods bought and sold by the Appellant. If the Appellant does not accept the accuracy of the deal sheets, the Appellant should specify which chains it considers incorrect and why;
- Whether, in respect of chains alleged to be directly connected with a defaulter, the Appellant accepts that there has been a fraudulent VAT default at the start of the chain and, if not, why;
- In relation to any other witness statements served by the Respondents what, if any, are the matters of fact in dispute. …
[20] On 25th June 2018, HMRC applied for an extension to the Directions in order to file their evidence. In compliance with the amended Direction 3, HMRC served their evidence on 10 August 2018.
[21] In compliance with Direction 4 (as amended), Tasca served its evidence on 28th February 2019.
[22] The Tribunal wrote to HMRC on 13th May 2019 noting that it had not received confirmation that HMRC had served further evidence pursuant to Direction 5. The letter gave HMRC seven days in which to respond.
[23] It appears that HMRC did not respond to this letter, or notify Tasca that HMRC intended to call no further evidence. It follows that there was a failure on the part of HMRC to comply with Direction 6. One consequence of this was that Direction 8 was prevented from taking effect, because the relevant time limit in Direction 8, tied as it was to the date of compliance with Direction 6, never began to run.
[24] The Judge set out, in considerable detail, a summary of the evidence filed in the FTT in relation to the Second Appeal; see [FFT15–47]. It is not necessary to repeat that summary. Mr. Carey did not challenge the summary as being wrong or inaccurate.
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The Commissioners for HM Revenue & Customs v Tasca Tankers Limited [2022] UKUT 00088 (TCC)
...[2022] UKUT 00088 (TCC) Appeal number: UT/2021/00075 PROCEDURE – application to strike out – whether FTT wrong to conclude that appellants had no reasonable prospect of success – yes – whether to remit proceedings to a differently constituted tribunal – yes UPPER TRIBUNAL (TAX AND CHANCERY ......