R Totel Ltd v The First-Tier Tribunal (Tax Chamber) and the Commissioners for HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judgment Date | 24 March 2011 |
| Neutral Citation | [2011] EWHC 652 (Admin) |
| Date | 24 March 2011 |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | Case No: CO/8686/2009 |
[2011] EWHC 652 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Before: Mr Justice Simon
Case No: CO/8686/2009
Mr Kieron Beal (instructed by Aegis Tax LLP) for the Claimant
Mr Jonathan Swift QC and Mr Jonathan Cannon (instructed by the Solicitor's Office, HMRC) for the Second Defendant
Hearing dates: 15–16 February 2011
The Hon. Mr Justice Simon:
Introduction
This case concerns two decisions of the First-tier Tribunal, Tax Chamber ('the Tribunal') in appeals against the assessment by the Second Defendants ('the Commissioners') of liability to pay Value Added Tax. The appeals were identified as MAN/06/0901 and MAN/08/1485; and the decisions under challenge were in respect of applications by the Claimant that it should be relieved, on the grounds of hardship, of the obligation to pay or deposit the sums assessed as payable before the hearing of appeals challenging those assessments.
Section 84(3B) of the Value Added Tax Act 1994 (' VATA 1994') provides,
In a case where the amount determined to be payable as VAT or the amount notified by the recovery assessment has not been paid or deposited an appeal shall be entertained if –
(a) HMRC are satisfied (on the application of the appellant), or
(b) the tribunal decides (HMRC not being so satisfied and on the application of the appellant),
that the requirement to pay or deposit the amount determined would cause the appellant to suffer hardship.
The applications for relief on the grounds of hardship were dismissed in two Decision Notices of the Tribunal (Tribunal Judge, Colin Bishopp) dated 11 May 2009.
The Decisions noted that, contrary to indications given by the Tribunal during the course of the hearing, there was no right of appeal on a point of law, by reason of s.84(3C) of VATA 1994 as amended. This provision states,
Notwithstanding the provisions of sections 11 and 13 of the Tribunals, Courts and Enforcement Act 2007, the decision of the tribunal as to the issue of hardship is final.
In Judicial Review proceedings, begun in August 2009, the Claimant sought relief against the Tribunal (as First Defendant) and the Commissioners, and joined HM Treasury as an Interested Party. Only the Commissioners took part in the proceedings.
Ground 1. The challenge to the abolition of the right of appeal from the Tribunal following a decision on a hardship application
The first issue that arises on the claim for Judicial Review does not depend on a review of the facts. It is based on an argument that the statutory instrument which introduced s.84(3C) of VATA 1994 was ultra vires. In order to introduce the argument it is necessary to set out some of the relevant statutory provisions.
The foundation of the Commissioners' power to make an assessment in respect of input tax claimed and paid is conferred by s.73(2) of VATA 1994.
In any case where, for any prescribed accounting period, there has been paid or credited to any person –
(a) as being a repayment or refund of VAT, or
(b) as being due to him as a VAT credit,
an amount which ought not to have been so paid or credited, or which would not have been so paid or credited had the facts been known or been as they later turn out to be, the Commissioners may assess that amount as being VAT due from him for that period and notify it to him accordingly.
Section 83(1)(p) of VATA 1994 confers a right of appeal to the First-tier Tribunal (formerly the VAT Tribunal) against an assessment made under s.73(2), or the amount of that assessment. Section 84 imposes certain procedural requirements on the bringing of an appeal. Until 1 April 2009, the relevant parts of s.84 of VATA 1994 were:
(3) Where the appeal is against a decision with respect to any of the matters mentioned in section 83(1) … (p) … it shall not be entertained unless –
(a) the amount which the Commissioners have determined to be payable as VAT has been paid or deposited with them; or
(b) on being satisfied that the appellant would otherwise suffer hardship the Commissioners agree or the tribunal decides that it should be entertained notwithstanding that that amount has not been so paid or deposited.
Thus an appeal would not be entertained by the VAT Tribunal unless either the taxpayer paid or secured the sum of VAT which was in dispute or there was an agreement or decision that the payment of such sum would cause hardship to the taxpayer. A decision made by the Tribunal on a hardship application was subject to an appeal on a point of law, as a consequence of s.11 of the Tribunals and Inquiries Act 1992 and §44 of Schedule 1 to that Act.
With effect from 1 April 2009, the Tribunal system in England and Wales was substantially transformed with the coming into force of the Tribunals, Courts and Enforcement Act 2007 ('TCEA 2007'). Section 3 of TCEA 2007 introduced a two-tier Tribunal system consisting of the First-tier Tribunal and the Upper Tribunal.
Section 11 of TCEA 2007 confers a right of appeal on points of law from decisions of the First-tier Tribunal to the Upper Tribunal.
(1) For the purposes of subsection (2), the reference to a right of appeal is to a right to appeal to the Upper Tribunal on any point of law arising from a decision made by the First-tier Tribunal other than an excluded decision.
(2) Any party to a case has a right of appeal, subject to subsection (8).
(3) That right may be exercised only with permission (or, in Northern Ireland, leave).
(4) Permission (or leave) may be given by—
(a) the First-tier Tribunal, or
(b) the Upper Tribunal,
on an application by the party.
(5) For the purposes of subsection (1), an 'excluded decision' is -
(d) a decision of the First-tier Tribunal under section 9 -
(i) to review, or not to review, an earlier decision of the tribunal,
(ii) to take no action, or not to take any particular action, in the light of a review of an earlier decision of the tribunal,
(iii) to set aside an earlier decision of the tribunal, or
(iv) to refer, or not to refer, a matter to the Upper Tribunal,
(e) a decision of the First-tier Tribunal that is set aside under section 9 (including a decision set aside after proceedings on an appeal under this section have been begun), or
(f) any decision of the First-tier Tribunal that is of a description specified in an order made by the Lord Chancellor.
(6) A description may be specified under subsection (5)(f) only if—
(a) in the case of a decision of that description, there is a right to appeal to a court, the Upper Tribunal or any other tribunal from the decision and that right is, or includes, something other than a right (however expressed) to appeal on any point of law arising from the decision, or
(b) decisions of that description are made in carrying out a function transferred under section 30 and prior to the transfer of the function under section 30(1) there was no right to appeal from decisions of that description.
Ground 1 is concerned with an amendment to s.84 of VATA 1994 which was made pursuant to a Statutory Instrument made under a power contained in the Finance Act 2008. Section 124 of this Act provided:
(1) The Treasury may by order made by statutory instrument make provision—
(a) for and in connection with reviews by the Commissioners, or by an officer of Revenue and Customs, of HMRC decisions, and
(b) in connection with appeals against HMRC decisions.
(2) An order under subsection (1) may, in particular, contain provision about—
(a) the circumstances in which, or the time within which—
(i) a right to a review may be exercised, or
(ii) an appeal may be made, and
(b) the circumstances in which, or the time at which, an appeal or review is, or may be treated as, concluded.
(6) Provision under subsection (1) may be made by amending, repealing or revoking any provision of any Act or subordinate legislation (whenever passed or made, including this Act and any Act amended by it).
(8) A statutory instrument containing an order under subsection (1) may not be made unless a draft of it has been laid before and approved by resolution of the House of Commons.
The Statutory Instrument which made the relevant changes to s.84 of VATA 1994 was the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (SI 2009 No.56). This was dated 18 January 2009 and came into force on 1 April 2009, following approval by positive resolution by the House of Commons.
Paragraph 221(3) of Schedule 1 to SI 2009 No.56 introduced a substituted s.84:
(3) Subject to subsections (3B) and (3C), where the appeal is against a decision with respect to any of the matters mentioned in section 83(1) … (p) … it shall not be entertained unless the amount which HMRC have determined to be payable as VAT has been paid or deposited with them.
Paragraph 221(5) inserted two new subsections after section 84(3A)
(3B) In a case where the amount determined to be payable as VAT or the amount notified by the recovery assessment has not been paid or deposited an appeal shall be entertained if –
(a) HMRC are satisfied (on the application of the appellant), or
(b) the tribunal decides (HMRC not being so satisfied and on the application of the appellant),
that the requirement to pay or deposit the amount determined would cause the appellant to suffer hardship.
(3C) Notwithstanding the provisions of sections 11 and 13 of...
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