R (ToTel Ltd) v First-tier Tribunal (Tax Chamber)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Moses,Lady Justice Arden,Master of the Rolls, Lord Neuberger |
| Judgment Date | 31 October 2012 |
| Neutral Citation | [2012] EWCA Civ 1401 |
| Docket Number | Case No: C1/2011/1505 |
| Court | Court of Appeal (Civil Division) |
| Date | 31 October 2012 |
[2012] EWCA Civ 1401
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
The Hon. Mr Justice Simon
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Neuberger, Master of the Rolls
Lady Justice Arden
and
Lord Justice Moses
Case No: C1/2011/1505
Mr Kieron Beal QC (instructed by Aegis Tax LLP) for the Appellant
Mr Jonathan Swift QC and Ms Rachel Kamm (instructed by The General Counsel and Solicitor to HM Revenue and Customs) for the Respondents
Hearing dates: 24 th-25 th July, 2012
The first question in this appeal is whether the power to make provision by statutory instrument conferred by s.124 of the Finance Act 2008 included the power to abolish a statutory right to appeal to the Upper Tribunal from a decision of the First-tier Tribunal. That statutory right had been conferred by s.11(2) of the Tribunals, Courts and Enforcement Act 2007 (TCEA 2007), which came into force on 3 November 2008. In judicial review proceedings, ( [2012] QB 358, [2011] EWHC 652 (Admin)) Simon J held that s.124 successfully conferred such a power and dismissed Totel Limited's legal challenge to the decision of the First-tier Tribunal. That Tribunal had, in relation to two tax appeals, dismissed Totel's applications that it should be relieved of the obligation to pay the tax in issue before those appeals were entertained. I set out all the relevant legislation in my annexe to this judgment.
The chronology is of importance. The Commissioners sought to recover input tax paid to the appellant, Totel, in the periods 01/06 and 03/06. For that purpose they raised an assessment for the first period, under s.73(2) of the Value Added Tax Act 1994 by letter dated 3 October 2006, reclaiming £205,625.
Totel had a right of appeal to a VAT Tribunal against the first assessment under s.83 (p) of the VATA 1994. But such a appeal could not be entertained unless the amount which the Commissioners had determined to be payable had been paid or deposited or the Commissioners or the VAT Tribunal were satisfied that Totel would suffer hardship were it to pay or deposit such an amount ( s.84(3) VATA 1994).
Totel appealed the first assessment on 15 December 2006, and in its notice of appeal sought a direction that hardship would be caused if it paid the sum in question. By 4 January 2007 the Commissioners had made it clear that they did not agree hardship would be caused, and, accordingly, Totel required a decision from the Tribunal as to hardship before it could pursue its appeal against the assessment. The history of the delay in mounting a hearing for such a decision has been fully set out in the decision of the First-tier Tribunal of 11 May 2009. Had the Tribunal been able to reach a conclusion as to hardship before 3 November 2008, and if it had been adverse to Totel, Totel would have had a right of appeal on a point of law to the High Court by virtue of s.11 of the Tribunals and Inquiries Act 1992.
For the second period, 03/06, HMRC raised an assessment for £1.2 million on 10 November 2008. Totel exercised its right of appeal, under s. 83(p), against the second assessment on 26 November 2008, and again sought a direction that hardship would be caused. S.3 of the Tribunal Courts and Enforcement Act 2007 provided that there "were to be" tribunals known as the First-tier and Upper Tribunals for the purpose of exercising the functions of, amongst other bodies the existing VAT Tribunal. Section 3 had been brought into force on 3 November 2008, twenty-three days before Totel's appeal against the second assessment (s.148(5) and Art 2 TCEA 2007 Commencement No 6 and Transitional Provisions Order 2008 (2008/2696)). But it should be observed that the functions of a "scheduled" tribunal such as the VAT Tribunal were not to be transferred to the new tribunal until the Lord Chancellor had made an order for that purpose (s.30 TCEA 2007), at which point he could, by order abolish the existing tribunal (s.31 TCEA 2007).
Accordingly, Totel's appeal against the second assessment was made to a VAT Tribunal whose functions were not transferred in November 2008. HMRC objected to Totel's hardship application by notice of 9 December 2008. Had a hearing in relation to Totel's assertion of hardship been convened before 1 April 2009, it would have been heard by a VAT Tribunal. S.11 of the TCEA 2007 was brought into force on 3 November 2008 (Art 2 of 2008/2696). S. 11 conferred a right of appeal to the Upper Tribunal on a point of law, "arising from a decision made by the First-tier Tribunal". This is the statutory right of appeal at the heart of this part of the instant appeal.
But on 1 April 2009 that statutory right was removed by the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (2009/56). Totel's appeals against both assessments, coupled with its application for a direction that the appeal should be considered without payment of the tax in dispute were "current proceedings" within the meaning of Paragraph 1(2) of Schedule 3 of the Transfer Order 2009 because Totel had served notice for the purpose of beginning proceedings before the "existing tribunal", as the VAT Tribunal is described in Art.2 (c) of the Transfer Order. By Art.6 such current proceedings were to continue on and after 1 April as proceedings before the First-tier Tribunal (according to the definition of tribunal in Art. 1(1)).
Had the VAT Tribunal reached an adverse decision in relation to the s.73(2) VAT assessments before 1 April 2009, then there would have been a right of appeal on a point of law to the Upper Tribunal (paragraph 11 (1)(a) and 11(2) of Schedule 3 to the Transfer Order). But had the VAT Tribunal reached an adverse decision in relation to the hardship application before 1 April 2009, paragraph 11(2) of the Transfer Order provides that there is no greater right of appeal than that which lies from the decision of a First-tier Tribunal after 1 April 2009. A decision of the First-tier Tribunal in relation to a hardship application after 1 April 2009, even if it was a decision in current proceedings would, if the relevant provisions (paragraph 221(5) of the Transfer Order) are lawful, be final.
These are the consequences of a combination of Art.3, Paragraph 221 of Schedule 1 and (in the event that the decision in relation to hardship had been made before 1 April 2009) Paragraph 11 (2) of Schedule 3 of the Transfer Order.
Art. 3 (1)(a) introduces Schedule 1 which, so it says:
"contains amendments to primary legislation which –
(a) transfer functions of existing tribunals and
(b) make consequential and other provision (including provision about reviews of decisions by (HMRC))"
Paragraph 221 of Schedule 1 makes provision in relation to appeals by amendment to Section 84 of the VATA 1994. The requirement to pay or deposit tax in issue is broadly the same as that previously contained in s.84(3), save in the crucial respect that the decision of a First-tier Tribunal is said to be final. The newly inserted sections, s.84(3B) and (3C) provide:
"(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 the Tribunals, Courts and Enforcement Act 2007, the decision of the tribunal as to the issue of hardship is final."
Paragraph 11(2) applies the finality of a decision of the First-tier Tribunal on hardship to a decision of the VAT Tribunal made before 1 April 2009 :
" …such rights of appeal shall lie from the decision (of an existing tribunal) as would lie from a decision of the First-tier Tribunal made on or after that date".
The essential question is whether there was power to provide in the Transfer Order that the decision of the First-tier tribunal on the hardship application was final. Resolution of this question turns on the provisions of the statute, the Finance Act 2008 which, so HMRC contends, conferred the power to declare such a decision final.
I should emphasise that the power, if it exists, is not contained in s.11 of the TCEA 2007 itself. S.11(1) applies to all decisions of the First-tier Tribunal other than excluded decisions. A decision as to hardship is not an "excluded decision" within s.11 (5) and by virtue of s.11 (6) could not be so specified.
S.124 of the Finance Act 2008 provides:
"(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...
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