Revenue and Customs Commissioners v NT ADA Ltd (formerly NT Jersey Ltd)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 22 February 2018 |
| Neutral Citation | [2018] UKUT 59 (TCC) |
| Date | 22 February 2018 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2018] UKUT 0059 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
Judge Roger Berner, Judge Sarah Falk
Michael Jones, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the appellants
Keith Gordon, instructed by NT ADA Limited, appeared for the respondent
Value added tax – Procedure – (1) Whether failure to offer review under VATA 1994, s. 83A invalidated – (2) Whether offer of review in fact made – Yes.
The Upper Tribunal (UT) allowed HMRC's appeal against the decision of the First-tier Tribunal (FTT) ([2016] TC 05375) and held that any failure by HMRC to offer a review would not invalidate the penalty for belatedly being registered for VAT.
The FTT had considered its jurisdiction in relation to the following “decisions” by HMRC:
- to register NT ADA for VAT;
- to issue on 29 February 2016 a certificate of registration for VAT to NT ADA with effect from 1 May 2008; and
- to impose by a letter dated 4 April 2016 a £234,883 penalty under VATA 1994, s. 67 for failing to register for VAT at the proper time.
NT ADA had argued that, notwithstanding its appeals, the above decisions of HMRC were not appealable decisions, being outside the scope of the FTT's jurisdiction. Although usually the FTT considers such matters following an application by HMRC that an appeal should be struck out, in this case HMRC argued that the FTT has jurisdiction to determine all of the appeals.
The decision of HMRC that NT ADA should be registered for VAT was in a letter to NT ADA, dated 29 June 2012. That decision was not in the abstract or on a hypothetical basis. Thus, the FTT had held that it was sufficiently crystallised to constitute a decision “in respect to” the registration of NT ADA within VATA 1994, s. 83(1)(a).
The VAT registration certificate, confirming NT ADA's registration for VAT from 1 May 2008, was issued by HMRC on 29 February 2016. On 4 May 2016, at the request of NT ADA, the VAT registration was cancelled from “close of business on 30 April 2008”. However, by letter dated 17 May 2016, HMRC reinstated the registration, as HMRC considered that NT ADA was “still required to remain VAT registered”.
The FTT had held that notification is not a pre-requisite to a valid VAT registration. Thus, the registration was effective irrespective of whether it was notified. Also, the requirement, under VATA 1994, s. 83A to offer a review of a decision, applies only where a decision has been “notified”, so the absence of an offer of a review did not affect the validity of the registration. Thus, it is an appealable decision within VATA 1994, s. 83(1)(a), as is the issue of its cancellation and the effect of HMRC's letter 17 May 2016, being matters “in respect to” the “registration or cancellation of any registration of any person”.
The letter containing the notice of the penalty, like the VAT registration certificate, was not sent to NT ADA's address in Jersey, but to where HMRC considered it had a fixed establishment in the UK. It was subsequently sent to NT ADA, which on 29 April 2016 notified the FTT of its appeal.
As with the registration certificate, NT ADA argued that the penalty notice is ineffective, as it was notified to the wrong address contrary to VATA 1994, s. 98 and did not offer a review contrary to s. 83A. Unlike the position in relation to registration, there is a requirement to notify a person who is liable for a penalty, VATA 1994, s. 76(4).
The FTT had held that the failure to make it clear to NT ADA that it was entitled to a review, and not could just ask for one, invalidates the decision, which cannot therefore be an appealable matter within VATA 1994, s. 83(1). The FTT had held that it lacks jurisdiction in relation to the penalty, so it struck out the appeal against the VATA 1994, s. 67 penalty, but the other appeals could proceed.
on 19 October 2016, following the release of the FTT decision, HMRC wrote to NT ADA withdrawing the original penalty assessment and replacing it with an amended penalty, correcting what HMRC considered to be a calculation error. As a result of this action, the FTT decision in respect of the original penalty assessment ceased to be of any practical relevance to the dispute between the parties to this appeal. Nevertheless, HMRC appealed to the UT, because from their perspective the issue was of general importance which may affect many other cases.
HMRC submitted (as before the FTT) that the 4 April 2016 letter complied with s. 83A (para. 16 of the decision). It would be clear to any reasonable reader that the recipient was being given the opportunity to have the decision reviewed, and the use of the word “opt” made it clear that it was within their control to do so. Also, HMRC submitted that it is clear from s. 83A(1) that it is a condition precedent to the requirement to offer a review that the decision is appealable under s. 83, so even if no review had been offered that failure would not stop the decision from being appealable. This was the case even if the failure affected the validity of the decision. However, the FTT had provided no legal basis for concluding that a failure to offer a review rendered the decision invalid. The legislation contained no express provision dealing with the consequences of a failure to offer a review and it would need to be shown that Parliament intended, by necessary implication, that a decision would be invalid in those circumstances. Such implications as there were suggested that a decision would not be invalid. The net effect of the FTT decision was to leave NT ADA facing an assessment which it could not challenge.
NT ADA submitted that compliance with s. 83A was compulsory and required an offer that was capable of acceptance. This was reflected in s. 83C, which requires HMRC to undertake a review where one has been offered and the offer has been accepted. The terminology was that of a contractual arrangement. Merely being able to ask for a review was not the same. Parliament had made it clear that, in VAT cases, taxpayers must be notified that there is a route of challenge, as of right, that does not involve going to the Tribunal. Failure to comply meant that there was not a valid notice, and therefore no decision that could be considered by the FTT. Any other conclusion would make s. 83A worthless.
HMRC's power to assess under s. 67 is in s. 76(1). This enables a penalty to be assessed and notified. No further provision is made as to the details of any assessment or the content of any notification of it. Under s. 76(9), an amount assessed and notified is recoverable, unless the assessment is withdrawn or reduced. Nothing in s. 76 suggests that an offer of a review is essential, or that an assessment unaccompanied by an offer of a review is either invalid or invalidly notified (para. 25 of the decision).
Section 83 contains a right of appeal against an assessment under s. 76 and nothing indicates that this right depends on the assessment having been made or notified in a particular form, or on it having been accompanied by an offer of a review. It requires only there to have been an assessment made and notified under s. 76.
Parliament clearly intended that a person receiving an appealable decision should be offered a review, but the UT saw nothing in the terms of s. 83A to support the proposition that failure to do so renders an assessment invalid, invalidly notified, or not capable of appeal (para. 28 of the decision).
The conclusion that a failure to offer a review does not affect the validity of a decision or the ability to appeal it leads to the question of what, if any, consequences there would be of a failure to offer a review, and whether Parliament can be taken to have intended that they should be no sanction. The UT did not think it is surprising that an obligation placed on HMRC does not bring with it an obvious sanction for non-compliance. Parliament simply expects obligations that it places on HMRC to be fulfilled. In practice, any failure to offer a review is likely to be remedied when pointed out, and if it was not then an aggrieved taxpayer would have recourse to judicial review proceedings to compel the offer of a review. A failure by HMRC to provide adequate notification of appeal or review rights in the decision letter could influence the exercise of the FTT's discretion to admit a late appeal (para. 37 of the decision).
The letter containing the penalty assessment stated:
If you disagree with this decision you can ask for a review by an independent HMRC Officer … Or you can appeal to the Tribunal Service within 30 days of this letter. If you opt for a review, you can still appeal to the tribunal after the review has finished.
The FTT had decided that this told NT ADA that it could ask for a review, but gave no assurance that one would be granted.
The UT found that there was an error of law in the FTT decision. A failure to offer a review in accordance with s. 83A does not invalidate either the decision or its notification, or render it unappealable. Also, the UT decided that the letter notifying the penalty offered a review. Thus, the appeal was allowed.
The next question was what, if anything, should be done in relation to the FTT decision. The UT concluded that there was nothing to be gained by setting aside the FTT decision. The penalty assessment had been withdrawn. In those circumstances, there was nothing of substance for the FTT to reconsider, and there was nothing to achieve by the UT remaking the decision. Any such reconsideration or remaking would have to take account of the circumstances as they now exist, i.e. that the assessment has been withdrawn, rather than remaking the decision as it would have been made at the date of the original decision if there...
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