Spring Capital Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 01 May 2018 |
| Neutral Citation | [2018] UKFTT 250 (TC) |
| Date | 01 May 2018 |
| Court | First Tier Tribunal (Tax Chamber) |
[2018] UKFTT 0250 (TC)
Judge Guy Brannan
Mr Michael Upton, Advocate, instructed by Russel & Aitkin Solicitors, appeared for the appellant
Ms Harry Jones, of HM Revenue and Customs, appeared for the respondents
Procedure – Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273) - Recusal application – Penalties – Fair minded and informed observer – Spring Capital Ltd [2015] TC 04273 – Spring Capital Ltd v R & C Commrs [2016] BTC 509 – Spring Salmon & Seafood Ltd v R & C Commrs [2016] BTC 511 – Magill v Porter [2002] 2 AC 357 – ICTA 1988, s. 343 and 344.
The application for recusal in Spring Capital Ltd [2018] TC 06482, was denied because the Appellant was out of time and evidence indicated the Judge had acted with a fair mind.
The appellant applied that Judge Guy Brannan be recused from hearing a corporation tax appeal and a penalty appeal.
The corporation tax appeal concerned the tax years 2005 to 2009. The Appellant had claimed relief for the amortisation of goodwill on a transfer of a trade from an associated company, Spring Salmon & Seafood Ltd. The value of the business was mainly attributed to goodwill at approximately £20m.
The Judge had concluded, that the tripartite transaction had not occurred, evidence was not credible and that the trade had simply migrated directly to the Appellant. It was further found that HMRC were not precluded from raising enquiries on the point and the amendment had been validly made. The Judge adjourned the hearing on whether carry forward losses were available (with the agreement of the parties) pending the outcome of that appeal (Spring Salmon & Seafood Ltd v R & C Commrs [2017] BTC 522).
On 7 April 2015, the appellant appealed the First Decision on two points although, only pursued one issue before the Upper Tribunal (UT) – the amendment. The Upper Tribunal dismissed the appellant's appeal on 10 June 2016.
The Judge had refused permission to appeal the second application on grounds the appeal was out of time.
The Appellant submitted that a fair-minded and informed observer would conclude that there was a real possibility the Judge would not give the appellant a fair hearing. The Appellant specifically cited the Judges' statement that “It would be remarkable in these circumstances if HMRC had not considered imposing penalties”.
The legal test to apply was by Lord Hope of Craighead in Magill v Porter [2002] 2 AC 357 at [103]:
The question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.
It was found that there was no suggestion that the Appellant deserved the penalties and not express a view of whether liable to any penalty.
Directions given were to prepare the ground for a case management hearing. HMRC had specifically objected to the introduction of new evidence. The Judge had made it clear that the case management hearing would consider those objections. No specific objection was raised. The Judge did not prohibit the Appellant from raising any objection.
The application for recusal was denied.
The motivation for the application for recusal may have been driven by the intended imposition of penalties by HMRC. The case is a reminder of the fair mind approach.
[1] The appellant applies under rules 5(1), 5(3)(d), 5(3)(f) and 6 of The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (S.I. 2009/273) that I should recuse myself from hearing appeals Spring Capital Ltd [2015] TC 04273 (“the corporation tax appeal”) and Spring Capital Ltd [2017] TC 05928 (“the penalty appeal”). I should note that, as far as I am aware, I am not listed to hear the penalty appeal – this has been joined with other appeals to be heard by another judge.
[2] The corporation tax appeal concerned the amounts of corporation tax chargeable to the appellant for the tax years 2005 to 2009. I heard part of this appeal in May and October 2014 and, following further written submissions, gave my decision on 10 February 2015 reported as Spring Capital Ltd [2015] TC 04273 (“the First Decision”). The full details of that part of the appeal are set out in the First Decision, but the relevant points can be summarised as follows.
[3] The appellant had claimed corporation tax relief in respect of the amortisation of goodwill on a transfer of a trade (“the seafood business”) from an associated company, Spring Salmon & Seafood Ltd (“SSS”) in the following circumstances. The appellant contended that on 22 September 2004 SSS transferred its seafood business to Mr Roderick Thomas and Mr Stuart Thomas (“Messrs Thomas”) (who were at various stages either directors or shareholders of the appellant). Then, on the same day, Messrs Thomas were said by the appellant to have transferred the seafood business to the appellant for a consideration equal to market value (the “tripartite transaction”). The value of the seafood business mainly consisted of goodwill which the appellant claimed was, on 22 September 2004, approximately £20 million. This issue (and the associated dispute as to the value of goodwill – see below) took up most of the time at the hearing.
[4] The appellant also argued that HMRC were precluded from raising certain enquiries pursuant to an undertaking given by HMRC on 19 March 2010 (“the Undertaking”) before the Court of Session in Scotland in relation to the restoration of SSS to the Register of Companies.
[5] In the First Decision, I concluded, first, that the tripartite transaction had never taken place and that Mr Roderick Thomas' evidence was not credible ([216]–[232] of the First decision). Instead, I found that the trade had migrated from SSS directly to the appellant. Secondly, I held that HMRC were not precluded from raising enquiries in relation to the appellant in respect of the Undertaking ([272]–[282] of the First Decision).
[6] In addition, the appellant challenged the validity of a consequential amendment, made by HMRC on 10 December 2010 under paragraph 34 Schedule 18 Finance Act 1998, in relation to the accounting period ended 30 April 2008 (the “2008 period”) (“the consequential amendment issue”). I found against the appellant on this point and concluded that the amendment in respect of the 2008 period had been validly made ([254]–[261] of the First Decision).
[7] There was a dispute about the value of any goodwill acquired by the appellant from SSS and expert valuation evidence was produced by both parties. In the light of my decision that the tripartite transaction had never taken place, it was unnecessary for me to decide the point, but I indicated that I was minded to accept the valuation of the appellant's expert witness, Mr Taub, of £6.39m ([216]–[252] of the First Decision).
[8] Finally, there was a dispute as to the whether the appellant was entitled to carried forward tax losses derived from the trade of SSS under s 343 ICTA 1988 (“the section 343 issue”). HMRC accepted that the appellant had a prima facie entitlement to carry forward losses under section 343 ICTA 1988 (subsequently re-written in the Corporation Tax Act 2010) to the extent that there were losses available for carry-forward in SSS at the date of the cessation of its trade. Because this question depended, at least in part, on whether there were any losses available for carry forward in SSS after a terminal loss relief claim had been made by SSS – a matter which was the subject of another appeal – I adjourned the hearing on this point (with the agreement of the parties) pending the outcome of that appeal ([272]–[282] of the First Decision). That other appeal having been decided (Spring Salmon & Seafood Ltd v R & C Commrs [2017] BTC 522), the section 343 issue now falls to be determined in this appeal.
[9] On 7 April 2015, with my permission, the appellant appealed the First Decision on two points although, in the event, pursued the appeal only in relation to one issue before the Upper Tribunal, viz the consequential amendment issue in relation to the 2008 period. My finding that the tripartite transaction had never taken place was not appealed. The Upper Tribunal dismissed the appellant's appeal on 10 June 2016 (Spring Capital Ltd v R & C Commrs [2016] BTC 509).
[10] In the meantime, the appellant sought to pursue a further, and in effect, second appeal against the First Decision. The sequence of events is set out in my decision in relation to that second application for permission to appeal (“the Second PTA Decision”) which was released on 21 September 2016. For ease of reference and because this application relates observations that I made in that decision, I attach the full text of that Second PTA Decision as an appendix to this decision. In short, I held that although I had jurisdiction to hear a second application for permission to appeal, I refused permission to appeal. I did so on the ground that the appeal was out of time and, in any event, I indicated that it would have been an abuse of process to allow a further appeal on issues which could have been raised (and indeed were raised on the initiative of the Tribunal) in the submissions leading to the First Decision.
[11] In support of its second application for permission to appeal, Mr Upton, appearing for the appellant, filed a Note of Submissions dated 8 June 2016 with the Tribunal. Those submissions addressed, inter alia, the fact that the appellant's second application was out of time, although a number of the submissions overlapped with the substantive grounds for the application for permission to appeal. Mr Upton's Note of Submissions quoted a letter from the appellant's solicitors dated 6 May 2016. In support of its contention that leave to appeal out of time should be granted, the 6 May 2016 letter stated:
In addition, on 30 March and 21 April 2016 HMRC gave the appellant notice of...
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