St Annes Distributors Ltd v HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judgment Date | 21 December 2010 |
| Neutral Citation | [2010] UKUT 458 (TCC) |
| Date | 21 December 2010 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2010] UKUT 458 (TCC).
Upper Tribunal (Tax and Chancery Chamber).
Sir Stephen Oliver QC.
A director appeared for the appellant.
Philip Moser (instructed by the Solicitor to HMRC) for the respondents.
Value added tax - Input tax - Refusal of claim - Appeal - Procedure - Whether appeal withdrawn - Whether appeal reinstated - Right to appeal to Upper Tribunal - Tribunals, Courts and Enforcement Act 2007, Tribunals, Courts and Enforcement Act 2007 section 11 section 12ss. 11, 12 - Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 17.
This was an appeal by the taxpayer company against a decision refusing to reinstate two VAT appeals.
The taxpayer appealed against an assessment and a refusal of a claim for repayment of input tax. The appeals related to transactions which HMRC alleged involved missing trader intra-Community (MTIC) frauds about which the taxpayer knew or ought to have known. The taxpayer's sole director had sent an e-mail to the tribunal proposing that the appeals should be withdrawn with no direction as to costs. A few days later the director resigned and his place was taken by the principal shareholder who wrote to the tribunal confirming that the taxpayer wished to proceed with the appeals. The tribunal treated that letter as an application for reinstatement of the appeals under r. 17(3) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The tribunal dismissed that application. It then refused an application to set that decision aside but gave permission to appeal.
HMRC contended that the tribunal had had no authority to grant permission to appeal. It had made an "excluded decision" which, by reason of s. 11(1) of the Tribunals, Courts and Enforcement Act 2007, was subject to no further right of appeal. Even if the Upper Tribunal were to rule that it had jurisdiction to hear the appeal, it could only be an appeal under s. 11 of the 2007 on a point of law arising from a decision made by the First-tier Tribunal and there was none.
Held, allowing the appeal:
1. Withdrawal of an appeal had immediate and significant consequences. Withdrawal by written notice was made by a two-stage process. The withdrawing party was required to serve a written notice of withdrawal. The tribunal then had to notify each other party in writing of the withdrawal. The then sole director had sent the e-mail because he was not being paid by the taxpayer and did not want to be involved in the appeals. The e-mail could not be construed as a written notice of withdrawal within r. 17(1)(a): still less could it be read as a "notice of a withdrawal made under rule 17 … which ends the proceedings" within r. 10(4)(b).
2. Consequently the subsequent message that the taxpayer still wished to proceed should not have been treated as an application for reinstatement. Rule 17(3) and (4) entitled a withdrawing party to apply for the case to be reinstated so long as the application was in writing and received by the tribunal within the 28 day "cooling off" period. The new director's letter did not read as a reinstatement application but as a confirmation to the tribunal that the appeals were still being prosecuted. The non-existence of any withdrawal and the First-tier Tribunal's failure to recognise that had flawed every purported step in the proceedings thereafter. The tribunal's decision not to reinstate the appeals contained an error of law; the error was the procedural irregularity of refusing the application to reinstate the two appeals that had never been withdrawn. It followed that the dismissal of the set aside application was also wrong in law.
3. The taxpayer had been given permission to appeal. The absence of a point of law under the Tribunals, Courts and Enforcement Act 2007, s. 11 might mean that the Upper Tribunal was bound to reject the appeal but it did not destroy the permission to appeal. Therefore the Upper Tribunal could address the legality of the proceedings before the First-tier Tribunal and, for the reasons given, its decision was wrong. Section 12(2)(b) of the 2007 Act enabled the Upper Tribunal to remake the decision where it found that a decision involved an error of law. There was an error of law in this case and the correct decision was that the dismissal direction was to be set aside because the appeals had never been withdrawn.
4. If that was wrong and the issue was whether the refusal to reinstate was wrong in law, the Upper Tribunal concluded that it was. The tribunal judge had applied the wrong test. The right approach to a r. 17(3) reinstatement application was to proceed on the basis that the Rules gave an appellant who had withdrawn his appeal the right to apply for reinstatement. If the appellant was using the right to apply for an abusive purpose then the tribunal might refuse it. Here, a judge with wide experience of MTIC-related appeals had assessed the chances of success at quite a high level. The events in this case should be understood as a misplaced withdrawal which the taxpayer had taken steps to put right. The directors were acting in good faith and their actions came within the spirit of r. 17 and the tribunal's exercise of its power to allow the application to reinstate fell well within the object that r. 17(3) was designed to achieve.
1. This appeal by St Annes Distributors Ltd ("St Annes") is brought with the permission of Judge Demack ("the Judge"). It is against his direction of 16 February 2010 ("the February Direction"). The February Direction described the matter as "an application by St Annes Distributors Ltd for the reinstatement of the appeals, both having been withdrawn by e-mail of 7 September 2009." St Annes had made two appeals against decisions of HMRC, one in 2006 and the other in 2008: both are the subject matter of this Upper Tribunal hearing. The decision appealed against is the Judge's refusal to reinstate following a message from St Annes dated 24 September 2009.
2. I have formed the view that the e-mail of 7 September 2009 was not "a written notice of withdrawal" as required by rule 17(1)(a) of the Tribunal Procedure Rules. Consequently the subsequent message from St Annes of 24 September 2009 confirming that they "still wished to proceed with the above Tribunal reference", should not have been treated as an application "for their case to be reinstated" for the purposes of rule 17(3) and (4).
3. Mr Sharma, the present sole director of St Annes, represented St Annes at the hearing before the Judge and at the present hearing before the Upper Tribunal. He had written the message of 24 September 2009 to the First-tier Tribunal...
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...the application. In respect of point (4) Judge Greg Sinfield found that with reference to St Annes Distributors Ltd v R & C CommrsVAT[2011] BVC 1539 "considering the circumstances of the withdrawal of the appeals in this case and the fact that there is no suggestion that Mr Smith acted othe......