TC03532: Compass Contract Services UK Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 30 April 2014 |
| Neutral Citation | [2014] UKFTT 403 (TC) |
| Date | 30 April 2014 |
| Court | First-tier Tribunal (Tax Chamber) |
[2014] UKFTT 403 (TC)
Judge Malachy Cornwell-Kelly, Mr Peter Davies
Mr David Scorey instructed by Deloitte & Touche LLP appeared for the taxpayer
Ms Jessica Simor QC and Mr Nicholas Gibson instructed by the General Counsel and Solicitor to HMRC appeared for the Crown
Appeal progressing without payment of tax or hardship relief - Jurisdiction to make directions in absence of compliance with Value Added Tax Act 1994 ("VATA 1994"), Value Added Tax Act 1994 section 84subsec-or-para 3s. 84(3), section 84 subsec-or-para 3A(3A) & section 84 subsec-or-para 3B(3B) - Status of directions and orders so made - Barring order against HMRC - Application for relief - Applicability of Mitchell v Newsgroup Newspapers Ltd[2014] 1 WLR 795 principles as applied by McCarthy & Stone (Developments) Ltd v R & C Commrs[2014] BVC 504 - Application dismissed.
The First-tier Tribunal (FTT) dismissed the application by HMRC for the lifting of the FTT's order barring them from taking any further part in an appeal by Compass Contract Services UK Ltd (Compass).
A notice of appeal dated 21 December 2010 by Compass was lodged against an assessment to recover input tax of £1,258,259, which HMRC decided was wrongly claimed by Compass.
On 22 July 2013, after various applications, extensions, stays, negotiations and failures, a judge made an "unless direction" stating that, if HMRC did not lodge their statement of case within 14 days of the release of that direction, "the respondent [HMRC] will be barred from taking any further part in the proceedings".
On 24 July 2013, HMRC wrote to the FTT referring to "the tribunal correspondence dated 22 July", i.e. the "unless direction", and saying that they are in the process of amending the case summary and would be grateful if a further period of 30 days could be granted to allow for the statement of case to be prepared.
Then on 16 August 2013, after HMRC had failed to lodge their statement of case, the FTT made a "barring order" stating: "The respondents are hereby barred, pursuant to Rules 8(3)(a) and 8(7) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, from taking any further part in these proceedings."
On 21 August 2013, HMRC applied for the FTT's order of 16 August barring them from taking any further part in these proceedings to be lifted. Unsurprisingly, on 23 August 2013 Compass objected to the application by HMRC and sought the maintenance in force of the barring order (and with costs to be awarded against HMRC).
HMRC submitted that the only proportionate response to the application was for the FTT to lift the "barring order". Also, HMRC argued that, as the tax at issue had not been paid or hardship relief agreed with HMRC, the FTT lacked jurisdiction to make the barring order. Section 84(3) did not allow the FTT to act in relation to the appeal until its provisions had been satisfied. On this argument, no relief from the barring order was possible, because the order had been made without jurisdiction (para. 36 of the decision).
The FTT made its decision bearing in mind the following matters:
-
(2) non-payment of tax: the FTT rejected the argument that compliance with s. 84(3)-(3C) is a condition for the FTT having jurisdiction to deal with an appeal (though it does not affect the validity and existence of the appeal by Compass). Although the argument was attractive in its simplicity, not least because it conveniently avoids the need to confront the issue of whether to give relief from the barring order. The FTT was persuaded by the submissions of Compass that this analysis goes too far and, while apparently giving effect to the statutory prohibition, in the result it produces a situation that cannot have been the legislator's intention. Thus, should there be - as in this case - a failure to respect the requirements of s. 84 and the case were still to proceed to a conclusion, the consequence would have to be that the decision of the FTT would be void; and, more seriously, that any appeal from that decision would also fail (para. 86 of the decision);
-
(3) the principles: the FTT identified (at para. 93 to 98 of the decision) the following factors from the Court of Appeal's decision in Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537, [2013] WLR(D) 466 and the Upper Tribunal's decision in McCarthy & Stone (Developments) Ltd v R & C CommrsVAT[2014] BVC 504:
-
(a) although the Civil Procedure Rules (CPR) do not apply to the FTT, it should have regard to the approach adopted by the courts in implementation of the CPR;
-
(b) an unless direction is a last resort and should be made where there have already been defaults by the party to whom it is addressed and not as a "good housekeeping" measure;
-
(c) the FTT will look for prejudice to the other party, either in terms of delay or in costs, resulting from the default;
-
(d) the default to be relieved must have been due to circumstances beyond the defaulter's control, or at least must be such as to be characterised as trivial;
-
(e) the decision in regard to relief must serve the overall purposes of justice;
-
(f) the checklist in the former text of CPR 3.9 may be taken into account, though not definitively; and
-
(g) the parties should, in principle, be heard;
-
(4) directions without notice: HMRC complained that the barring order was made without notice and without hearing submissions from the parties. The FTT held that the contested direction could not be characterised merely as "good housekeeping": there is a public interest in the efficient and timeous resolution of disputes. It is proper for the FTT by its case management decisions to have regard to that. The delay in this case had become unacceptable and, in the absence of an application to vary the directions, any objection to their being made without notice cannot be sustained;
(5) possible variation of the "unless" direction: HMRC claimed that the application for an extension of time on 24 July 2013 could have been treated as an application under r. 6(5) to vary the direction. However, the application was not expressed as one for the variation of the direction, because it would then have been listed for hearing, or at least notified to Compass for it to object to it or not. The FTT did not speculate on what would have been the outcome if that had been done, but understandably in the circumstances it was not done and so the barring order took effect;
(6) the reason(s) for the missed deadline (the nature and circumstances of the error): The evidence shows that the conduct of the case was in the hands of a junior officer, who was not legally qualified and who apparently had not realised the significance of the "unless order" and needed more training;
(7) prejudice to the taxpayer: having not paid the tax at issue, Compass had no immediate financial incentive of the kind normally felt by a taxpayer to hasten matters. It is difficult in this regard to be sympathetic to Compass's position on account of HMRC's delay;
(8) prejudice to the hearing: unsurprisingly Compass is content to live with whatever disadvantage may flow from HMRC being unable to put forward their evidence. Indeed, in cases where a taxpayer is unrepresented and has a poor understanding of the issues, the FTT is accustomed to the exercise of compensating for that deficit. Thus, it is difficult to see that a degree of prejudice to the hearing of the matter can in the present appeal be an unacceptable consequence of the order, or a persuasive reason for relief from it; and
(9) a difference in public law litigation?: HMRC argued that litigation before the FTT is public law litigation and is subject to a different conception of the public interest than in the context of private law litigation. There is the public interest in collecting the right amount of tax, an interest in which every taxpayer shares and which builds on the interest of other litigants in the efficient administration of justice. Although HMRC should to the greatest extent possible be treated as any other litigant, arguably recognition must be given to the distinction between public law and private law proceedings and the sanctions applied to defaults should be adapted proportionately. However, nothing in the McCarthy case supports the taking account of this further consideration in the way suggested.
No costs were awarded to Compass, as HMRC had not acted unreasonably in applying for relief against the barring order (para. 125 of the decision).
Both parties in the case were well represented, but considerably at fault in allowing the situation to develop where the FTT had to decide what to order while being as far as possible fair, practical and lawful.
[1]HMRC's application for the lifting of the tribunal's order of 16 August 2013 barring them from taking any further part in this appeal is dismissed.
[2]The tribunal's barring order of 16 August 2013 remains in effect.
[3]The taxpayer shall no later than 30 May 2014 apply to the Listing Office for a case management hearing to be fixed in order to determine directions for the hearing of the appeal.
[4]The taxpayer's application for costs is dismissed.
[1]This is an application by HMRC dated 21 August 2013 for the tribunal's order of 16 August 2013 barring them from taking any further part in these proceedings to be lifted. By notice of objection dated 23 August 2013, the taxpayer Compass Contract Services UK Limited ( "Compass" ), objects to the application and seeks the maintenance in force of the barring order.
[2]The appeal in this case was lodged by notice dated 21 December 2010 against a decision of HMRC on 22 November 2010 with regard to an assessment made on 3 September 2010 to recover input tax which HMRC say was wrongly claimed by and allowed to Compass; the tax at issue was £1,258,259. The...
To continue reading
Request your trial
-
BPP Holdings Ltd v Revenue and Customs Commissioners
...Ltd [2014] UKUT 196 (TCC); [2015] STC 973 and in the Ft-T decision, Compass Contract Services UK Ltd v Revenue and Customs Comrs [2014] UKFTT 403 (TC). However, in paras 59 to 60, she accepted the submission on behalf of HMRC that "[s]trictly" those cases were not in point as they concern......
-
TC03768: BPP University College of Professional Studies
...[58]I also note that the guidance from Mitchell has been applied by the FTT. See the decisions in Compass Contract Services UK LtdTAX[2014] TC 03532. It may well be that when a tribunal takes into account all relevant factors on an application for relief from sanction, it will consider the ......
-
Revenue and Customs Commissioners v BPP Holdings Ltd and Others
...that there was nothing in the "public law"argument, which had already been rejected by the F-tT in Compass Contract Services UK LtdTAX[2014] TC 03532. The F-tT's application of Mitchell [39]As Miss Simor and Mr Grodzinski recognised, I have already dealt with the question whether the amende......