TC03768: BPP University College of Professional Studies
| Jurisdiction | UK Non-devolved |
| Judgment Date | 01 July 2014 |
| Neutral Citation | [2014] UKFTT 644 (TC) |
| Date | 01 July 2014 |
| Court | First Tier Tribunal (Tax Chamber) |
[2014] UKFTT 644 (TC)
Judge Barbara Mosedale
Mr S Grodzinski QC, instructed by Simmons & Simmons LLP, appeared for the Appellant
Mr S Singh, Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
Procedure - HMRC directed to provide further and better particulars - Unless order breached - Whether HMRC should be barred - Whether Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537 applies - HMRC barred.
The First-tier Tribunal (FTT) has barred HMRC from taking further part in an appeal by BPP University College of Professional Studies against assessments for VAT at the standard rate in respect of supplies of books treated as zero-rated supplies finding that HMRC had failed to comply with an earlier direction of the Tribunal in the form of an "unless" order issued under r. 8 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273).
The appellant applied for a direction under r. 8 of the Tribunal Procedure Rules 2009 that HMRC be barred from taking further part in an appeal concerning assessments raised by HMRC for VAT at the standard rate on the supply of books that the appellant had treated as zero-rated supplies on the grounds that HMRC had not complied with an earlier direction from the FTT in the form of an "unless" order issued under r. 8(3).
The earlier order followed an application by the appellant that HMRC's statement of case, which had been submitted late, had failed to satisfactorily explain the factual and legal basis for the assessments. The order directed HMRC to submit a Reply to the appellant's request for further information and "identify, with the same degree of particularity as will be relied upon at the hearing of these appeals, each and every matter on which they rely in support of their argument…".
Although HMRC had submitted their Reply, the appellants argued that it failed to comply with the direction because firstly, in terms it stated that it would not list all facts and matters that HMRC intended to rely on at the hearing and secondly, it failed to identify a single fact on which HMRC relied let alone all the facts.
The FTT found that on both counts the Reply did not comply with the directions. It was not open to HMRC to say they were not obliged to fully comply with the direction; they were obliged to either obey it, appeal it, or seek to have it set aside but instead they had agreed to provide the Reply on the directed terms and whilst pleadings in general did not require each party to identify every fact, matter and submission with the same degree of particularity as would be relied upon at the hearing, it was open to the Tribunal to direct more detailed pleadings than ordinarily required and that is what the Tribunal had done. The Reply further contained no facts at all, instead referring to an earlier letter which had pre-dated the statement of case and direction and had that letter been an adequate statement of HMRC's position then the Tribunal would not have issued the unless order that it did.
Having found that the direction had not been complied with, the FTT then considered the appropriate sanction, if any. The appellant relied upon Mitchell v News Group Newspapers [2013] EWCA 1537 which the FTT found was not strictly relevant in that it related to considerations to be applied in an application for relief from sanctions rather than the imposition of sanctions but it did stress the overriding objective to ensure fair and just hearings and that significant weight ought to be given to the importance of compliance with directions and avoiding unnecessary delays and expense. In this respect, the FTT found that there had been unnecessary delay and expense and Tribunal directions had been breached. There was clear prejudice to the appellant in having to wait eight months for a proper statement of case and not barring HMRC would leave the appellant without a remedy for that prejudice. HMRC gave no good reason for the delay and were clearly on notice that a failure to comply might lead to a barring order yet they did not correct the position for another five months. Accordingly, barring was the appropriate sanction.
This case highlights the use of procedural r. 8 of the Tribunal Procedure Rules 2009 which allows the Tribunal to issue what is generally known as an "Unless order" that the proceedings will be struck out (or a part of the proceedings will be struck out) unless a party complies with a particular direction. In this case, the appellant had previously applied for the unless order on the basis that HMRC's statement of case was inadequate which order was issued under r. 8 and directed HMRC to provide a Reply to the appellant's request for further and better particulars. Although HMRC had provided a Reply, the FTT found that the Reply had failed to comply with the direction and the case was struck out.
[1]On 14 March 2014 the appellant, to whom I shall refer to as "UC", applied for a direction that the respondent be barred from taking further part in the appeal by reason of its failure to comply with the Tribunal's directions dated 15 January 2014.
[2]As I understand the background to this case, up to 2006 a company within the group of BPP Holdings Ltd ("Holdings") supplied standard rated education to students and included within that single supply was printed matter. A reorganisation of the business took place in 2006 which resulted in a separate company (BPP Learning Media Ltd - "LM")) which was not within the same VAT group making a supply of books to the students while a company ("PE") in the Holdings' VAT group continued to supply the education.
[3]As the separate supply of books is zero rated under Value Added Tax Act 1994 schedule 8 group 3Group 3 of Schedule 8 to the Value Added Tax Act 1984 ("VATA"), LM, or more accurately UC, as the representative member of the VAT group to which LM belongs, did not account for VAT on the supply.
[4]With effect from 19 July 2011 the law was amended by Finance Act 2011 section 75s 75 Finance Act 2011 ("FA 11") to introduce notes (2) and (3) into Value Added Tax Act 1994 schedule 8 group 3Group 3. These notes provided as follows:
-
(2)Items 1 to 6 do not include goods in circumstances where -
(a) the supply of the goods is connected with a supply of services, and
(b) those connected supplies are made by different suppliers.
(3)For the purposes of note (2) a supply of goods is connected with a supply of services if, had those two supplies been made by a single supplier -
(a) they would have been treated as a single supply of services, and
(b) that single supply would have been a taxable supply (other than a zero-rated supply) or an exempt supply.
[5]From 19 July 2011 the appellant accounted for VAT on the supply of the printed materials.
[6]On 29 November 2012 HMRC issued two alternative assessments on LM and Holdings of approximately £6 million for the period September 2008 to 18 July 2011 on the grounds that VAT should have been charged on the supply of the books on the bases either:
(a) There was a single composite supply; or
(b) There was an abuse of law under Halifax plc v C & E CommrsECAS (Case C-255/02) [2006] BVC 377.
[7]On 6 December 2012 HMRC issued a decision to UC and Holdings that as from 19 July 2011 the supplies of printed material by LM, where PE supplied educational courses, was standard rated.
[8]The two assessments and the decision were appealed in time. The three appeals were joined and directions issued for a joined statement of cas ("SOC") to be served on 2 October 2013. HMRC applied for a short extension of time when the joined SOC was served late on 21 October.
[9]The appellants did not consider that the SOC satisfactorily explained the factual and legal basis for the two assessments and decision. The appellants applied direct to HMRC for further and better particulars on 11 November 2013. There was some correspondence and calls between the parties in which the solicitor acting for HMRC appeared to accept in principle that HMRC ought to give the replies requested but would not (yet) commit HMRC to a time frame in which the replies would be provided.
[10]As they had said they would, the appellants then applied on 22 November 2013 to the Tribunal for an order that unless replies were provided within 14 days of the date of the order HMRC would be barred from proceedings. A hearing was convened for 9 January 2014.
[11]By the end of December the parties were agreed that the replies were to be provided by 31 January 2014. However, HMRC would not consent to order proposed by the appellant as it was in the form of an "unless" order which stated that HMRC would be barred if the replies were not provided by the agreed date of 31 January 2014.
[12]The hearing convened to hear the appellants' application therefore went ahead on 9 January. The directions issued by Judge Hellier record that HMRC had agreed to provide the further and better particulars by 31 January 2014. The Judge refused the appellants' application for an "unless" order under rule 8(1), but he made an "unless" order under rule 8(3)(a). In other words, the Direction provided:
UPON the Respondents having agreed to provide by 31 January 2014 replies to each of the questions identified in the Appellants' request for further information dated 11 November 2013;
And UPON hearing Counsel for the parties, the following Directions are made:
1.If the Respondents fail to provide replies to each of the questions identified in the Appellants' Request for Further Information by 31 January 2014, the Respondents may be barred from taking further part in the proceedings …
[13]On 31 January 2014 HMRC served a reply to the Request for Further Information. I will refer to this as the Reply.
[14]On 24 April 2013 HMRC notified the appellants that...
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