Wrottesley v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 23 November 2015 |
| Neutral Citation | [2015] UKUT 637 (TCC) |
| Date | 23 November 2015 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
Judge Timothy Herrington, Judge Sarah Falk
Marika Lemos, instructed by New Quadrant Partners, appeared for the Appellant
Akash Nawbatt and David Peter, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
Procedure Domicile Whether to hold a preliminary hearing to determine the appellant's domicile of origin Appeal against case management decision Whether First-tier Tribunal (FTT) applied correct principles Error on point of law FTT decision set aside Decision remade.
The Upper Tribunal (UT) dismissed a taxpayer's application for a preliminary hearing to determine his domicile of origin in advance of the main hearing dealing with the substantive issue of the taxpayer's domicile during the tax years in question. The UT found that the First-tier Tribunal (FTT) decision in Wrottesley TAX[2014] TC 04084 involved an error on a point of law and decided to set aside the FTT's decision and remake it, although ultimately it came to the same decision as the FTT.
Lord Wrottesley (the appellant) applied for the issue of his domicile of origin to be determined at a preliminary hearing. The question of the appellant's domicile during the years 200001 to 200708 was the single issue to be determined in his substantive appeal against determinations issued by HMRC on the grounds that he was domiciled in England and Wales during those years. The appellant contended that at the time of his birth his father had acquired a domicile of choice in Ireland and that accordingly his domicile of origin was Irish and therefore even if he later obtained a UK domicile of choice he would only have to demonstrate that he had abandoned any such UK domicile of choice for his Irish domicile of origin to be revived. Alternatively if the appellant had a UK domicile of origin he would need to prove he had acquired a Swiss domicile of choice.
After referring to various cases the FTT concluded that considering all the circumstances, and especially that a further hearing would be necessary in any event and that it appeared unlikely that a preliminary hearing could be listed sooner than the substantive appeal, it was not appropriate to direct a preliminary hearing. The appellant appealed to the UT.
The UT decided that it should only intervene with the FTT case management decision if:
1) the FTT had applied an incorrect principle;
2) the FTT's decision was plainly wrong, or exceeded the generous ambit within which a reasonable disagreement is possible (per G v G UNK[1983] 2 All ER 225);
3) the FTT had failed to take account of relevant considerations or took account of irrelevant considerations; and/or
4) there was an error in the balancing exercise and insufficient weight or too much weight was given to certain factors.
Although the UT did not find the FTT decision plainly wrong, it was not satisfied that the FTT had applied all the correct principles, took all relevant considerations into account and disregarded irrelevant ones, and made no error in the balancing exercise. The UT concluded that the FTT's decision involved an error on a point of law and decided that it should set aside the FTT's decision and remake it (rather than remit it to the FTT).
The UT went on to consider whether to order a preliminary hearing by applying the following key principles:
1) The matter should be approached on the basis that the power to deal with matters separately at a preliminary hearing should be exercised with caution and used sparingly.
2) The power should only be exercised where there was a succinct, knockout point which would dispose of the case or an aspect of the case. In this context an aspect of the case would normally mean a separate issue rather than a point which was a step in the analysis in arriving at a conclusion on a single issue. In addition, if there was a risk that determination of the preliminary issue might prove to be irrelevant then the point was unlikely to be a knockout one.
3) An aspect of the requirement that the point must be a succinct one is that it must be capable of being decided after a relatively short hearing (as compared to the rest of the case) and without significant delay. This was unlikely if (a) the issue could not be entirely divorced from the evidence and submissions relevant to the rest of the case, or (b) if a substantial body of evidence was required to be considered. This explained why preliminary questions would usually be points of law. The tribunal should be particularly cautious on matters of mixed fact and law.
4) Regard should be had to whether there was any risk that determination of the preliminary issue could hinder the tribunal in arriving at a just result at a subsequent hearing of the remainder of the case.
5) Account should be taken of any potential for overall delay, making allowance for the possibility of a separate appeal on the preliminary issue.
6) The possibility that determination of the preliminary issue might result in there being no need for a further hearing should be considered.
7) Consideration should be given to whether determination of the preliminary issue would significantly cut down the cost and time required for pre-trial preparation or for the trial itself, or whether it could in fact increase costs overall.
8) The tribunal should at all times have in mind the overall objective of the tribunal rules to enable the tribunal to deal with cases fairly and justly.
In remaking the decision the UT concluded that the balancing exercise came out in favour of refusing to direct a preliminary hearing. The power should be used sparingly, particularly when the issue concerned a mix of fact and law, and there was no clear justification to exercise it in this case. A conclusion on the appellant's domicile of origin would not dispose of the whole case or a separate aspect of the case. It was not a succinct point in the circumstances of the case. Overall the UT thought it would be likely to increase the time and resources needed to resolve the dispute. The prospect of additional delay was a material factor. The UT were also not persuaded that the difference it might make to the appellant's pre-trial preparation was a material consideration given that the factual enquiry would remain the same and the appellant always had a choice about the evidence he wished to present. Finally, whilst the appellant might walk away once the preliminary issue had been decided that was uncertain, and to accord any weight to it would risk tribunal resources being employed for purposes other than those for which it had jurisdiction, namely to resolve the actual dispute before the tribunal.
The UT accordingly dismissed the appellant's application for the domicile of origin issue to be determined as a preliminary issue.
The UT found there to be no statutory basis for it to consider a separate dispute over domicile of origin and was concerned that to direct a preliminary hearing on that issue could effectively allow that to occur. Whilst such a course of action might have been useful to the taxpayer to have a separate determination of his domicile of origin, the UT did not think it was an appropriate use of tribunal time.
[1] This is an appeal against a case management decision of the First-tier Tribunal (FTT) (Judge Brooks) released on 21 October 2014. The substantive proceedings relate to an appeal against HMRC's determination that the appellant was domiciled in England and Wales during the years of assessment 200001 to 200708. By its decision the FTT considered and refused the appellant's application for his domicile of origin to be determined as a preliminary issue in advance of the main hearing of the appeal.
[2] The sole issue in the substantive proceedings is the appellant's domicile during the tax years in question. Both parties agree that the appellant's domicile of origin will need to be determined in order to decide this question. In summary the appellant claims that his domicile of origin is a discrete issue for which the limited relevant evidence is already prepared, and that resolution of it would both facilitate preparation for and the hearing of the rest of the case and could mean that the remainder of the case would not need to be heard.
[3] The appellant was born in 1968 in the Republic of Ireland, shortly after his parents had moved there from the UK and acquired an estate in County Galway. The appellant's father died unexpectedly in 1970, at which time the Irish and UK tax authorities accepted that the father was domiciled in Ireland. The estate was subsequently sold and the appellant left Ireland with his mother, initially to Spain but in 1975 to the UK where the appellant was educated and served in the army until 1995. After leaving the army the appellant worked in or from the UK but also spent increasing amounts of time in Switzerland where he developed an interest in winter sports, eventually competing for the Irish bob skeleton team. In 2001 the appellant married a Swiss citizen who also worked in the UK. The couple lived in London but also had accommodation in Switzerland at the home of the appellant's wife's family, and from around 2008 at a separate home made available by his father-in-law.
[4] In April 2001 the appellant filed a claim with the Inland Revenue that he was not domiciled in the UK as from around the year 2000. The claim was made under what was then s 207 Income and Corporation Taxes Act 1988 and Schedule 1A to the Taxes Management Act 1970. In providing details of the claim the appellant maintained that his domicile of origin was Irish. An enquiry was opened into the claim under paragraph 5 of Schedule 1A on 21 June 2001. Following protracted correspondence and an application to issue a closure notice in respect of the enquiry, on 18 April 2012 HMRC issued...
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