In BPP Holdings Ltd and others v HMRC [2017] UKSC 55, the Supreme Court ruled against HMRC in litigation on tax tribunal procedure. It related to a VAT appeal by the education group BPP. Their appeal had been on ice while the procedural litigation took place. It will now resume with HMRC barred from any involvement.
The Supreme Court judgment makes three important general points:
thinking on litigation procedure from the civil/commercial courts must be taken into account in tax appeals;
there’s no special rule giving HMRC extra freedom when it comes to the litigation timetables set by the tax tribunals; and
although First-tier Tribunal decisions on procedural issues can be appealed, they’re sticky; they will only be overturned if they are just plain wrong.
In BPP’s VAT appeal, HMRC had failed to deliver information required by the tribunal timetable. The tribunal issued an order warning them. HMRC failed again. The tribunal issued a further order precluding them from taking part. Now the Supreme Court has upheld it, that order means – amongst other things – that in the appeal hearing only BPP will make its arguments. HMRC has no right to participate.
On the three points above:
The Supreme Court stated that the tax tribunals must ‘pay close regard to’ the approach of the civil courts on litigation process. However, that approach generally isn’t to be imported unthinkingly. Judgement is needed, weighing the relevant differences between the civil courts and the tax tribunals. The only exception is where the Upper Tribunal or Court of Appeal has already specified that civil procedure case law in a particular area should be adopted in the tribunals.
HMRC argued that their failure shouldn’t be sanctioned because of ‘the public interest being harmed in that VAT which should be paid may not be recovered’. The Supreme Court rejected this. The Court of Appeal had already rejected an argument that special rules apply to HMRC because of constraints on public sector resource. In the tribunal, HMRC simply must play by the rules.
The Supreme Court restated the basic rule that the Upper Tribunal and courts don’t start from scratch in cases like this. They don’t substitute their own view for the FTT: instead the FTT decision is final unless it ‘cannot be justified’. The Supreme Court accepted that some FTT judges wouldn’t have made the order, and even that the order may have been ‘close to the line’ of what was justifiable. But that didn’t matter. It was a defensible decision and so HMRC were stuck with it.
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BPP: HMRC must play by the rules too
In BPP Holdings Ltd and others v HMRC [2017] UKSC 55, the Supreme Court ruled against HMRC in litigation on tax tribunal procedure. It related to a VAT appeal by the education group BPP. Their appeal had been on ice while the procedural litigation took place. It will now resume with HMRC barred from any involvement.
The Supreme Court judgment makes three important general points:
thinking on litigation procedure from the civil/commercial courts must be taken into account in tax appeals;
there’s no special rule giving HMRC extra freedom when it comes to the litigation timetables set by the tax tribunals; and
although First-tier Tribunal decisions on procedural issues can be appealed, they’re sticky; they will only be overturned if they are just plain wrong.
In BPP’s VAT appeal, HMRC had failed to deliver information required by the tribunal timetable. The tribunal issued an order warning them. HMRC failed again. The tribunal issued a further order precluding them from taking part. Now the Supreme Court has upheld it, that order means – amongst other things – that in the appeal hearing only BPP will make its arguments. HMRC has no right to participate.
On the three points above:
The Supreme Court stated that the tax tribunals must ‘pay close regard to’ the approach of the civil courts on litigation process. However, that approach generally isn’t to be imported unthinkingly. Judgement is needed, weighing the relevant differences between the civil courts and the tax tribunals. The only exception is where the Upper Tribunal or Court of Appeal has already specified that civil procedure case law in a particular area should be adopted in the tribunals.
HMRC argued that their failure shouldn’t be sanctioned because of ‘the public interest being harmed in that VAT which should be paid may not be recovered’. The Supreme Court rejected this. The Court of Appeal had already rejected an argument that special rules apply to HMRC because of constraints on public sector resource. In the tribunal, HMRC simply must play by the rules.
The Supreme Court restated the basic rule that the Upper Tribunal and courts don’t start from scratch in cases like this. They don’t substitute their own view for the FTT: instead the FTT decision is final unless it ‘cannot be justified’. The Supreme Court accepted that some FTT judges wouldn’t have made the order, and even that the order may have been ‘close to the line’ of what was justifiable. But that didn’t matter. It was a defensible decision and so HMRC were stuck with it.
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