R3: Role of Upper Tribunal

Upper tribunal jurisdiction

Same powers as High Court

“(1) In relation to the matters mentioned in subsection (2), the Upper Tribunal—
(a) has, in England and Wales or in Northern Ireland, the same powers, rights, privileges and authority as the High Court, and
(b) has, in Scotland, the same powers, rights, privileges and authority as the Court of Session.
(2) The matters are—
(a) the attendance and examination of witnesses,
(b) the production and inspection of documents, and
(c) all other matters incidental to the Upper Tribunal's functions.
(3) Subsection (1) shall not be taken—
(a) to limit any power to make Tribunal Procedure Rules;
(b) to be limited by anything in Tribunal Procedure Rules other than an express limitation.
(4) A power, right, privilege or authority conferred in a territory by subsection (1) is available for purposes of proceedings in the Upper Tribunal that take place outside that territory (as well as for purposes of proceedings in the tribunal that take place within that territory).” (TCEA 2007 s.25).

Upper tribunal jurisdiction

To develop structured guidance

"[74] We have not heard detailed submissions on this aspect, and it is in any event a matter of practice for the Presidents of the relevant Chambers of the First-tier and Upper Tribunals, rather than this court, as to what if any guidance should be given to tribunal judges. However, the system so described does point the way to a means of promoting consistency in the approach to questions arising under article 8, at both levels of decision-making. The experience built up by tribunals in dealing with individual cases can provide a basis on which the Upper Tribunal may develop a consistent approach to the handling of cases at the first tier. Their guidance in turn should help to inform the evolution of departmental policy. The result is not a confrontation between the executive and the courts or tribunals, but rather a partnership between two agencies each charged by the legislature with a specific role in administering a system which is to be fair both to the public and to individual applicants." (R (oao MM) v. Secretary of State for the Home Department [2017] UKSC 10)

“The appeal to the Court of Appeal (under section 13) was from the decision of the Upper Tribunal, not from the First Tier, and their function was to determine whether the Upper Tribunal had erred in law. That was best approached by looking primarily at the merits of the Upper Tribunal's reasoning in its own terms, rather than by reference to their evaluation of the First Tier's decision. True it is that the Upper Tribunal's jurisdiction to intervene had to begin from a finding of an error of "law". But that was not the main issue in the appeal, which was one of more general principle. Indeed, given the difficulties of drawing a clear division between fact and law, discussed by Lord Hoffmann, it may not be productive for the higher courts to spend time inquiring whether a difference between the two tribunals was one of law or fact, or a mixture of the two. There may in theory be a case, where it can be shown that the sole disagreement between the two tribunals related to an issue of pure fact, but such a case is likely to be exceptional. In the present case, as Lord Sumption has shown, there were no significant issues of primary fact. The differences between the two tribunals related to the understanding of the "abuse of law" principle, and their evaluation of the facts in the light of that understanding. The Upper Tribunal reached a carefully reasoned conclusion on law and fact. The task of the Court of Appeal was to determine whether that conclusion disclosed any error of law.” (HMRC v. Pendragon plc [2015] UKSC 37, §51 applied in Elbrook Cash and Carry Ltd v. HMRC [2019] UKUT 201 §35 (“guidance on issues of practice of general application within the FTT”)).

"Where, as here, the interpretation and application of a specialised statutory scheme has been entrusted by Parliament to the new tribunal system, an important function of the Upper Tribunal is to develop structured guidance on the use of expressions which are central to the scheme, and so as to reduce the risk of inconsistent results by different panels at the First Tier level." (R (Jones) v. First Tier Tribunal (Social Entitlement Chamber) [2013] UKSC 19, §41).

“The economic activity issue is not one of those exceptional cases which is an issue of pure fact. There is no dispute about the findings of fact. HMRC’s challenge is, in our view, related to the FTT’s understanding of the concept of economic activity and its application to the facts in the light of that understanding. That is a matter which, as Lord Carnwath observed in [50], is particularly well suited to detailed consideration by the Upper Tribunal, with a view to giving guidance for future cases.” (HMRC v. Pertemps Ltd [2019] UKUT 234 (TCC), §32, Nugee J and Judge Sinfield).

To develop structured guidance

- UT giving guidance on approach to common evaluative issue

"[106] In a broader sense the challenge raises the wider issue of how the FTT could and should approach the Third RMC Stage. In the many decisions reached on IR35, a wide variety of approaches have been adopted by the FTT and Upper Tribunal. In some cases, the approach has been to identify and discuss those factors pointing towards employment, those factors pointing away from employment and those factors which might be described as neutral, and then to either carry out a balancing exercise, or, in some instances, simply to state a conclusion. In other cases, the approach has been more impressionistic, identifying the "bigger picture" leading to a conclusion as to employment status. In several cases, the discussion of the Third RMC Stage has focussed on whether the individual was in business on their own account, and the relationship between services provided inside and outside the hypothetical contract.
[107] Without wishing to lay down a prescriptive template, it may be helpful, given the divergent approaches which have been taken, to offer some general guidance as to how the Third RMC Stage should be approached." (HMRC v. S&L Barnes Limited [2024] UKUT 262 (TCC), Judge Thomas Scott and Judge Baldwin)

- UT giving guidance on approach to common evaluative issue

Disputes as to evidence given before FTT

Ask FTT for its notes of the hearing

“The hearing before the FTT was not recorded. The parties have approached Judge Demack and he has provided a copy of his notes, which have been typed up and approved.” (HMRC v. Royal College of Pediatrics and Child Health [2015] UKUT 38 (TCC), §55, Birss J).

If a party disagrees with the note, put the point to the Judge for comment

“Essentially the Dexine procedure amounts to obtaining the judge’s note and putting the criticisms of the note by a party or the parties to the judge for comment. If the judge replies stating that he or she believes the note is correct, then the conclusion must be accepted. Mr Conlon also referred to the judgment of HHJ McMullen QC in Company X v Mrs A, Mr B, [2003] WL 21917453 (EAT) that in such circumstances “the record of the Chairman is conclusive”… The Dexine approach is a sensible and workable one. It can and in my judgment it should be applied in the Upper Tribunal.” (HMRC v. Royal College of Pediatrics and Child Health [2015] UKUT 38 (TCC), §56…58, Birss J).

Unworkable for Upper Tribunal to form its on view on what evidence was given

“To attempt to exercise the power which Mr Puzey submits I have shows how unworkable it would be. Mr Puzey did not suggest he should be sworn in and crossexamined on the issue. Even if one simply compares Mr Puzey’s note with that of Mr Conlon and the judge, the fact that Mr Puzey wrote what he did in his notebook does not mean that it reflects what the witness was actually saying. As Mr Conlon submitted, given the significance of that sort of evidence in a case of this kind, if such a thing had been said you might expect counsel for the taxpayer to notice and remember it. But he says he did not. Am I to turn both lawyers into witnesses and arrange for the cross-examination of both Mr Puzey and Mr Conlon? As Mr Conlon also pointed out, counsel’s notebook often contains notes which are not verbatim records of what a witness said. Notes can also reflect counsel’s thoughts about the case and points to take later. Even if I had the power which Mr Puzey submits exists, I would not exercise it in the appellant’s favour on this point. I am not satisfied that Mr Staniforth gave the evidence contended for.” (HMRC v. Royal College of Pediatrics and Child Health [2015] UKUT 38 (TCC), §59, Birss J).

Failure to follow procedure: alternative evidence will not be admitted

"[31] So, the procedure prescribed in Dexine Rubber is that, unless the representatives of both parties agree as to the evidence given, the judge’s note should be obtained and any criticisms of the note put to the judge for comment. If the judge states that his or her note is correct, new evidence will not be admitted to challenge the judge’s version of events.

...

[39] In this case, the precise procedure laid down in Dexine Rubber was not followed, in that no request was made for the judge’s note. No explanation for that was offered. The taxpayer cannot, however, be in a better position as regards the admissibility of the disputed evidence by declining to ask for the judge’s note. In any event, the Refusal Decision makes clear that neither the judge nor the tribunal member could recollect the Disputed Evidence, and, critically, that it was not recorded in either of their notes of the hearing. The judge did not amend his note.

[40] We determine in these circumstances that the Disputed Evidence should not be admitted, so that the Appellants’ primary ground of appeal fails." (Fiander v. HMRC [2021] UKUT 156 (TCC), Judge Thomas Scott and Judge Greenbank)

Disputes as to evidence given before FTT

Appellant not blamed where FTT retires and does not preserve hearing notes

"[89] So, in relation to the allegation made by Mr Boch, and contested by HMRC, that the decision is deficient because it fails to record or discuss Mr Warren’s oral evidence, we have a situation which does not fit neatly within the guidelines set out in Fiander. No application was made to obtain the judge’s notes at the time of the first application for permission to appeal or at the time, in September 2021, when the Appellant applied to amend its grounds of appeal when issues concerning the evidence before the FTT were first raised. Additionally, the allegation on which Mr Boch now relies was not included in any application for permission to appeal to the FTT. That is a serious deficiency, because only the FTT panel which heard the appeal was in a position properly to respond to the allegation. Since the FTT judge has now retired, we have been deprived of the benefit of his response. Finally, we still do not know whether the member’s notes might have shed light on the issue. On the other hand, it is unsatisfactory, both for the parties and for this Tribunal, that we do not have any judge’s notes of the hearing. Irrespective of whether a judge has retired, the hearing notes should be preserved during the period when an appeal is in progress. The absence of hearing notes in this appeal is not the fault of the Appellant." (The How Development 1 Ltd v. HMRC [2023] UKUT 84 (TCC), Judge Thomas Scott and Judge Brannan)

Appellant not blamed where FTT retires and does not preserve hearing notes

Effect of withdrawal of party’s case on appeal

Withdrawal of appeal same as withdrawal of appellant’s case

“The Tribunal in EF and NG [2013] UKUT 143 (IAC) first considered whether any distinction could be drawn between the withdrawal of an appeal (which was how the Secretary of State had expressed the withdrawal), and the withdrawal of a party’s case, as provided for by Rule 17 of the UT Rules. It held, at [23], that there was not.” (HMRC v. TGH (Commercial) Limited [2017] UKUT 116 (TCC), §21, Judge Berner).

Tribunal not required to substantively determine appeal in the event of withdrawal

“In this case, therefore, it is not a question of determining whether there are exceptional circumstances why an issue that has become academic should nonetheless continue to be entertained on appeal. It is not a case where all relevant parties maintain their cases in the appeal; the opposite is the case as the respondent, TGH, has withdrawn, and no substantive disputed matter remains to be determined on the appeal. The natural consequence is that the substantive proceedings are brought to an end, a consequence implicitly recognised in the UT Rules by the reference, in Rule 10(6)(b), to the timing of an application for costs in the case of a withdrawal being determined by reference to the sending by the Tribunal of the notice under Rule 17(5) that “a withdrawal which ends the proceedings has taken effect” (emphasis supplied). Even if the issue might be one of general importance to taxpayers and HMRC generally, that is not a reason for the Tribunal to adjudicate on the merits of an appeal where there are no continuing proceedings in that sense.” (HMRC v. TGH (Commercial) Limited [2017] UKUT 116 (TCC), §26, Judge Berner).

But will formally allow the appeal if it is the Respondent who withdraws

“The position is not the same where it is the respondent in the Upper Tribunal who has withdrawn its case. In such a case justice will not be done merely by recording the discontinuance. In my view, in such a case, the proper course is for there to be a formal determination of the appeal, by it being allowed…A formal determination that the appeal is allowed involves no finding on the merits. The powers of the Tribunal under s 12(2) TCEA do not arise in those circumstances. The decision of the FTT may not be set aside, and it may not be re-made by this Tribunal. The effect of allowing the appeal, however, is that the FTT decision is of no effect as regards the liability to tax in this case, and the original decision of HMRC against which TGH appealed is effectively restored.” (HMRC v. TGH (Commercial) Limited [2017] UKUT 116 (TCC), §§29…32, Judge Berner).

Effect of withdrawal of the underlying decision before appeal

SM v Secretary of State for the Home Department [2014] UKUT 64 (IAC)

Effect of withdrawal of party’s case on appeal

Outstanding issues before FTT

May be more efficient for UT to determine fundamental issue

“In my view the determining factor should be the means by which the matter may be resolved most efficiently, and in weighing that factor against the background and the parties’ arguments as I have described I have come to the conclusion that the more effective course is for the Upper Tribunal to determine the fundamental issue first. If it upholds the majority but does not feel able to determine the outcome in respect of the five individuals it is true that it will have to remit the matter to the First-tier Tribunal for that determination to be made, and in that case two hearings will be necessary. However, if it upholds the majority but finds it possible to deal with those five individuals’ circumstances itself, or alternatively reverses the majority in a manner which is determinative of those five cases, only one hearing will be necessary. Even if it reverses the majority but does not feel able to resolve the five cases, it will be able to remit the matter to be determined in accordance with its view of the law rather than the (on this hypothesis) incorrect view of the majority.” (Murray Group Holdings Ltd v. HMRC FTC/15/2013, §25, Judge Bishopp).

If to be determined by FTT, should usually be the same FTT

“But even if there were any merit in HMRC’s complaint [that the FTT refused to make various findings of fact], it would be most unusual to change the composition of a tribunal part-way through a case. It would lead to delay, since the relevant evidence would have to be heard again, and consequent expense; and there would be a considerable risk of 7 inconsistency between the findings of the original panel and those of any new panel which might be appointed.” (Murray Group Holdings Ltd v. HMRC FTC/15/2013, §16, Judge Bishopp).

Outstanding issues before FTT