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Procedure.Tax
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Q6: Failure to address a submission
Substantial submissions must be dealt with
"[59] However, we consider that the FTT failed to provide adequate reasons as to why it did not accept the Appellant's argument that there was one main philosophical aim, and everything was done in pursuance of that aim. HMRC argue that it is implicit in the FTT's decision, when read as a whole, that in finding that Relief was a main aim of at least equal importance to the philosophical aim, this was a rejection of the factual assertion that the sole aim was philosophical and all other aims were in service of that aim or subservient to it.
[60] The FTT concluded at [101] having found that the Appellant had a philosophical aim that was a central or main aim:
…This does not determine the appeal and I must now consider whether UGLE had other aims that were equally important and, if so, whether they fall outside Article 132(1)(l) PVD
[61] We can see no explicit explanation as to why that did not determine the appeal, given the Appellant's argument that it had one sole main philosophical aim throughout the relevant period, the provision of Relief being a mere manifestation of that aim. We consider that such an explanation was required in order to address the Appellant's argument." (United Grand Lodge of England v. HMRC [2023] UKUT 307 (TCC), Judges Ramshaw and Poole)
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"[94]...The FTT did err in law by failing to address the letter from the Appellants’ representative (Mr Roseff) dated 16 January 2018 in making its decision. The Appellants relied upon the wording of the letter to submit that HMRC had been aware since that time that the Appellants were in possession of the material they now sought, in particular the hard drive. The FTT did not identify the letter nor consider this issue in its decision.
[95]...The FTT did not address the issue despite hearing clear and opposing submissions from both parties on the topic. This was a material error of law because the January 2018 letter was relevant to deciding whether the disclosure application was made late and should therefore be refused." (Ellis v. HMRC [2022] UKUT 254 (TCC), Judge Greenbank and Judge Rupert Jones)
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“In the circumstances the FTT failed to take into account a very important part of the appellant’s case, and erred in law. Without seeking to decide the point, I can safely say that it was a point with significant merit.” (Projosujadi v. Director of Border Revenue [2015] UKUT 297 (TCC), §31, Mann J).
“It is plain just looking at the experts’ reports that they did not both agree that those consequences followed from derecognition. Mr Chandler considered that they did; Mr Parish did not. They acknowledged that the question might involve questions of law rather than accountancy, but they expressed views nonetheless. The FTT did not consider this difference…While it is plain that in various respects they preferred Mr Chandler’s evidence and analysis to that of Mr Parish it does not follow that they accepted all his reasoning. The terminology of this part of the Decision does not really admit of the inference that they accepted it in this area. It is just not plain enough that they did. They have not set out their reasons for getting to their conclusion, and the terms of the Decision suggest they thought it was a matter of simple logic with no-one arguing otherwise….That means that there is an error in the FTT’s reasoning.” (Greene King plc v. HMRC [2014] UKUT 178 (TCC), §§68…69…70, Mann J)
“The argument may or may not have been of sufficient merit to mean that there were reasonable grounds for believing that the assessment overcharged, or may have overcharged, Pumahaven to tax, but it was a principled argument which deserved to be dealt with and which ought not to have been ignored. See for a comparable issue the decision of the Court of Appeal in Flannery v. Halifax Estate Agencies [2000] 1 AER 373.” (Pumahaven Ltd v. Williams (Inspector of Taxes) [2002] EWHC 2237, §32, upheld on appeal).
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- Failure to address a submissions on a core issue
"[76] HMRC did not contend before the FtT that the bars, restaurant or theatre were entirely subservient to the gaming. The core of HMRC's case before the FtT was that the SMO proposed by HCL was critically flawed because it proceeded on the false premise that the economic use of the area allocated to hospitality or entertainment was exclusively limited to taxable supplies, when the economic reality was of dual use.
[77] There were plainly findings of primary fact made by the FtT, as addressed above, that were capable of supporting the case advanced by HMRC that the economic reality was of dual use.
[78] We therefore accept, as [HMRC] submits, that at [113] to [127] of the Decision, the Tribunal failed to address and give reasons for rejecting HMRC's contention that the areas allocated to the bars, restaurant and theatre were also used in part for the purposes of HCL's gaming business, such that there was dual use of those areas, or why if there was such dual use, the SMO guarantees a more precise result than the result which would arise from the application of the turnover-based standard method.
[79] Nowhere in the Decision did the Tribunal give reasons for rejecting HMRC's contention that the areas allocated to bars, restaurant and theatre were also used in part for the purposes of its gaming business, such that there was dual use of those areas, or why if there was such dual use, the SMO Method (which assumed exclusivity of use) could be more precise than the standard turnover method (or fair, reasonable and precise).
[80] We agree that the FtT did not explain why, if there was such dual use, the SMO (which assumed exclusivity of use) guarantees a more precise result than the result which would arise from the application of the turnover-based standard method. The onus was on HCL to displace the use of the standard method.
[81] This is a material error of law. This ground succeeds. It follows that in our judgement the Decision of the FtT is vitiated by a material error of law – a failure to address a core issue and give any reasons - and must be set aside on this ground." (HMRC v. Hippodrome Casino Ltd [2024] UKUT 27 (TCC), Judges Rupert Jones and Mandalia)
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- Need to carefully identify what was argued before the FTT
"[40] It has not been argued that the FTT failed to accurately record the arguments advanced or incorrectly identified the issues it had to decide. We accept that the argument was advanced that the Appellant had a philosophical aim that was its main aim, and that Freemasonry consists as a series of principles and practices and all its activities should be understood as being in service of that aim. We do not accept that the case was advanced on the basis that the provision of Relief cannot be an aim (whether a main aim or not) separate from the philosophical aim. An argument that all the activities were in service of the philosophical main aim does not equate to an argument that Relief cannot be a separate aim (whether a main aim or not). Further, there was no submission that we can see before the FTT that to found a separate aim any such aim must be outwith the main aim. This was not in the grounds of appeal to the UT upon which permission to appeal was granted and no application to amend the grounds of appeal was made." (United Grand Lodge of England v. HMRC [2023] UKUT 307 (TCC), Judges Ramshaw and Poole)
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- Not required to deal with every argument in support
"[30] Whilst it is incumbent on a FTT to deal with the main arguments advanced it is not required to deal with every argument made to it. In Fage UK Ltd & Anor v Chobani UK Ltd & Anor [2014] EWCA Civ 5 ("Fage") at [115] Lewison, LJ. said:
…There is no duty on a judge, in giving his reasons, to deal with every argument presented by counsel in support of his case. His function is to reach conclusions and give reasons to support his view, not to spell out every matter as if summing up to a jury. ….
[31] In HMRC v Beigebell Ltd [2020] UKUT (TCC) the UT, after acknowledging that the FTT was not obliged to set out every submission or argument raised, held at [29]:
…However, a necessary component of explaining to HMRC why they had lost involved demonstrating that HMRC's case had been addressed… (emphasis in original)" (United Grand Lodge of England v. HMRC [2023] UKUT 307 (TCC), Judges Ramshaw and Poole)
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Must deal with only point advanced by party​
"[42] ... As this was the only submission made in the appellant’s skeleton argument regarding the assertions made in the letter, it was incumbent on the Tribunal to have engaged with the argument raised even if only to reject it. However, given our finding, even if this were an error of law, it would not be material." (G B Fleet Hire Limited [2021] UKUT 225 (TCC), Judge Ramshaw and Judge Andrew Scott)
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Mistakenly assuming a point is not disputed is an error of law
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"[55] Overall, therefore, the FTT made an error of law when it concluded that the existence of the channel model was unchallenged. The error was material to the Decision for the reasons set out above. HMRC’s appeal on Ground 3 therefore succeeds." (HMRC v. Beigebell Ltd [2020] UKUT 176 (TCC), Judge Richards and Judge Cannan)
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Must address invitation to make an inference
See also Q9: Insufficient reasons
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“Where there is evidence, and it is evidence from which the tribunal is invited to make an inference, the tribunal must address that question and explain its reasons either for drawing an inference or refusing to do so. It is not sufficient simply to say that there was no evidence. The failure by the FTT properly to address the submissions of HMRC by reference to the available evidence was an error of law.” (HMRC v. Pacific Computers Ltd [2016] UKUT 350 (TCC), §82, Mann J and Judge Berner).
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Must address argument as to the improbability of HMRC's case
"[27]...The ground, properly understood, evinces a wider point that the FTT did not address itself to the probability of HMRC’s case as it ought to have in order to deal with the totality of Mr Cooper’s case. His case was not restricted simply to arguing the deposits were loans or account transfers. It also encompassed the argument that the deposits could not have been trading income because the business had completely failed. In that respect Mr Birkbeck rightly drew attention to the FTT’s recording of his submission (at [76]) that there was no evidence of any trading activities. This submission could be viewed either in terms of bolstering Mr Cooper’s case that the deposits were “not loans” or as making a freestanding point as to why it was said the assessment overcharged him (because the income could not have been trading income due to the lack of trading activity). Either way there is no indication the FTT dealt with the submission. So, while there was no error of legal approach in the FTT omitting to balance the probability of Mr Cooper’s case that the deposits were loans against the probability of HMRC’s case that the deposits were trading income, there was an error in omitting to deal with an important component of Mr Cooper’s case." (Qolaminejite v. HMRC [2021] UKUT 118 (TCC), Judge Raghavan and Judge Andrew Scott)
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Tribunal should check rather than assume an argument is not being pursued
“The letter merely says that the Special Commissioner formed the view that Mr. Prosser did not wish to pursue his arguments on the point. If such a view is formed by a tribunal in the course of a hearing, it appears to me appropriate that the tribunal should ask counsel whether an argument which had originally been formulated is no longer being pursued. It does not appear to me to be satisfactory for the tribunal to form the view itself that it need not deal with an argument without having secured confirmation that it is indeed being dropped.” (Williams v. Pumahaven Ltd [2002] EWHC 2237, §34).
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Read FTT decision as a whole
"[22] We consider that when the decision is read as a whole, as it clearly must, then it is plain the FTT did consider Mr Uddin’s case.
[23] As the appellant acknowledges, the FTT recorded his submissions to the effect that he had been assured by his accountant the matters were in hand at [16] and [17]. The decision of Katib was obviously relevant: the FTT specifically referred to the appellant’s submission in relation to it at [23]. Accordingly, it was clear the FTT was aware of Mr Uddin’s submissions. It was also aware of the need to consider Katib.
[24] Mr Watkinson highlighted, however, that the FTT failed to mention the part of Katib ([56]) of crucial relevance to Mr Uddin’s case; that was the paragraph which confirmed that the situation where a taxpayer was misled was relevant to the third stage. It is correct the FTT did not cite this paragraph. But we disagree this means the FTT failed to consider the misleading of Mr Uddin as relevant. At [16] the FTT expressly recorded that “The appellant submitted that the delay arose because the appellant’s representative had misled him.” It is clear from [16] and [17] that the tribunal understood that Mr Uddin’s case was that he had put matters into his accountant’s hands and was, from time to time, told that matters were in hand, when they very clearly were not.
[25] It is also clear from what the FTT said at [35] that the tribunal understood the relevance of Mr Uddin’s argument...
[...]
[28] It is true the FTT did not, as it might usefully have done, expressly clarify that it was accepting that Mr Uddin had been misled. But in view of the FTT’s line of reasoning, that was not an error of law. In essence, the FTT considered that in all the circumstances of this case Mr Uddin being misled would not constitute a reason sufficient to outweigh the importance of complying with time limits pointing against the grant of permission." (Uddin v. HMRC [2023] UKUT 99 (TCC), Judge Raghavan and Judge Baldwin)
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May lead to case being sent back
"[84] In the event of success on Ground 1, neither party invited us to decide the matter. Both considered it was appropriate for us to remit the matter for decision by the FTT. We agree. The FTT had (unlike us) heard the oral evidence first-hand and was referred to the detail of the underlying documents whereas we were not. We consider that the FTT panel which heard the matter is best placed to consider the remainder of Mr Cooper’s case, to make any findings as necessary and any consequential changes as regards the determination of the penalty appeals." (Qolaminejite v. HMRC [2021] UKUT 118 (TCC), Judge Raghavan and Judge Andrew Scott)
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“It seems fairly clear that [HMRC] did, in fact, make a submission to this effect…Accordingly, the FTT should have dealt with this submission. But the detail has not been argued before us, and we were only asked to send the matter back to the FTT if we found in favour of HMRC on the point. Thus, if we had not reversed the decision of the FTT as to the fair and reasonable attribution, we would have sent the matter back to the FTT to deal with ground 2.” (Volkswagen Financial Services (UK) Ltd v. HMRC [2012] UKUT 394 (TCC), §§104 – 105 – overturned on appeal on the question of whether HMRC did make this submission).
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“I did not understand Mr Artis to dispute counsel for the appellants’ assertion that the tribunal had before it documentary evidence demonstrating that the vehicles provided to Mr Davies and Mr Togneri were provided by Reedon. The FtT does not identify that evidence, nor does it explain why it rejected it, as it must have done. As Mr Young submitted, Reedon is not mentioned in the tribunal’s findings in respect of Plan 2. No attempt is made to deal with the appellants’ argument that Mr Donald was Services’ company secretary, that he carried out work for that company, that he was entitled to remuneration therefor, and that the use of a car represented that remuneration. In my view, therefore, the third ground of appeal is made out…Counsel were agreed during the hearing that, in the event that I upheld this ground, the case should be remitted to the tribunal to give further reasons for its rejecting the appellants’ appeal in respect of Plan 2, and I shall do so. It follows from what I have said earlier in this judgment that the appeal on grounds 1 and 2 is dismissed.” (James H Donald (Darvel) Ltd v. HMRC [2015] UKUT 514 (TCC), §§76…77, Lord Jones).
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“[The Revenue] submitted that the decision was not relevant in this case because I have an appellate jurisdiction, not a supervisory jurisdiction, but in my opinion that makes no difference. It is clear that errors of process which, if there was no right of appeal, could be corrected by judicial review can, if there is a right of appeal, be corrected on appeal. Suppose that the present case was before me on a judicial review application, not on an appeal. Ex parte Goodacre strongly suggests that I should quash Dr. Brice's decision and leave the matter on the basis that a new decision on the issue of reasonable grounds or not was to be reached by the Special Commissioners: I should not decide that underlying issue myself. If that is what I would do on a judicial review application, I believe that it is also what I should do on an appeal.” (Williams v. Pumahaven Ltd [2002] EWHC 2237, §41).
No new evidence on remission
"[86] The case is to be determined on the basis of the evidence that was before the FTT at the time of the hearing. We leave it to the discretion of the FTT panel to direct the timing and form of any submissions and the mode of any hearing that may be required in order to re-make the decision. We encourage the parties to seek to agree draft directions for the FTT to consider in that regard." (Qolaminejite v. HMRC [2021] UKUT 118 (TCC), Judge Raghavan and Judge Andrew Scott)
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Or the Upper Tribunal may treat itself as judge of fact and law
“The UT were entitled to treat themselves as the judges of fact and law on this issue, the FTT having failed to address it. The issue for the Court of Appeal and for this court is whether the UT erred in law.” (Amoena (UK) Ltd v. HMRC [2016] UKSC 41, §37).
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“Neither party expressed any enthusiasm for a remittance to the FTT at the main hearing before me…I have decided, with some reluctance, that I should deal with the points myself.” (Greene King plc v. HMRC [2014] UKUT 178 (TCC), §71, Mann J).
Appellant should apply for remittance to FTT to avoid UT costs regime
“[The taxpayer] resisted [HMRC’s] application in principle for costs if HMRC won on the basis that this was his first bite of the cherry on this point. As we have said, we consider that having failed to persuade the First-tier Tribunal to review its decision and having been granted permission to appeal, the appellant should have applied to the Upper tribunal to remit the appeal to the First-tier Tribunal to make a decision on the validity aspects that had been argued but on which no decision had been given. In that way there would have been no costs of substance in the Upper Tribunal. As it is we have heard this appeal and consider that costs should follow the event in the normal way.” (Gunn v. HMRC [2011] UKUT 59 (TCC), §12).
Sufficient basis for permission to appeal
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“I agree that the failure of the FTT to refer to and consider the UT’s decision in ATEC meant that the test for granting permission to appeal was satisfied. However, I do not consider that the appeal should succeed.” (Pierhead Purchasing v. HMRC [2014] UKUT 321 (TCC), §29, Proudman J).