© 2024 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
Procedure.Tax
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N11: Estoppels and abuse of process
Estoppel prevents a person relying on a fact or argument
"[100] In ordinary language, an "estoppel" means that a person is prevented ("estopped") from relying on a particular fact or argument. In Tinkler, Lord Burrows, giving the leading judgment with which the rest of the Supreme Court agreed, said at [28]:
"There are several types of estoppel recognised in English law. These include
estoppel by representation, promissory estoppel, proprietary estoppel, estoppel by convention and, most recently, so-called contractual estoppel... Attempts have been made over the years to try to unify the various estoppels but such unification has proved elusive and the different types of estoppel continue to be seen as having their own particular requirements and effects."" (MWL International Ltd v. HMRC [2024] UKFTT 402 (TC), Judge Redston)
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Summary
"[27] For present purposes, I derive the following from the authorities:
i) Where a civil claim has been the subject of an adjudication, issue estoppel will generally bar a party from re-opening in a second claim an issue determined against him in the first one if the issue was essential to that decision;
ii) Where a civil claim has been struck out as an abuse of process on account of intentional and contumelious conduct, want of prosecution or wholesale disregard of rules of Court or, perhaps, struck out by reason of other "inexcusable" procedural failure on the part of the claimant, a second claim covering the same subject matter will be struck out unless there is special reason not to do so;
iii) Where a civil claim has been discontinued, the claimant will need to obtain the Court's permission to bring a second one arising out of facts which are at least substantially the same if the defendant had filed a defence in the first claim;
iv) Where a point was not raised in a set of proceedings but could have been, it may be an abuse of process for the party to raise it in later proceedings. When deciding whether that is the case, the Court takes a "broad, merits-based" approach in accordance with Johnson v Gore Wood & Co;
v) While the point was left open in Shiner, the weight of authority suggests that issue estoppel has, at most, a much smaller part to play in the context of tax appeals. However, it may be abusive for a party to contest a point which has been decided against him in such an appeal in later proceedings and, in that context, the Court will again make a "broad, merits-based" evaluation." (HMRC v. Kishore [2021] EWCA Civ 1565, Newey LJ)
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ISSUE ESTOPPEL​
General (very limited scope in tax appeals)
“Issue estoppel may arise where a particular issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant one of the parties seeks to re-open that issue.” (Arnold v. NatWest Bank Plc [1991] 2 AC 93, Lord Keith).
“We agree with Judges Richards and Berner that the question whether Mr Garland is entitled to pay voluntary NICs in Period 1 has been conclusively decided against him by UT 1, and it is not possible for us to re-open that question. There is a public interest in the finality of litigation and a defined appellate process which, as we have explained, Mr Garland has exhausted. Accordingly, even if we should think there was merit in Mr Garland’s arguments in respect of Period 1 we are obliged to refuse permission on ground (5).” (Garland v. HMRC [2016] UKUT 431 (TCC), §28).
“However, issue estoppel does not appear to have any actual application in tax cases. In Cafoor [1961] AC 584 PC it was held that a decision in one tax year does not create an issue estoppel for another tax year. That doctrine was held to apply as much to VAT as direct tax cases in Littlewoods [2014] EWHC 868 (Ch) at §190.” (Foneshops Ltd v. HMRC [2015] UKFTT 410 (TC), §25)
Overriding purpose
“designed to prevent the re-litigation of facts and other issues which have been or could have been decided in earlier proceedings between the same parties” (Bennett v. CEC [2001] STC 150)
Three requirements
“It is common ground that, in order for an issue estoppel to arise, three conditions need to be satisfied:
(i) the same question must previously have been decided;
(ii) the judicial decision which is said to create the estoppel must have been a final decision of a court of competent jurisdiction; and
(iii) the parties to the prior judicial decision … must have been the same persons as the parties to the subsequent proceedings in which the estoppel is raised…” (Littlewoods Retail Ltd v. HMRC [2014] EWHC 868 (Ch), §152, Henderson J)
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(1) Same question in both proceedings
For tax purposes, issue estoppel only applies to the liability to tax itself, and even then, only when that liability is the ultimate question before the Court or Tribunal. For example, interest is a separate liability to tax, as is a consequent penalty.
"I consider that the Caffoor principle applies to the underlying determinations of VAT and section 85 agreements in the present case, and that no issue estoppel can arise in relation to the separate claims for interest now advanced by the claimants so as to prevent HMRC from arguing that the VAT was in fact due as a defence to the claims. The position is in my judgment similar in all essential respects to that considered by Jacob J in King v Walden, which I respectfully think was correctly decided.” (Littlewoods Retail Ltd v. HMRC [2014] EWHC 868 (Ch), §207(1)).
“The appellant points out that issue estoppel is of limited application in tax proceedings due to the doctrine described in Cafoor [1961] AC 584 PC. That doctrine is that a decision in one tax year does not create an issue estoppel for another tax year. That doctrine was held to apply as much to VAT as direct tax cases in Littlewoods (supra) at §190.” (Bradonbay Ltd v. HMRC [2015] UKFTT 229 (TC), §52).
“If there effectively is no issue estoppel in actions for interest on tax over or underpaid, then it seems an irresistible conclusion that a tribunal determination on liability to VAT cannot create an issue estoppel in penalty actions arising out of that liability.” (Foneshops Ltd v. HMRC [2015] UKFTT 410 (TC), §28)
- Persuasive effect of earlier findings in any event
“I am therefore of opinion that the assessment is final and conclusive between the parties only in relation to the assessment for the particular year for which it is made. No doubt, a decision reached in one year would be a cogent factor in the determination of a similar point in a following year, but I cannot think that it is to be treated as an estoppel binding upon the same party for all years.” (IRC v. Sneath 17 TC 149 at 163, per Lord Hanworth)
- Confiscation order proceedings do not give rise to res judicata or estoppel
“That decision clearly does not preclude HMRC altogether from investigating Mr Martin’s tax affairs. In my judgment, it does not preclude HMRC from raising assessments based on the results of their investigation; they are not bound to accept that the house was constructed before the earliest of the assessment periods.” (Martin v. HMRC [2015] UKUT 161 (TCC), §55, Warren J)
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(2) Final decision of a court of competent jurisdiction
“The appellant appears to accept that this Tribunal is a court of competent jurisdiction…” (Bradonbay Ltd v. HMRC [2015] UKFTT 229 (TC), §50 – HMRC were arguing that issue estoppel would apply to the decision of the FTT)
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- Includes interlocutory or procedural decision
“Yet I take it to be too clear to need citation of authority that the parties to the suit are bound by the determination of the issue. They cannot subsequently in the same suit advance argument to adduce further evidence directed to showing that the issue was wrongly determined. Their only remedy is by way of appeal from the interlocutory judgment and, where appropriate, an application to the appellate court to adduce further evidence.” (Fidelitas Shipping 30 Co Ltd v V/O Exportchleb [1966] 1 QB 630 at 642, Diplock LJ).
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“Osman proceeded on the basis that the original decision which was stated to have created an issue estoppel was a final decision on disclosure and the further application was seeking to re-litigate the same issue. In this case, as Mr Furness accepts, the Targets cannot seek to re-litigate the Carmelite Application, being an application for disclosure, but the question as to whether to strike out the Targets’ pleadings on the underlying issue has not been specifically litigated.” (Granada Rental & Retail Limited v. The Pension Regulator [2014] UKUT 175 (TCC), §24, Judge Herrington)
“The fact that the decision which is said to create an issue estoppel was an interlocutory decision is not a bar to its creation.” (Granada Rental & Retail Limited v. The Pension Regulator [2014] UKUT 175 (TCC), §9, Judge Herrington)
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- But not substantive issues raised in the context of interlocutory decisions on a procedural issue
“However, as Mr Furness points out, the Carmelite Application was not extensively argued, as it undoubtedly would have been had the issue been on the table as, in effect, a preliminary issue. I therefore accept the distinction he draws between an application that has been set up for hearing as a purely procedural one, as the Carmelite Application was, dealing with the question of disclosure, and a hearing that has been set up to argue the merits of a preliminary issue.” (Granada Rental & Retail Limited v. The Pension Regulator [2014] UKUT 175 (TCC), §22, Judge Herrington)
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- Does not apply where earlier appeal struck out for procedural reasons
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"[51] In considering whether the striking out of an appeal constituted a “decision” on the underlying grounds put forward by an appellant, I was assisted by Takhar v Gracefield Developments Ltd [2019] UKSC 13. In that case, Lord Sumption (with whom Lords Hodge, Lloyd-Jones and Kitchin agreed) held that where a case is struck out for a procedural reason, the “cause of action” is the set aside application itself, and this “relates to the conduct of the earlier proceedings, and not to the underlying dispute”. Lord Sumption went on to say that, as a result. “there can therefore be no question of cause of action estoppel” applying. In other words the substantive issues in the appeal have not previously been decided. Although Takhar concerned a strike-out application on the basis of fraud, in my judgment the principle is the same in other cases." (Henry v. HMRC [2024] UKFTT 237 (TC), Judge Redston)
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- Estopped from relitigating matter following withdrawal
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"[73] We should also add that there is nothing unjust, absurd or anomalous in concluding that the effect of section 85 in the present case is that the tribunal is deemed to have determined the sole issue raised in the Assessment Appeal, that input tax on the investment management services was not allowable; rather this is simply an inevitable corollary of the deemed state of affairs and is consistent with (i) the purpose of section 85 and (ii) the reality that, by withdrawing the Assessment Appeal, TTSL was conceding the issue. It is a sensible conclusion on the facts of this case where TTSL is clearly seeking to re-litigate the same issue that arose in the Assessment Appeal. Indeed, we consider it would be absurd if TTSL could withdraw the Assessment Appeal and then make a claim for repayment of the very sums which had been assessed.
[74] We are satisfied therefore that the FTT was right to find at [222] that if there was no cause of action estoppel, then TTSL was barred by issue estoppel from bringing the Claim Appeal. The consequence of that finding is that the FTT was right to strike out the Claim Appeal and this appeal must be dismissed."
(Telent Technology Services Limited v. HMRC [2024] UKUT 183 (TCC), Green J and Judge Cannan)
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“Therefore, on 18 April 2011, as a result of withdrawing its appeal there was in effect a binding Tribunal determination that Meridian’s claims for input tax for 04/06 and 05/06 was incorrect as it was overstated and had no right to deduct input tax attributable to the transactions for which its recovery had been denied on the basis that it knew or should have known that these transaction were connected to fraud. This therefore disposes of the issue of whether the 04/06 and 05/06 returns are correct and, as such, Meridian is estopped from advancing the same arguments in the present appeal. In addition we find that it would be an abuse of process were it to be allowed to do so.” (Meridian Defence & Security Ltd v. HMRC [2014] UKFTT 300 (TC), §24, Judge John Brooks).
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- Unless it is clear that party was not intending to abandon the claim
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“In my view, what emerges from these authorities is that there is no inflexible rule to the effect that a withdrawal or judgement by consent invariably gives rise to a cause of action or issue estoppel. If it is clear that the party withdrawing is not intending to abandon the claim or issue that is being withdrawn, then he or she will not be barred from raising the point in subsequent proceedings unless it would be an abuse of process to permit that to occur.” (Ako v Rothschild Asset Management Ltd [2002] EWCA Civ 236, §41).
“The decision that the appeals should be allowed by consent was obviously not intended to be an end to the deregistration decision and we therefore decided that HMRC was not estopped from making the second deregistration decision… In our view the appeal against HMRC’s decision to reduce both input and output tax to nil for the period to 09/08 and to refuse the repayment claims in the subsequent returns were allowed by Judge Brooks, by consent. This does of course mean that that decision has already been made and has not been challenged by HMRC in any way within the prescribed time limits. It is therefore subject to res judicata and we cannot interfere with that decision.” (Wicked Wang Promotions v. HMRC [2017] UKFTT 100 (TC), §§19…22)
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(3) Same parties
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- HMRC not bound by litigation they were not a party to in absence of binding order
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"[269]...(1) notwithstanding the decision of Bean J in Faulds, the Respondents are not barred, by reason of the doctrine of issue estoppel, from adopting the Primary Case Preferred Analysis or the Primary Case Alternative Analysis. That is because they were not party to the proceedings in Faulds and did not agree to be bound by the decision (see Faulds at paragraph [9]). In addition, as noted in paragraph 65 above, following the decision, no application was made under Rule 19.8A(2)(b) of the CPR for the decision to bind the Respondents unless they applied under Rule 19.8(b) of the CPR to set aside or vary the order of the High Court. As such, the Respondents are free to advocate those analyses in the present proceedings;" (Dalriada Trustees Ltd v. HMRC [2023] UKFTT 314 (TC), Judge Beare)
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Exception: ​New material that could not have been adduced with reasonable diligence
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"[223] I record for completeness that Mr Jones did not refer to the exception set out at §196 and §197, namely that issue estoppel does not apply “in the special circumstance that further material relevant to the correct determination of a point involved in the earlier proceedings, whether or not that point was specifically raised and decided”. In particular, he did not seek to argue that the new arguments included in the Claim (see §25) based on the UT judgment in University of Cambridge constituted “special circumstances” for the purposes of issue estoppel.
[224] The Arnold exception only operates, of course, where the newly adduced material “could not by reasonable diligence have been adduced in those proceedings”. The UT’s judgment in University of Cambridge was issued in June 2015, so before the Assessment was appealed to the FTT, and thus prima facie could have been adduced in those proceedings." (Telent Technology Services Limited v. HMRC [2022] UKFTT 147 (TC), Judge Redston)
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Delay in raising estoppel may provide defence
"[21] We agree with Mr Jones KC that the FTT was wrong to treat the issues of acquiescence and estoppel raised by TTSL as issues of general case management. We consider that, in the context of a strike out application based on estoppel and abuse of process, the lateness of the application could give rise to a substantive defence based on acquiescence or estoppel. Case management issues might arise from the lateness of an application but TTSL did not take any case management issue here. It did not object to HMRC amending the statement of case." (Telent Technology Services Limited v. HMRC [2024] UKUT 183 (TCC), Green J and Judge Cannan)
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CAUSE OF ACTION ESTOPPEL​
- Appeal against assessment to input tax and claim for repayment of that input tax are same cause of action
"[92] In the present case, we agree with Mr Elliott and the FTT that TTSL's cause of action in the Claim Appeal was the same cause of action as in the Assessment Appeal. The cause of action was TTSL's claim to be entitled to input tax credit on fees paid to investment advisers in relation to the Escrow Account. The FTT was therefore right to strike out the appeal on the grounds of cause of action estoppel, and we reject Ground 3 of the appeal.
[93] Overall, that is not a surprising result. It would be surprising if TTSL had the right to assert entitlement to input tax credit twice in relation to the same input tax in the same VAT period, either because of a narrow interpretation of section 85 or on the basis that there is no cause of action estoppel. In substance TTSL was making the same claim arising out of the same facts. Whilst it is true that the first decision being challenged was an assessment and the second decision was the refusal of a claim, they were based on exactly the same facts and matters. If cause of action estoppel does not apply, then one would expect issue estoppel to apply." (Telent Technology Services Limited v. HMRC [2024] UKUT 183 (TCC), Green J and Judge Cannan)
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ESTOPPEL BY ACQUIESCENCE​
- Silence can only amount to acquiescence where there is a duty to speak
"[40] [HMRC] rightly acknowledged that estoppel by acquiescence is a recognised form of estoppel. He referred to a decision of Blair J in Starbev GP Ltd v Interbrew Central European Holdings BV [2014] EWHC 1311 (Comm) which treated it as a sub-set of estoppel by convention. The case was determined on different grounds, but Blair J noted at [127] that in a contractual context, silence on the part of a party can only amount to acquiescence where there is a duty to speak. Mr Elliott submitted that in the present context there was no duty to speak and there could be no estoppel by acquiescence. Mr Jones KC disagreed and submitted that there was a duty to speak, in the sense that HMRC were obliged to state their case in full." (Telent Technology Services Limited v. HMRC [2024] UKUT 183 (TCC), Green J and Judge Cannan)
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- Detriment essential
"[41] In the event, it is not necessary for us to resolve that issue or to determine whether HMRC can be said to have acquiesced in TTSL pursuing the Claim Appeal by failing to make their strike out application until July 2021. That is because we are satisfied that it is a necessary ingredient of estoppel by acquiescence, as for any estoppel by representation, that the party claiming the benefit of the estoppel has suffered detriment. The FTT made a clear finding that TTSL had not suffered any detriment and it has not appealed that finding." (Telent Technology Services Limited v. HMRC [2024] UKUT 183 (TCC), Green J and Judge Cannan - on the facts no detriment because FTT found that most likely T would have pursued the appeal anyway)
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- Estoppel by acquiescence and estoppel by convention are types of estoppel by representation
"[45] In the light of Tinkler at [64] and ING at [64(v)], we do not accept that submission. We are satisfied that detrimental reliance is a requirement of both estoppel by convention and estoppel by acquiescence, both being different forms of estoppels by representation." (Telent Technology Services Limited v. HMRC [2024] UKUT 183 (TCC), Green J and Judge Cannan)
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ESTOPPEL BY CONVENTION
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Jurisdiction​
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- FTT seeing no reason why it did not have jurisdiction to consider T's reliance on estoppel
"[224] In this case, HMRC did not make any submissions to the effect that the Tribunal did not have jurisdiction to consider arguments based on estoppel by convention. We have not therefore considered this point in any detail although record that, bearing in mind the statutory framework which we have already discussed in the context of legitimate expectation, we do not see any obvious reason why the Tribunal would not have jurisdiction to consider arguments based on estoppel by convention in the context of an appeal against a recovery assessment, particularly given that this does not fall into the category of public law arguments." (Queenscourt Limited v. HMRC [2024] UKFTT 460 (TC), Judge Vos)
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- FTT deciding that HMRC cannot be bound by estoppel
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[126] [HMRC] submitted that even if the Tinkler conditions were met, HMRC could not be estopped from applying ITEPA s 167, because it was a statutory provision enacted by Parliament. Although she did not refer to Halsbury's Laws, we noted that this similarly says:
"the principle that a party cannot set up an estoppel in the face of a statute has been described as a principle that appears in our law in many forms."
[127] [HMRC relied on Keen v Holland [1984] 1 All ER 75. In that case, Mr Keen had submitted that Mr Holland was estopped from relying on s 2(1) of the Agricultural Holdings Act 1948, because he had signed contracts excluding the protection given by that subsection. Oliver LJ, giving the judgment of the Court, said at p 261 that this argument was "not, in our judgment, sound" because:
"The terms of section 2(1) are mandatory once the factual situation therein described exists, as it does here, and it cannot, as we think, be overridden by an estoppel even assuming that otherwise the conditions for an estoppel exist."
...
[124]We therefore agree with [HMRC] that HMRC cannot be estopped from applying a statutory provision, whether or not they have a discretion as to its application, and despite the Tinkler conditions having been met." (MWL International Ltd v. HMRC [2024] UKFTT 402 (TC), Judge Redston)
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"​[15] [HMRC] contended that it was necessary to apply the dicta of Finlay J in Williams v Grundy's Trustees, KB 1933, 18 TC 271, “nothing is better settled than the principle that there is no estoppel as against the Crown”.
A blunder cannot prevent HMRC from collecting tax. The mistake was unfortunate but cannot prevent HMRC collecting the tax which is chargeable and due to be collected.
...
[23] The principle of no estoppel against the Crown operated to override the mistake by HMRC." (Frost v. HMRC [2010] UKFTT 344 (TC), Judge Radford)
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- Not contrary to the purpose of TMA s.9A
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"[81] The situation with which we are concerned is distinguishable. Section 9A TMA requires that a notice of enquiry is given to the taxpayer; and section 115(2) provides one method by which that notice may be given. But it would have been open to the parties (ie HMRC and Mr Tinkler) to agree expressly the method by which the notice of enquiry was to be given (including, it would seem, that a notice of enquiry given to Mr Tinkler’s tax advisers would have counted). It follows from the TMA being permissive as to the method of giving notice that an estoppel by convention, by which HMRC and Mr Tinkler/BDO operated on the basis that a valid enquiry had been opened (ie that a particular method had been used), does not undermine the purpose of the Act. As, applying the principles of estoppel by convention, Mr Tinkler is otherwise estopped from denying that HMRC opened a valid enquiry, there is nothing in the statutory provisions, purposively interpreted, that requires the court to reject that estoppel.
[82] There is an additional reason, on the facts, supporting that conclusion. We have seen, at para 15 above, that the FTT found that Mr Tinkler and/or his PA knew of HMRC’s enquiry in November 2005. Even if, contrary to the view taken in the last paragraph, the purpose of section 9A would otherwise be undermined by the operation of the estoppel by convention, there cannot be any conceivable undermining of the statutory purpose once the taxpayer actually knows of the enquiry. After November 2005, therefore, there has been no conceivable statutory reason why the taxpayer should be protected by rejecting the operation of estoppel by convention." (HMRC v. Tinkler [2021] UKSC 39)
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Ingredients of estoppel (summary)
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"[53] As I have already said, both counsel submitted that the Benchdollar principles, subject to the Blindley Heath amendment to the first principle, applied in this case. I agree. This judgment therefore affirms that those principles, as amended by Blindley Heath, are a correct statement of the law on estoppel by convention in the context of non-contractual dealings. What I have also sought to do is to explain the ideas underpinning the first three principles which may provide assistance in the understanding and application of those principles." (HMRC v. Tinkler [2021] UKSC 39 - see the summary in the Court of Appeal, below)
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"[53] As summarised in Chitty on Contracts (32nd edition) at 4-108:
"Estoppel by convention may arise where both parties to a transaction "act on assumed state of facts or law, the assumption being either shared by both or made by one and acquiesced in by the other." The parties are then precluded from denying the truth of that assumption, if it would be unjust or unconscionable (typically because the party claiming the benefit has been "materially influenced" by the common assumption) to allow them (or one of them) to go back on it."
[54] The parties were agreed that the principles governing estoppel by convention arising out of non-contractual dealings are conveniently summarised in the judgment of Briggs J in HMRC v Benchdollar Limited and Ors [2009] EWHC 1310 (Ch), [2010] 1 All ER 174 at [52]. This summary was approved by the Court of Appeal in Blindley Heath Investments Ltd & Anor v Bass [2015] EWCA Civ 1023, [2017] Ch 389 at [91], subject to one qualification explained at [92]. If that qualification is made to the first paragraph of the summary, the amended summary is as follows:
(1) It is not enough that the common assumption upon which the estoppel is based is merely understood by the parties in the same way. The assumption must be shown to have crossed the line in a manner sufficient to manifest an assent to the assumption.
(2) The expression of the common assumption by the party alleged to be estopped must be such that he may properly be said to have assumed some element of responsibility for it, in the sense of conveying to the other party an understanding that he expected the other party to rely on it.
(3) The person alleging the estoppel must in fact have relied upon the common assumption, to a sufficient extent, rather than merely upon his own independent view of the matter.
(4) That reliance must have occurred in connection with some subsequent mutual dealing between the parties.
(5) Some detriment must thereby have been suffered by the person alleging the estoppel, or benefit thereby have been conferred upon the person alleged to be estopped, sufficient to make it unjust or unconscionable for the latter to assert the true legal (or factual) position." (Tinkler v. HMRC [2019] EWCA Civ 1392, §§53 - 54, Hamblen LJ)
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"[222] The relevant principles can be summarised as follows:
(1) There must be an expressly shared common assumption between the parties.
(2) The sharing of the common assumption must include words or conduct from which the necessary sharing or assent to the assumption can properly be inferred.
(3) The expression of the common assumption by the party alleged to be estopped (in this case HMRC) must be such that they may properly be said to have assumed some element of responsibility for it, in the sense of conveying to the other party an understanding that they expect the other party to rely on it.
(4) The person alleging the estoppel (Queenscourt) must in fact have relied upon the common assumption, to a sufficient extent, rather than relying upon their own independent view of the matter.
(5) That reliance must have occurred in connection with some subsequent mutual dealing between the parties.
(6) Some detriment must thereby have been suffered by the person alleging the estoppel (Queenscourt) or some benefit must thereby have been conferred upon the person alleged to be estopped sufficient to make it unjust or unconscionable for the latter to assert the true legal (or factual) position." (Queenscourt Limited v. HMRC [2024] UKFTT 460 (TC), Judge Vos)
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- Should be raised in advance of FTT hearing
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"[56] The argument that there was an estoppel by convention was not raised in advance of the FTT hearing. The argument formed no part of HMRC's case to the FTT nor of their Skeleton Argument, it being raised for the first time in counsel's closing submissions. HMRC failed to call any officer who had been involved either in the sending of the original letter or in subsequent conversations with BDO. Instead, HMRC sought to rely on the documents before the FTT and the cross-examination of Mr Tinkler. This is unsatisfactory. It is always important that the precise nature of an alleged estoppel and of the factual circumstances giving rise to it are clearly articulated. It is also generally desirable that the parties should have a proper advance opportunity to consider any such case and the need for evidence." (Tinkler v. HMRC [2019] EWCA Civ 1392, §56, Hamblen LJ)
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- Burden of proof on party asserting estoppel
"[18] ... As regards estoppel by convention, the burden of proof is upon HMRC as it is HMRC who raises it and relies upon it. The standard of proof in all these respects is of course that of the balance of probabilities." (Cattrell v. HMRC [2024] UKFTT 67 (TC), Judge Chapman KC)
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Shared assumption that it would be unconscionable to go back on​
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(1) C must know the D shares the common assumption, and D must objectively expect C to rely on it
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"[51] It may be helpful if I explain in my own words the important ideas that lie behind the first three principles of Benchdollar. Those ideas are as follows. The person raising the estoppel (who I shall refer to as “C”) must know that the person against whom the estoppel is raised (who I shall refer to as “D”) shares the common assumption and must be strengthened, or influenced, in its reliance on that common assumption by that knowledge; and D must (objectively) intend, or expect, that that will be the effect on C of its conduct crossing the line so that one can say that D has assumed some element of responsibility for C’s reliance on the common assumption." (HMRC v. Tinkler [2021] UKSC 39)
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[115] We agree with [the taxpayer], and find as a fact that the Inspector knew the Cars would be used for some private journeys. We make that finding for the following reasons:
(1) Mr Walpole told the Inspector that the Cars were regarded as "travelling offices", because they contained phone equipment. It would have been an obvious and inescapable inference that the Cars were regularly used for all types of journey, including those with a private purpose, because otherwise there was a high risk that calls from customers would be missed.
(2) One of the requirements agreed at the Meeting was that employees who used the Cars each had access to a personal car owned privately. That requirement only makes sense if it was a proxy for the statutory condition that "any private use of the car made by the employee was merely incidental to the employee's other use of the car". The Inspector therefore accepted the Cars would be used for all types of journey, although as the directors had personal cars owned privately, the number of journeys with a private purpose could be expected to be lower than if this was not the position.
[116] We therefore find that there was a common assumption that the Cars were pool cars provided the Appellants kept to the terms agreed in the Meeting. We also agree that the Inspector, acting on behalf of the Inland Revenue, assumed responsibility for that assumption, knowing it would be relied on, and that the Appellants did rely on it. It follows that the requirement in Tinkler that the Inspector's conduct must have "crossed the line" (see §111) has also been met." (MWL International Ltd v. HMRC [2024] UKFTT 402 (TC), Judge Redston)
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- No estoppel if no assent to HMRC's assumption
"[49] However, Tinkler was a factually different situation as the taxpayer (through his advisor) was actively engaged in responding to the enquiry during the time when a notice of enquiry could have been given. In the present case, however, Mr Cattrell (through PWC) was involved in agreeing to the RSA in 2005 and there was then no contact until October 2013 at the earliest.
[50] I find that there was a shared assumption that a notice of enquiry had been given. HMRC were clearly of the view that a notice had been given, as shown from its records and internal memoranda. For the reasons set out above, I find that Mr Cattrell had received the notice of enquiry and so, contrary to Mr Lynam's submissions, did understand that a notice of enquiry had been given (although there is nothing to say that Mr Cattrell understood the legal ramifications of this). However, this shared common assumption did not cross the line. Crucially, the RSA was predicated on the need to issue a notice of enquiry if one had not already been issued. Crucially, paragraph (i) of the RSA provided that, "HMRC will open enquiries into all other individuals within the RSA but will not request information and documentation relating to the GS loss claims." Similarly, paragraph (c) provided that, "The RSA does not affect the statutory rights and obligations of either the individual or HMRC." The RSA did not, therefore, manifest an assent to any assumption that a notice of enquiry had already been given, as the RSA itself catered for the possibility that it had not been given. Although there was no such reservation in the communications in 2013 and 2014 (which did appear to assume that the enquiry was valid) these are after the date upon which a notice of enquiry could have been given under section 9A of the TMA 1970 and so any reliance upon that would not be detrimental reliance as HMRC were by then already out of time.
[51] It follows that the RSA did not constitute an assumption of responsibility either, as the RSA did not provide for or otherwise indicate that Mr Cattrell accepted that a notice of enquiry had been given. I accept that he was, through PWC as his agent, indicating (and, indeed, agreeing) that he would participate in the RSA. However, for the reasons set out above, the RSA still on its face envisaged a need to give a notice of enquiry where one had not been given." (Cattrell v. HMRC [2024] UKFTT 67 (TC), Judge Chapman KC)
​
- No bar to estoppel that the relying party initiated the mistake or was negligent
​
"[56] However, with respect to the Court of Appeal, I do not think anything significant turns on that misrepresentation in this case. In particular, as we have seen by reference to Amalgamated Investment, The Amazonia and Benchdollar, it is not a bar to estoppel that HMRC initiated the mistake or that, as in Benchdollar, HMRC was careless in relation to that mistake or induced the other party’s mistake by a misrepresentation. The Court of Appeal regarded those factors as highly relevant to its decision not least in deciding on the unconscionability aspect of estoppel by convention. With respect, this gave those factors far too much weight. On these facts, it was largely irrelevant that HMRC may be said to have initiated the common mistake by a misrepresentation and to have been careless in doing so." (HMRC v. Tinkler [2021] UKSC 39)
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But cannot use estoppel by convention to defeat claim for misrepresentation
​
"[67] Before moving on to those two additional issues, there is one clarificatory point about the general relationship between misrepresentation and the unconscionability element of estoppel by convention. This particular point does not arise on the facts of this case but it is relevant in thinking more generally about estoppel by convention. I have made clear that, on the facts of this case, and in line with Benchdollar, HMRC’s misrepresentation is no bar to its invocation of estoppel by convention. But one can postulate facts where the invocation of estoppel by convention might be used to try to undermine a claim based on the misrepresentation. Say, for example, A makes a negligent misrepresentation to B that a particular fact (X) is true. X is untrue. B suffers loss by relying on A’s negligent misrepresentation. When B finds out the truth, B brings a claim against A for damages for the tort of negligent misstatement. Estoppel by convention is raised by A as a defence to that claim applying the argument that A and B shared a common assumption that X is true, which was relied on by A, so that B is estopped from denying that X is true; and if X cannot be said to be untrue, B cannot establish the alleged misrepresentation by A. This hypothetical example serves to illustrate that one needs an explanation as to why estoppel by convention does not undermine claims for misrepresentation.
[68] The best explanation is that, where estoppel by convention would serve to undermine the cause of action for misrepresentation, it would not be unconscionable for the misrepresentee (B in the above example) to be able to deny estoppel by convention even if A has detrimentally relied on B’s affirmation of the common assumption. The fifth principle in Benchdollar could not therefore be satisfied by A. But, of course, this is not a problem on the facts of this case because estoppel by convention is not here being invoked by HMRC to defeat a cause of action by Mr Tinkler for misrepresentation. Indeed, no such claim against HMRC could possibly succeed because Mr Tinkler has suffered no loss consequent on HMRC’s negligent misrepresentation." (HMRC v. Tinkler [2021] UKSC 39)
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- Actions and beliefs of agent attributable to principal
​
"[26] By filling in and returning Form 64-8, Mr Tinkler was making clear to HMRC that BDO had general authority to deal with HMRC in relation to his tax affairs including dealing with questions arising under an enquiry. That apparent conferral of authority was very wide indeed. As we have seen in para 7, it stated that BDO was authorised to act on behalf of the taxpayer in connection with “any matters within the responsibility of [HMRC]”. There was a limited carve out from that conferral of apparent authority in relation to being given an enquiry notice. But in all other respects, including making clear to HMRC that Mr Tinkler was assuming that a valid enquiry had been opened, BDO had Mr Tinkler’s apparent authority to act on his behalf. Put in shorthand, BDO had the apparent authority of Mr Tinkler for the estoppel-raising conduct alleged.
[27]...The FTT went on to find that, although not necessary to do so (because apparent authority was enough), BDO had Mr Tinkler’s express instructions, and hence actual authority, to write the letter to HMRC of November 2005. And at para 145, it concluded that, for the purpose of estoppel by convention, “the actions and beliefs of BDO are properly attributed to Mr Tinkler.” I agree." (HMRC v. Tinkler [2021] UKSC 39)
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(2) Detrimental reliance
​​​
- Detrimental reliance by not taking steps to correct mistake
​
"Turning to the fifth and final principle in Benchdollar, it is not in dispute that HMRC’s reliance was detrimental because, by reason of HMRC acting on the affirmed common assumption that a valid enquiry had been opened, it did not send another notice of enquiry to Mr Tinkler before the expiry of the 12 months’ time limit on opening an enquiry into the 2003/04 Return. And if the enquiry were treated as invalid, the 30 August 2012 closure notice - by which HMRC were able to deny BDO’s tax claim of over £635,000 (see para 13 above) - would also have to be treated as invalid. Correspondingly, Mr Tinkler would stand to gain some £635,000 if estoppel by convention could not here be established by HMRC." (HMRC v. Tinkler [2021] UKSC 39)
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- Replying and conducting oneself on the basis that the mistaken assumption is correct can be sufficient
​
"[59] One of my essential disagreements with the Court of Appeal’s approach to the facts may be expressed by saying that this was not a case where BDO was simply repeating back to HMRC the mistake/misrepresentation (that the notice had been validly served). BDO’s conduct went further than that. Indeed, in addition to the positive conduct of BDO referred to in the previous two paragraphs, there is the point that BDO had wide apparent authority to deal with HMRC on behalf of Mr Tinkler. Had there been a problem with the enquiry notice, HMRC would reasonably have expected BDO to raise that problem. Far from doing that, BDO conducted itself, with Mr Tinkler’s apparent authority, on the basis that there was a valid enquiry underway. By so doing, BDO affirmed HMRC’s mistaken assumption.
...
[61] The important points, in relation to the first three of the principles in Benchdollar, are that both parties shared a mistaken common assumption; that BDO had made manifest to HMRC that it was sharing, and acting on, that common assumption (eg BDO’s conduct on 6 July 2005 and clearly again on 24 November 2005 had “crossed the line”); and that HMRC was thereafter relying, as BDO must have expected and intended, on the affirmation of the common assumption in relation to its subsequent mutual dealing with BDO. As BDO must have intended or expected, BDO’s affirmation of, or subscription to, the common assumption strengthened, or influenced, HMRC in thereafter relying on the common assumption. Using the words of the second principle in Benchdollar, BDO had “assumed some element of responsibility” for the common assumption and for HMRC’s reliance on it." (HMRC v. Tinkler [2021] UKSC 39)
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- Not having opportunity to mitigate effect of retrospective decision
"[122] We agree, and find that the retrospective nature of the decisions meant that the Appellants were unable to take steps to mitigate their position, so as to reduce or eliminate the NIC charges, and they therefore suffered detriment." (MWL International Ltd v. HMRC [2024] UKFTT 402 (TC), Judge Redston)
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(3) Detrimental reliance must be in the course of subsequent mutual dealings
"[227] The problem faced by Queenscourt, however, is the requirement that the reliance must have occurred "in connection with some subsequent mutual dealings between the parties" and that some detriment must "thereby" have been suffered by Queenscourt.
[228] As we have said, the reliance identified by Ms Brown is the giving of the second error correction notice seeking a further repayment of VAT. However, the detriment which she relies on is the impact on the Group's business which we have already described in our discussion of the legitimate expectation arguments."
(Queenscourt Limited v. HMRC [2024] UKFTT 460 (TC), Judge Vos)
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- HMRC enquiry is mutual dealings
​"[62] In my view, there is also no difficulty at all in HMRC satisfying the fourth principle in Benchdollar that requires the reliance to be “in connection with some subsequent mutual dealing between the parties”. HMRC’s reliance on the common assumption that a valid enquiry notice had been served was in connection with carrying out the enquiry, which included mutual dealings such as questions being asked by HMRC about the Ukrainian properties which were answered by BDO, and HMRC, in the light of those answers, issuing a closure notice. I examine later, albeit to reject, Mr Thomas’ submission that a particular narrow meaning must be given to “mutual dealings”.
...
[77] ... It is sufficient for our purposes to make clear that the scope of estoppel by convention extends to the mutual dealings about tax between HMRC and the taxpayer that were in play in this case." (HMRC v. Tinkler [2021] UKSC 39)
- Submitting tax returns and numerous enquiries is mutual dealings
"[118] We have already found as facts that the Appellants submitted their payroll returns on a on the basis of their understanding of the common assumption agreed at the Meeting, and that there had been "numerous tax enquiries" into the Appellants. That is sufficient to meet the requirement that subsequent mutual dealing took place between HMRC and the Appellants." (MWL International Ltd v. HMRC [2024] UKFTT 402 (TC), Judge Redston)
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- Unconscionability unlikely to have additional role if 5 principles met
​
"[64] What about unconscionability? This was mentioned as part of the fifth of Briggs J’s principles in Benchdollar; and in other leaner formulations - such as that of Lord Steyn in The Indian Endurance - it has been put forward as playing an even more central role. In most cases, in line with Briggs J’s statement of principles, unconscionability is unlikely to add anything once the other elements of estoppel by convention have been established and, in particular, where it has been established that the estoppel raiser has detrimentally relied on the common assumption. However, one can certainly envisage exceptional cases where unconscionability may have a useful additional role to play. For example, even if all the other elements of estoppel by convention can be made out, fraudulent conduct by the estoppel raiser would rule out estoppel by convention (see, by analogy, D and C Builders Ltd v Rees [1966] 2 QB 617 in which duress by the promisee in inducing the promise ruled out promissory estoppel). But such examples are likely to be rare. Even though HMRC was primarily at fault on the facts of this case - by carelessly sending the notice of enquiry to the wrong address and its consequent misrepresentation to BDO - I agree with the approach in Amalgamated Investment, The Amazonia and Benchdollar so that that does not amount to unconscionable conduct barring the establishment of estoppel by convention.
[65] Although unnecessary to my decision, I am reinforced in my view that unconscionability here supports the application of estoppel by convention by the findings of the FTT regarding Mr Tinkler’s knowledge. As we have seen at para 15 above, the FTT found that Mr Tinkler and/or his PA knew of HMRC’s enquiry in November 2005. At that time, Mr Tinkler could have informed HMRC that no notice of enquiry had been received by him. That would have left HMRC with sufficient time, within the 12-month deadline, to issue a replacement notice of enquiry. But Mr Tinkler and/or his PA did not do that. In those circumstances, it may be thought particularly unconscionable for him to raise this point for the first time over nine years later." (HMRC v. Tinkler [2021] UKSC 39)​
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Taxpayer estopped from denying validity of VAT option to tax land
​
"[75] Mr Simpson submitted that the principle of estoppel by convention was plainly engaged, because all the requirements in the list set out by Briggs J were satisfied:
(1) From 6 March 2008, when Officer Bounds wrote to HMRC acknowledging that the Jubilee Centre was opted to tax, until Mr Ali’s letter of 12 November 2018, both parties had proceeded on the common assumption that there was a valid OTT in place. Rolldeen had “crossed the line” so as “to manifest an assent to the assumption” when Mr Mufid submitted Form VAT1614A to HMRC and followed this with the letter to Officer Bounds. Both documents explicitly stated that Rolldeen had made no exempt supplies in relation to the Jubilee Centre, and both had been signed by Rolldeen’s director, Mr Shaheen.
(2) Rolldeen assumed responsibility for the common assumption when Form VAT1614A and the letter were sent to Officer Bounds.
(3) HMRC had relied on the common assumption that the OTT was valid.
(4) There was subsequent mutual dealing between the parties, because Rolldeen reclaimed input VAT on costs relating to the Jubilee Centre and HMRC had accepted that this VAT was validly deductible, and made any related repayments.
(5) HMRC would suffer significant detriment if there was no valid OTT, because there would be no VAT on the sale of the Jubilee Centre. In addition to that £50,000, Rolldeen had claimed significant input tax in relation to the Jubilee Centre, forming part of the £122,797.94 included on its VAT returns during the period for which Rolldeen had owned the property. HMRC was unable to recover that VAT because the Jubilee Centre had been sold on 2 March 2015. Almost eight years has passed since that date, well outside the time limit for raising an assessment (see VATA s 77(1)(a)).
[76] I agree with Mr Simpson that all the principles set out in Benchdollar are satisfied for the reasons he gives. I also agree that by signing and submitting the form VAT1614A, and subsequently confirming the position in the letter to Officer Bounds, Rolldeen’s conduct “crossed the line”, because it must have objectively intended that HMRC would accept that no previous exempt supplies had been made." (Rolldeen Estates Limited v. HMRC [2023] UKFTT 359 (TC), Judge Redston)
Taxpayer estopped from relying on illegality of conduct of HMRC to which it was a party/benefited from
​
“In other words, the claim would be that the liability under the self-assessments (and therefore for the surcharges) arose because company income was declared on personal returns as the result of an (alleged) unlawful agreement with HMRC. Whether the agreement with HMRC was unlawful is a matter of public law, in other words, it is a question of whether HMRC exceeded the discretion entrusted to it by Parliament by entering into the 1999 and 2006 agreements which permitted Mr Byrne to declare company income on his personal return. Putting aside the issue whether this Tribunal has jurisdiction to consider a case that the (alleged) illegality of an act by HMRC should be a ‘defence’ for an appellant, it seems to us in any event that the appellant is estopped from asserting any illegality against HMRC when he was a party to the alleged unlawful agreement and clearly benefited from it. Therefore, we consider that even if he could prove illegality, and even if the Tribunal had jurisdiction to consider it, the appellant is estopped from alleging the illegality in these circumstances.” (Byrne v. HMRC [2017] UKFTT 144 (TC), §65, Judge Mosedale).
HMRC not estopped from belatedly arguing that new claim settled by earlier proceedings
"[41] In the event, it is not necessary for us to resolve that issue or to determine whether HMRC can be said to have acquiesced in TTSL pursuing the Claim Appeal by failing to make their strike out application until July 2021. That is because we are satisfied that it is a necessary ingredient of estoppel by acquiescence, as for any estoppel by representation, that the party claiming the benefit of the estoppel has suffered detriment. The FTT made a clear finding that TTSL had not suffered any detriment and it has not appealed that finding." (Telent Technology Services Limited v. HMRC [2024] UKUT 183 (TCC), Green J and Judge Cannan)
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"[99] In my judgment, a party can change its view of the law at any time subject to the other party having a fair opportunity to respond. In other words, as Mr Elliott said, it is a matter of case management...
[100] Although the subject matter of Tower was closure notices and the context was the Tribunal’s jurisdiction to decide appeals under TMA s 50, it is clear that there is a wider application for the principle that a party may introduce new legal arguments subject to the requirements of proper case management...
...
[106] It follows from the above that the Appellant has not shown it has suffered detriment by way of costs or otherwise. I also considered Mr Jones’s submission that HMRC had acted unconscionably. However, as Lord Burrows said in Tinkler, this is the position only in “rare or exceptional cases”, and Mr Jones did not explain why this was such a case, and I could think of no basis on which it satisfied those requirements." (Telent Technology Services Limited v. HMRC [2022] UKFTT 147 (TC), Judge Redston)
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ESTOPPEL BY REPRESENTATION
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Distinguishing estoppel by representation and estoppel by convention
[101] HMRC considered that if any estoppel was in point, it would be estoppel by representation. In Steria v Hutchison [2006] EWCA Civ 1551 at [93], Lord Neuberger said that for such an estoppel to arise, the following elements needed to be present:
"(a) a clear representation or promise made by the defendant upon which it is reasonably foreseeable that the claimant will act;
(b) an act on the part of the claimant which was reasonably taken in reliance upon the representation or promise, and
(c) after the act has been taken, the claimant being able to show that he will suffer detriment if the defendant is not held to the representation or promise."
[102] Lord Neuberger continued by endorsing the following passage from the Privy Council judgment in Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank [1986] AC 80 at p 110:
"[T]he essence of estoppel is a representation (express or implied) intended to induce the person to whom it is made to adopt a course of conduct which results in detriment or loss..."
[103] We acknowledge that what had happened at the Meeting could be analysed as follows:
(1) the Inspector made a representation as to what was required for the pool car exemption to be met;
(2) the Appellants relied on that representation when filing subsequent tax and NICs returns; and
(3) the Appellants will suffer detriment if HMRC are not held to that representation.
[104] However, in our judgment the better view is that at the Meeting the Inspector and Mr Walpole shared the common factual assumption that Maywal was following the requirements set out at §40, and also shared the common legal assumption that in consequence the cars were pool cars, and went on to agree that Maywal could rely on the pool car exemption as long as the facts remained the same. In other words, the parties' common understanding as to the facts about the Cars and the law on pool cars together formed the basis of their future mutual dealings. As explained below, it is the law on estoppel by convention which is potentially engaged, rather than estoppel by representation." (MWL International Ltd v. HMRC [2024] UKFTT 402 (TC), Judge Redston)
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Possibly where the parties have agreed to treat company income as personal income
“ Bearing in mind that the facts are that it was agreed that he would return this income instead of it being returned by the company, it may be that under equity he would have been estopped from making any such amendment even if it had been made in time (unless of course at the same time he corrected the company’s tax position). But we do not need to decide this because he did not attempt to make such an amendment.” (Byrne v. HMRC [2017] UKFTT 144 (TC), §§38…39, Judge Mosedale)
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CONCESSIONS
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No withdrawal of concession where it would be unfair
​
"[12] In general, the rule is that parties should not be taken by surprise by submissions made by the other side. It is clear to me that, up until Miss Simler’s mention of s334 when she opened HMRC’s case on 8 November, the Appellant, with good reason, believed HMRC had conceded the point. I find the submission on s334 put the Appellant at a disadvantage: Mr Grace had already given his evidence on 2 November and left the country. He was not present in the hearing on 8 & 9 November during the legal submissions. His counsel could not ask him about the nature of his residence in South Africa, as, at the time Mr Grace gave evidence, it was not known HMRC wished to resile on its concession on s334.
[13] In any event, I do not consider that Mr Grace’s evidence did materially change before me: it is implicit in the findings of fact made by Dr Brice in 2007 that Mr Grace knew each time he left the UK to go to his home in South Africa that he would later be returning to the UK. So I conclude that Miss Simler is bound by her concession that s334 does not apply to Mr Grace: failing to give earlier warning of the new submission put the Appellant at a disadvantage and there was no reason (such as a change in evidence) for such a late warning." (Grace v. HMRC [2011] UKFTT 36 (TC), Judge Mosedale)​
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RES JUDICATA
- Applies to attempts to re-raise the same argument in the same proceedings
​
"[62] Although issue estoppel has a diminished role to play in many tax cases under the Caffoor principle, that principle has no application here. Not only are BT seeking to redetermine matters relating to the same accounting periods, but they are seeking to redetermine matters decided in these very same proceedings....
[63] We have found that both the s80(1) and the s80(1B) issues were raised before the Court of Appeal, and that the Court decided these issues in favour of HMRC. The Supreme Court then refused permission to appeal. We find that the decision of Court of Appeal binds BT and BT is estopped from continuing to pursue these issues. If there was any doubt about the matter, we would have found that it would be an abuse of process for BT to continue to pursue the s80 point applying the test set out by Lord Bingham in Johnson v Gore-Wood." (British Telecommunications Plc v. HMRC [2023] UKUT 122 (TCC), Leech J and Judge Aleksander)
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- Decision on one tax year has no binding effect in relation to other years
​
“…their decision on an appeal is not a decision on a ‘lis inter parties’…Accordingly a determination of an appeal by the commissioners or a s 54 agreement cannot any more since 1964 than before 1964 afford scope for application of the doctrine of res judicata or issue estoppel in respect of assessments in succeeding years or additional assessment in the same year.” (Barnett v. Brabyn (Inspector of Taxes) [1996] STC 716).
“In estimating the total income of the taxpayer the Commissioners must necessarily form, and perhaps express, opinions upon various incidental questions of fact or law. But the only thing that the Commissioners have jurisdiction to decide directly and as a substantive matter is the amount of the taxpayer's income for the year in question. This being so, their decision upon any incidental question of fact or law, however necessary it may be for the purpose of ascertaining the income for the year of assessment, cannot, as it seems to me, be conclusive in reference to the ascertainment of the taxpayer's income for any subsequent year of assessment with which the Commissioners have nothing to do, and in respect of which a fresh estimate will have to be made when the time comes, and possibly by other Special Commissioners.” (CIR v. Sneath [1932] 2 KB 362 at 391).
“It is clear from Lightman J’s comments that a decision in respect of one year or one assessment on the basis of a particular state of affairs does not preclude the making of an assessment for a later year based on a different view of the circumstances related to that year.” (Thomas v. HMRC [2016] UKFTT 133 (TC), §128).
“One issue…was whether it would be permissible for HMRC in the FTT hearing of DPAS no.2 to re-open the issues of law decided in DPAS no.1. [Counsel for HMRC] pointed out that there was no doctrine of res judicata in tribunal decisions: be that as it may, there is a principle that there should be no abuse of process.” (DPAS Ltd (No.2) v. HMRC [2015] UKFTT 0071 (TC), §35).
“In my view there can be no question of res judicata as regards the findings of fact by this Tribunal in one appeal relating to different statutory provisions in relation to a different appeal involving (with the exception of the Fourth Respondent) different parties.” (Spring Capital Ltd v. HMRC [2015] UKFTT 0066 (TC), §209).
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See also R v. CEC ex p. Building Societies Ombudsman Co Ltd [2000] STC 892; Bennett v. CEC No.2 [2001] STC 137, §36.
​
- Necessary determination in criminal proceedings gives rise to res judicata
“In order to be acquitted of the criminal offence Mr Lennon must have been able to persuade the District Judge that he was simply transhipping the cigarettes from Dundalk in the Republic of Ireland to Donegal also in the Republic of Ireland…This Tribunal considers that the acquittal of the criminal charge results in the matter being res judicata and the appeal is therefore allowed.” (Lennon v. HMRC [2018] UKFTT 562 (TC), §§21 - 22, Judge Rankin)
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- Does not apply to incidental or collateral finding
“Using Millet J’s wording, it seems to me that the Tribunal’s references quoted above to the alleged tripartite transaction were references which were not an essential part of the decision – they were incidental or collateral findings of fact.” (Spring Capital Ltd v. HMRC [2015] UKFTT 0066 (TC), §207).
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ABUSE OF PROCESS
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Preventing misuse of the court's procedure
"[39] Two aspects of Lord Diplock's statement should be noted. First, the power in question is a power to prevent misuse of the court's procedure. It follows that the power cannot be exercised if the claimant is making proper use of the civil jurisdiction of the court to protect his rights. Secondly, the court's procedure must be being misused in a way which would be "manifestly unfair" to one or more of the parties or would otherwise "bring the administration of justice into disrepute among right-thinking people". The primary purpose of the doctrine, in other words, is to preserve public confidence in the administration of justice." ​(Mueen-Uddin v. Secretary of State for the Home Department [2024] UKSC 21)
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(1) Generally abusive to reargue the same point
Due to the very narrow scope of issue estoppel in tax litigation, abuse of process takes on greater relevance in stopping persons re-litigating points that have previously been decided.
“Moreover, while I was not specifically addressed on this matter, there is an issue to what extent findings of fact and law I made in the first Qualapharm decision ([2015] UKFTT 479 (TC)) are relevant to this second Qualapharm case. It seems to me that as both proceedings concerned not only the same parties but arise out of the same tax enquiries and to a large extent involve related submissions, albeit a different subject matter (information notices rather than closure notices) it would be an abuse of process to allow either party to re-open decided matters.” (Qualapharm Ltd (No.2) v HMRC [2016] UKFTT 100 (TC), §108)
“Abuse of process appears to be very like issue estoppel save perhaps for flexibility where there are special circumstances…And unlike issue estoppel, abuse of process applies to tax cases. So I find that abuse of process does prevent previously litigated issues being re-tried between the same parties in tax cases unless there are special circumstances.” (Foneshops Ltd v. HMRC [2015] UKFTT 410 (TC), §31).
“While the doctrine of res judicata, which prevents parties re-litigating issues which have already been decided in proceedings between them, may not apply to Tribunal proceedings, raising the issue of the scope of the 2004 Contract Settlement may nevertheless be an abuse of process by the appellant.” (Spring Salmon & Seafood Ltd v. HMRC [2013] UKFTT 320 (TC), §119).
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- Not generally concerned with pre-litigation conduct
“The Tribunal has case management powers to regulate the conduct of litigation that is before it. Yet Mr Hackett is not making any complaint as to how HMRC have conducted the litigation from the point at which the appellants notified their appeals to the Tribunal. He is, therefore asking the Tribunal to punish HMRC for what the appellants consider to be unacceptable delay before Tribunal proceedings were commenced. I do not consider that would be a proper exercise of case management powers. The authorities that Mr Hackett showed me dealt primarily with delay after proceedings were commenced and, although Foulser was not focused on questions of delay, it dealt with a situation where HMRC were argued to have taken certain prejudicial actions while proceedings before the Tribunal were current.” (Always Sheet Metal Ltd v. HMRC [2017] UKFTT 198 (TC), §106, Judge Jonathan Richards).
​
- Generally abusive to reargue the same point
“In particular, [HMRC] put Grattan (ECJ) at the forefront of his submissions, arguing that just as it was a decision of such significance as to engage the Arnold exception, so too it negated any abuse of process…In my view this was the only basis upon which the Revenue could hope to justify what would otherwise be as clear-cut a case of abuse of process as one could readily imagine. It is enough to recall that, in addition to accepting the decision in Littlewoods (CA) and subsequently freely entering into the 2004 and 2008 section 85 Agreements, after first putting the Littlewoods group to the time, trouble, expense and anxiety of protracted litigation on the underlying liability issues, the Revenue then expressly conceded in the First Trial before Vos J that all of the VAT upon which interest is now claimed by all of the active claimants had been overpaid. Furthermore, this concession underlay, and was repeated in, the order for reference to the ECJ made by Vos J on 4 November 2010, as well as the United Kingdom's written observations submitted to the Court on 6 April 2011.” (Littlewoods Retail Ltd v. HMRC [2014] EWHC 868 (Ch), §§247…248).
“My conclusion is that in this case there are no special circumstances which apply to justify permitting the appellant to argue in this appeal matters which it could and should have argued in the original £300 penalty appeal. It cannot put the case for the second time that the information notice, and specifically item 8(c), was invalid.” (Spring Capital Ltd v. HMRC [2016] UKFTT 232 (TC), §49)
“Would abuse of process apply if Gnutti were to seek to take proceedings against HMRC or the appellant after the tribunal settled this case one way or another? It certainly seems that it might apply. As Henderson J explained it in Littlewoods at [243] there is public interest in the finality in litigation. Intervening events might justify re-litigating (see Littlewoods at [251]) so I am unable to say whether or not abuse of process would be found to apply: but there seems to be a real possibility. That issue estoppel does not apply to tax cases appears to be no bar to a court concluding that re-opening a decided issue is an abuse of process.” (Bradonbay Ltd v. HMRC [2015] UKFTT 229 (TC) §60 – concerned an application to add a party in order to try and bind them by the FTT’s findings of fact).
Unless there has been a change in the legal or factual landscape
“…I emphasise that my conclusion on this issue might have been different if Grattan (ECJ) were in truth a case which had changed the relevant legal landscape in such a way as to show that the underlying VAT had been due all along. In those circumstances, it is possible that the balance would have come down in favour of allowing HMRC to re-open the question, even at this very late stage. I do not think it profitable, however, to speculate further about what my decision would have been in such an event.” (Littlewoods Retail Ltd v. HMRC [2014] EWHC 868 (Ch), §251).
Lack of funds in related proceedings might mean it is not abusive to reargue
​
"[97] The FTT first concluded (at [135], in Mr Kishore’s favour) that in some instances lack of funds, particularly where the other party was to blame, might mean that it was not abusive to re-litigate a matter that had already been decided. Accordingly, since there was a disputed issue of fact as to whether the reason the Kittel appeals were not pursued was because the appellant ran out of funds and whether this was the fault of HMRC, this issue would ordinarily have to go to trial." (Kishore v. HMRC [2020] UKUT 233 (TCC), Zacaroli J and Judge Raghavan)
- Second strike out application on essentially the same grounds (but relying on different test) is abusive
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"[72] [HMRC's] response relied on contrasting the different bases of the two applications. HMRC’s 2018 strike-out application was put on the basis that the findings in SDM meant that the appellants’ appeals stood no reasonable prospect of success, whereas the current strike-out application turned, she argued, on the different basis of whether the appellants’ case represented an Ashmore style abuse (that re-litigation of factual issue should not take place without fresh evidence to suggest the answer might be different). The FTT’s conclusion in 2018 was thus based on different test that the FTT was not satisfied that the appellants’ appeals stood no reasonable prospect of success; a high threshold for the strike-out applicant to show.
[73]...It is true the applications were put by HMRC on different bases (the FTT too noted “HMRC’s grounds...[were] not quite the same as the grounds put forward in 2018” ([172]). However that does not detract from the fact that the issue that lay at the heart of the 2018 application - whether the factual finding the goods did not arrive in UT2 SDM was determinative of that issue in the appellant’s appeals (such that the appellants’ appeals stood no reasonable prospect of success) - was identical to the central issue in HMRC’s application, namely whether the appellants were seeking to relitigate a matter that had already been determined. The different test involved in a “no reasonable prospect of success” was irrelevant because the key issue in the 2018 application was the binary one of whether the factual finding in UT2 SDM was determinative. On that the FTT made a decisive, and final (given there was no appeal) finding that the factual finding in UT2 SDM was not determinative. (We also note in any case that the reasoning in the Court of Appeal’s decision in Shiner (at [19] would suggest that an abuse of process argument would be accommodated under Rule 8(3)(c) (no reasonable prospect of success) in any case, so the ultimate test would not be different)." (Parnham v. HMRC [2023] UKUT 285 (TCC), Judges Raghavan and Brannan)
​
- Includes disputing findings of fact relevant to later appeal
"[73] It is true, as Mr Trees says, that the issue to be decided in his appeal is different: the FTT hearing his appeal will have to decide whether he was dishonest, not whether he knew the transactions were connected with fraud. But that does not give him an unfettered right to put forward any grounds of appeal. In Gore Wood, Lord Bingham approved the dictum that it would be an abuse of process to allow a person “to litigate a second time what has already been decided between himself and the other party to the litigation”. Litigation between HMRC and CCA, of which Mr Trees was the controlling mind, has already been concluded on the basis that Mr Trees knew the transactions were connected to fraud. Allowing him to reargue that point would be to permit him to litigate it a second time.
[74] That does not mean that Mr Trees cannot argue, at the hearing of his appeal, that he was not dishonest: that is a new point and the burden of proving it will rest with HMRC. But in deciding whether or not he was dishonest, the parties and the FTT hearing his appeal must start from the position that he knew the transactions were connected with fraud." (Trees v. HMRC [2023] UKFTT 339 (TC), Judge Redston)
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- Issues decided in judicial review give rise to abuse in tax appeal
“As a matter of principle, an opportunity to take a point in the judicial review proceedings in the present matter could be taken to be sufficient to render a subsequent appeal an abuse on Johnson grounds. The difference in types of proceedings does not render this inapposite.” (Shiner v. HMRC [2015] UKUT 596 (TCC), §64, Mann J).
​
- Points arising in litigation concluded otherwise than by adjudication are within the principle
“an order dismissing proceedings is capable of giving rise to issue estoppel even though the court making such order has not heard argument or evidence directed to the merits….the effect of the second defendant declining to proceed with the hearing and acknowledging that her application must be dismissed, must in our judgment have been finally to determine the issue against the second defendant” (SCF Finance Co Ltd v. Masri [1987] 1 QB 1028 at 1047).
“My conclusion on the question of abuse of process is that I agree with HMRC, that, barring special circumstances, it would be an abuse of the litigation process if the appellant were able to raise in this appeal an issue that was effectively decided against it when its MTIC appeal was struck out. While the appellant complains it is unfair if all the facts are not considered in his penalty appeal, that is really the point: the facts he wants considered are the facts that ought to have been considered in the MTIC appeal. The appellant’s own conduct led to that appeal being lost and in my view, based on the above binding authority in SCF, the same consequences must flow as if the hearing had taken place and the Tribunal had decided against the appellant. For true fairness, there must be finality in litigation. There is no second bite of the cherry. The MTIC appeal was the appellant’s only opportunity to litigate the question of connection to fraud and knowledge/means of knowledge of these 181 transactions. It threw away that opportunity by failing to comply with an unless order and lost the appeal: barring special circumstances, it cannot have another opportunity now to argue the same issues, albeit the subject matter of the appeal (a £3 million penalty) is different to the subject matter of the MTIC appeal (a £25 million input tax rejection).” (Foneshops Ltd v. HMRC [2015] UKFTT 410 (TC), §31).
“Therefore, on 18 April 2011, as a result of withdrawing its appeal there was in effect a binding Tribunal determination that Meridian’s claims for input tax for 04/06 and 05/06 was incorrect as it was overstated and had no right to deduct input tax attributable to the transactions for which its recovery had been denied on the basis that it knew or should have known that these transaction were connected to fraud. This therefore disposes of the issue of whether the 04/06 and 05/06 returns are correct and, as such, Meridian is estopped from advancing the same arguments in the present appeal. In addition we find that it would be an abuse of process were it to be allowed to do so.” (Meridian Defence & Security Ltd v. HMRC [2014] UKFTT 300 (TC), §24, Judge John Brooks).
But only points necessarily taken to be determined against the party
“However, in so far as the appellant’s grounds of appeal in the penalty appeal amount to saying that it had no actual knowledge of the fraud, I do not think it can be said that it is seeking to re-litigate an issue that was in effect decided against it when its MTIC appeal was struck out. As I have said, knowledge is the more serious allegation and therefore, when the appeal was struck out, only the less serious allegation (means of knowledge) can be taken as having been unsuccessfully defended. The appellant’s actual knowledge is therefore not an issue that has already been decided. It would not be an abuse of process for this issue to be raised.” (Foneshops Ltd v. HMRC [2015] UKFTT 410 (TC), §49).
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- Appeals withdrawn not within the principle
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“As Lord Millett explained in Johnson v Gore Wood, at p 59, the abuse of process principle is no more than a procedural rule based on the need to protect the process of the court from abuse and the defendant from oppression. In the case of the prior appeals of Intekx for which on account of the withdrawal of those appeals there has been no determination of the facts and issues by the tribunal, it would in my judgment not be an abuse of the processes of the tribunal for those facts and issues to fall to be determined by the tribunal on this appeal by Mr Hackett. I would go further. To fix Mr Hackett with deemed findings in respect of those appeals, in the circumstances where he is appealing against a personal liability which has arisen only after those appeals were withdrawn would in my judgment be contrary to the interests of justice. Nor do I consider that requiring HMRC, on whom the burden of proof is accepted to fall in this appeal, to prove relevant facts which have so far not been substantively determined could be regarded in any sense as oppressive.” (Hackett v. HMRC [2016] UKFTT 781 (TC), §45, Judge Berner).
- Need not be the same litigant if there is substantial identity
“The correct approach is that formulated by Sir Robert Megarry V.-C. in Gleeson v. J. Wippell & Co. Ltd. [1977] 1 W.L.R. 510 at 515 where he said: "Second, it seems to me that the substratum of the doctrine is that a man ought not to be allowed to litigate a second time what has already been decided between himself and the other party to the litigation. This is in the interest both of the successful party and of the public. But I cannot see that this provides any basis for a successful defendant to say that the successful defence is a bar to the plaintiff suing some third party, or for that third party to say that the successful defence prevents the plaintiff from suing him, unless there is a sufficient degree of identity between the successful defendant and the third party. I do not say that one must be the alter ego of the other: but it does seem to me that, having due regard to the subject matter of the dispute, there must be a sufficient degree of identification between the two to make it just to hold that the decision to which one was party should be binding in proceedings to which the other is party. It is in that sense that I would regard the phrase 'privity of interest . . . .'" On the present facts that test was clearly satisfied.” (Johnson v. Gore Wood & Co [2000] UKHL 65).
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- - Substantial identity between director and company
"[77] I add for completeness that Mr Trees did not seek to argue that there was no abuse of process because the parties were different: CCA was the appellant in the MTIC appeal and he is the appellant in the DLN appeal. He was right not to take that point. It is clear from Gleeson (approved in Gore Wood) that where the parties are different there can still be abuse of process if there is “a sufficient degree of identity” between the original party and the new appellant. Both parties accepted that CCA was Mr Trees’ alter ego, or, as Lord Bingham put it, his “corporate embodiment”. CCA 2020 is therefore binding in this new litigation between Mr Trees and HMRC." (Trees v. HMRC [2023] UKFTT 339 (TC), Judge Redston)
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“Mr Hackett, in his capacity as director of Intekx, has had an opportunity to put forward his case that in that period there was no connection between the transactions of Intekx in that period and fraudulent evasion of VAT, and that Intekx did not know of any such connection. It would be contrary to the principle of finality of litigation to allow that determination to be re-visited on this appeal. It would be a clear abuse of process to do so, and there are no circumstances that could justify such a course.” (Hackett v. HMRC [2016] UKFTT 781 (TC), §43, Judge Berner).
​
“In this case, as Mr Galvin was the sole director of Reddrock, Reddrock can only have acted as his alter ego. In the light of the decision of the House of Lords in Johnson I find that it would therefore be an abuse of process for Mr Galvin to be able to re-litigate factual issues that were previously decided in the Original Appeal.” (Galvin v. HMRC [2016] UKFTT 577 (TC), §90)
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- Applies to penalty appeals
"[56] It is clear from cases dealing with the civil head of Article 6 that the right to a fair trial does not preclude a court or tribunal from striking out an action or giving summary judgment either on the grounds that it is an abuse of process or because there is no reasonable prospect of success: see Rampal v Rampal (No 2) [2001] EWCA Civ 989 per Thorpe LJ at §32, Summers v Fairclough Homes Ltd [2012] UKSC 26 per Lord Clarke at §46 and Mannion v Ginty [2012] EWCA Civ 1667 per Lewison LJ at §13.
...
[58] In our judgment, the essential requirement of Article 6 is that in the current proceedings the Appellant has a right to a fair trial, bearing in mind that fiscal penalties do not fall within the hard-core of the criminal law and that the “criminal-head” requirements of Article 6 do not (as the ECtHR found in Jussila) apply with their full stringency. The exact requirements necessary to ensure a fair trial will depend on the nature of the issue to be tried, its seriousness and all the circumstances of the individual case. What is required is a broad assessment of whether the particular charge brought against the Appellant is dealt with in a manner which provides a fair hearing when the proceedings are viewed as a whole.
[59] In relation to the 2017 Decision, which determined the question of the Appellant’s knowledge that the relevant transactions were connected with fraud, we consider that the Appellant received a fair hearing before an independent tribunal..." (C F Booth Limited v. HMRC [2022] UKUT 217 (TCC), Bacon J and Judge Brannan)
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Points not determined in earlier litigation generally not within strict principle​
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- Appeals withdrawn not within strict principle
"[44] Abuse of process, properly understood, therefore is referring to the abuse of the process of the Court or Tribunal. This is consistent with the observation of Lord Millett, also in Johnson v Gore Wood at [page 59] that the abuse of process principle is no more than a procedural rule based on the need to protect the process of the Court from abuse and the defendant from oppression.
[45] That is of course why abuse of process, as Lord Bingham explained, has much in common with cause of action estoppel and issue estoppel which may prevent a party to litigation from challenging a conclusion reached by a Court or Tribunal in prior proceedings between the same parties (or their privies).
[46] Given this underlying principle, it is difficult to see how it can be an abuse of the Tribunal’s process to raise an issue which has not previously been raised before the Tribunal in other proceedings. The Tribunal has not previously been required to expend resources in determining the matter and HMRC has not (in the words of Lord Bingham) previously been vexed by the same matter." (C4C Investments Limited v. HMRC [2022] UKFTT 367 (TC), Judge Vos)
​
“As Lord Millett explained in Johnson v Gore Wood, at p 59, the abuse of process principle is no more than a procedural rule based on the need to protect the process of the court from abuse and the defendant from oppression. In the case of the prior appeals of Intekx for which on account of the withdrawal of those appeals there has been no determination of the facts and issues by the tribunal, it would in my judgment not be an abuse of the processes of the tribunal for those facts and issues to fall to be determined by the tribunal on this appeal by Mr Hackett. I would go further. To fix Mr Hackett with deemed findings in respect of those appeals, in the circumstances where he is appealing against a personal liability which has arisen only after those appeals were withdrawn would in my judgment be contrary to the interests of justice. Nor do I consider that requiring HMRC, on whom the burden of proof is accepted to fall in this appeal, to prove relevant facts which have so far not been substantively determined could be regarded in any sense as oppressive.” (Hackett v. HMRC [2016] UKFTT 781 (TC), §45, Judge Berner)
- Penalty appeals not within strict principle where earlier substantive proceedings struck out due to procedural failings
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"[29] In my view, however, the UT was correct to proceed on the basis that Johnson v Gore Wood & Co principles applied. As I see it, the question whether Mr Kishore should be permitted to contest in the penalty appeals issues which arose in the Kittel appeals (notably, whether he should have known that he was participating in transactions connected with the fraudulent evasion of VAT) is to be determined on the basis of the "broad, merits-based judgment" of which Lord Bingham spoke, not the Arbuthnot line of authority.
[30] As was pointed out by Mr Brendan McGurk, who appeared for Mr Kishore, the focus of the Arbuthnot-type authorities has been on whether a claimant can bring a second civil claim. In the present case, Mr Kishore has of course been the appellant in the penalty appeals as he was in the Kittel appeals, but in substance he is defending himself, challenging penalties which HMRC have sought to impose on him. We were not referred to any case in which it has been held that, absent a special reason, it is an abuse of process for a defendant to a civil claim to raise by way of defence a point that he ran in previous proceedings in which his claim or defence (as the case may be) was struck out on account of procedural failings. Even assuming that to be the law, however, the stricter Arbuthnot-type approach must, as it seems to me, be of no more than limited significance in the context of appeals against tax penalties. I can see that it might be in point if, say, a person brought a second appeal against a penalty, a previous appeal against the same penalty having been struck out. In contrast, I do not consider that an Arbuthnot test should be applied in a case such as the present one. Had the Kittel appeals reached a final hearing and the FTT decided against Mr Kishore on, say, means of knowledge, it appears that there would have been no issue estoppel and so he would not automatically have been debarred from denying means of knowledge in the penalty appeals: whether he should be allowed to do so would, rather, have fallen to be decided on Johnson v Gore Wood & Co principles. It would strike me as odd if Johnson v Gore Wood & Co's "broad, merits-based" approach applied in circumstances where a Tribunal had already decided a point but a stricter approach were taken when the previous proceedings had never been the subject of a decision but had instead been struck out. It is also, I think, important that the penalty appeals concern punitive measures. That, to my mind, militates in favour of a "broad, merits-based" approach rather than an Arbuthnot test." (HMRC v. Kishore [2021] EWCA Civ 1565, Newey LJ)
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Broad merits based judgment for points not determined
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- Lack of funds to pursue earlier litigation can be relevant
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"[33] With regard to the first of these points, Mr Singh did not dispute that a litigant's lack of funds could potentially be relevant to a Johnson v Gore Wood & Co assessment. In fact, Lord Bingham said in terms in Johnson v Gore Wood & Co that he "would not regard [lack of funds] as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim", and in the present case Mr Kishore says that he ran out of money at least in part because of the way HMRC had conducted the Kittel appeals and their refusal to pay a repayment supplement which they eventually conceded was due to him in relation to the 12/05 period. Mr Singh's argument was essentially to the effect that lack of funds would be irrelevant to the application of an Arbuthnot-type test, but, as I have said, I do not consider such a test appropriate. In short, this ground of appeal is parasitic on the ground of appeal which I have already rejected and fails with it." (HMRC v. Kishore [2021] EWCA Civ 1565, Newey LJ)
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- Absence of notification of potential penalty can be relevant
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"[34] The position is similar with HMRC's final ground of appeal, that the UT erred in considering that the absence of any notification of an intention to impose a misdeclaration penalty was relevant to whether the penalty appeals were abusive. Once again, Mr Singh accepted that the absence of notification could potentially be of relevance to a Johnson v Gore Wood & Co assessment such as is, in my view, apposite. He was right to do so. In Johnson v Gore Wood & Co, Lord Bingham explained that the "broad, merits-based judgment" should take account of "all the facts of the case". In the circumstances, this ground of appeal must also fail." (HMRC v. Kishore [2021] EWCA Civ 1565, Newey LJ)
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- Abuse to appeal same decision twice after original appeal struck out
"[57] It is clear from the facts that the First Appeal was struck out following Mr WrightAnderson’s failure to comply with the Unless Order, and that this was the last in a long line of failures to comply with the Tribunal’s directions. It is thus a case where there has been both “want of prosecution” and inexcusable procedural failures. It follows that the New Appeal should therefore be struck out for abuse of process unless there is a “special reason” not to do so.
[58] The heart of Ms Anderson’s submissions was that Mr Henry had not known about these failures of his representative, and should be allowed to make the New Appeal. I considered whether this was a “special reason”.
...
[63] Although UT in Katib was considering a different issue (a late appeal application), the case illustrates the application of the principles set out in Hytec. I similarly find that reliance on Mr Wright-Anderson does not provide Mr Henry with a special reason, so as to provide an exception from the approach set out in Securum and Kishore. In my judgment, allowing Mr Henry with a “second bite of the cherry” would be an abuse of process. I therefore strike out the New Appeal under Rule (3)(c) of the Tribunal Rules." (Henry v. HMRC [2024] UKFTT 237 (TC), Judge Redston)
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- Not an abuse for HMRC to withdraw decision in relation to one product and then rely on it in relation to similar products
"[121] I am not persuaded that, applying a broad-based merits test, it was an abuse of the process of the Tribunal for the Commissioners to decline to repay the amount by which the duty paid by Matalan exceeded what would have been due if the qualifying swimwear received a "10" classification ("the excess duty"). I say that for the following reasons:
(a) there had been no judicial determination of the validity or otherwise of the essential proposition, which is a question of interpretation of the Code in relation to to facts which are not in dispute;
(b) whatever Matalan's expectations were, there was no agreement that the outcome of the first appeal would determine the classification for tariff purposes of Matalan's qualifying swimwear;
(c) the principle set out in paragraph 116 (a) derived from the decisions in Broken Hill, Hope, and Cafoor means that, even if the Tribunal had decided the essential proposition in Matalan's favour, neither it nor HMRC would be bound by that determination, as a matter of res judicata, in relation to future transactions or BTIs (although any BTIs put in place as a result of the Tribunal's decision would take effect, subject to the Code, in accordance with their terms);
(d) that result may be said to be inconsistent with the approach of the law in other contexts, but the "result is not to be regretted in the public interest";
(e) specifically it is in the public interest that traders should pay the correct amount of tax or duty – no more and no less;
(f) it is also in the public interest that taxpayers should receive fair treatment but I am not persuaded that in the present case Matalan has been unfairly treated to an extent that the latter should outweigh the former interest;
(g) if the doctrine of issue estoppel would not preclude HMRC from refusing to repay for the reasons stated above it is not easy to see how, in present circumstances, the doctrine of abuse of process could do so;
(h) the effect of holding that HMRC must repay the excess duty will be that Matalan receives a competitive advantage compared with other importers who have had to pay the correct amount. It is true that some traders within the Community may have had their goods in this category receive the "10" classification as a result of decision made in the Member States concerned (on the evidence there was considerable uniformity in applying the "90" classification); but that does not negate the desirability of ensuring as far as possible that duty is paid at the correct rate;
(i) Matalan has been put to trouble and expense in appealing the initial review decision. But that expense is not very considerable and Matalan have received £ 37,500 from HMRC in respect of it.
(j) Whilst the right-thinking man would be distinctly unimpressed by the way in which HMRC (taken as a whole) had handled this case, he would not, in my judgment, regard it as unjust that HMRC should not have to pay Matalan the excess duty." (Matalan Retail Ltd v. HMRC [2009] EWHC 2046 (Ch), Clarke J)
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- Abuse for litigant intended to be covered by sample case to seek to reargue
"[26] ... The Ashmore case is essentially a case of the marshalling of litigation. Where a civil court (or tribunal) is faced with an incident for which a defendant may be liable and which injured a large number of people or some situation where a large number of people similarly placed wish to make a contested claim against another, as was the case with the sex discrimination claim against the British Coal Board being made in the Ashmore case, the court, as a necessary part of the administration of justice, has to be prepared to make orders requiring the interested parties to come forward so that appropriate cases can be selected for trial and the parties can address the court upon whether their case raises any different issues from those selected. Each party has an opportunity to persuade the court that its case requires special treatment and should not follow the result of the selected cases. Any aggrieved party may seek to appeal such a procedural order. Where some interested party has been content not to intervene and awaits the outcome of the substantive trial, he must abide by the result, even if adverse, save possibly for seeking belatedly to intervene in order to support an appeal against the substantive decision. Simply to seek to relitigate the whole thing over again is an abuse of process and will not be allowed, as is more fully explained in the judgment of Stuart-Smith LJ in that case, [1990] 2 QB 338, at 345-355." (Re Norris [2011] UKHL 34)
- Not an abuse for HMRC to impose penalties after substantive litigation
"[50]...Johnson v Gore Wood & Co confirms that the "bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all". In the present case, however, Mr Kishore is complaining of HMRC's failure to do something other than make a claim or advance a defence in proceedings, viz. issue penalty assessments. Any proceedings were always going to be initiated by Mr Kishore; HMRC could never have invoked the penalties by way of defence to the Kittel appeals; and the penalties could not have been put in issue before the FTT, whether in conjunction with the Kittel appeals or otherwise, until after they had been raised. In any event, it is "wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive", as Lord Bingham explained in Johnson v Gore Wood & Co. For a party to be held to be acting abusively, it must be the case that he should have raised a claim or defence in previous proceedings, not just that he could have done so...
[51] ... For completeness, I should record that section 77(2) of the VATA provides that a penalty assessment "may be made at any time before the expiry of the period of 2 years beginning with the time when the amount of VAT due for the prescribed accounting period concerned has been finally determined"." (HMRC v. Kishore [2021] EWCA Civ 1565, Newey LJ)
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- HMRC not bound by position taken at earlier stage in litigation
"[92] Although HMRC did argue in FII CA 1 that section 33 ousted the common law claims, we do not consider that the stance it took in 2010 provides useful insight into the proper approach to be taken on these appeals to Issue 2, not least given the assumed and hypothetical basis on which the section 33 issue was canvassed in that case (see [251] of FII CA 1)." (HMRC v. Applicants in Post Prudential Closure Notice Applications Group Litigation [2024] UKUT 23 (TCC), Richard Smith J and Judge Cannan)
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(2) Party should bring whole case in single set of proceedings
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"[40] The law in relation to abuse of process has developed in the manner characteristic of the common law. Relevant principles have emerged as the courts have considered the circumstances of cases in which the issue has arisen in different contexts. As Lord Diplock indicated in Hunter at p 536, it would be unwise to confine the concept of an abuse of process to fixed categories. Nevertheless, a number of categories have become well established. Examples include the unfair or oppressive treatment of an accused, the rule in Henderson v Henderson (1843) 3 Hare 100 that requires a party to bring its whole case in a single set of proceedings, and the power to stay or dismiss proceedings which are frivolous or vexatious." ​(Mueen-Uddin v. Secretary of State for the Home Department [2024] UKSC 21)
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- Argument or evidence that could and should have been raised in related proceedings: must be abusing the process of the court
"[77] But for the court to uphold a plea of abuse of process as a bar to a claim or a defence it must be satisfied that the party against whom the bar is asserted is abusing the process of the court by oppressing the other party by repeated challenges relating to the same subject matter. It is not sufficient to establish abuse of process for a party to show that a challenge could have been raised in a prior litigation or at an earlier stage in the same proceedings. The party must go further and show that it should have been raised at that earlier stage and that it is abusive to raise the matter at the later stage.
[78] We are satisfied that there is no such abuse on this issue. The FII GLO litigation and the related GLO litigations proceeded against a background in which both domestic and EU law were in a state of significant development and interacted with each other in this GLO litigation. Henderson J in FII (HC) 2 (para 468) correctly spoke of “a complex and evolving legal landscape”. The three judgments of the CJEU on references in the FII GLO litigation in 2006, 2012 and 2013 together with judgments on references in other relevant proceedings, and the now three appeals to this court in the FII GLO litigation as well as the appeals to the House of Lords in Sempra Metals and to this court in Littlewoods and Prudential, are testimony to the evolving nature of that landscape. Issues which affect the FII GLO litigation have been decided in the other legal proceedings such as Littlewoods and the portfolio dividends GLO (including in Prudential) and vice versa. Against that background, it is unsurprising that questions that are of central importance to the claims in the FII GLO litigation have only recently been decided or are yet to be decided." (Test Claimants in FII Group Litigation v. HMRC [2021] UKSC 31)
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“Having a second go at proceedings on the basis of evidence which was available first time round but not adduced is likely to be the sort of abuse at which Johson v Gore Wood is aimed…For the reasons appearing in Johnson, they should not be entitled to fight on a limited factual basis in one tribunal, and keep some facts back and then deploy them in another tribunal in due course, and indeed use those facts as a reason for having a second bite at the cherry. There was nothing in the nature of the judicial review proceedings which forced that course on them. It was a litigation choice.” (Shiner v. HMRC [2015] UKUT 596 (TCC), §§63…66, Mann J).
“The crucial question is whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise an issue which could have been raised previously…It seems to us that the most appropriate forum for Mr Huitson to raise the Article 56 issue was in his own judicial review claim. There was no explanation as to why he did not raise the issue either in the Administrative Court or before the Court of Appeal…In all the circumstances and in the absence of any explanation we are satisfied that the application to amend was an abuse of process. That was one reason for which we refused permission to amend to introduce the Article 56 ground.” (Huitson v. HMRC [2015] UKFTT 448 (TC), §§63 – 65).​
- Consider the importance of the argument in the related proceedings
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"[117] First, as was emphasized by Lord Bingham in Johnson v Gore Wood (in the passage quoted above) the fact that Mr Kishore could have raised a point does not mean that he should have done so. It is still necessary to consider, in light of all the circumstances, whether it would be abusive to raise it now.
[118] We consider that an important consideration is the relevance of the point (that was not raised) to the issue that was determined in the first proceedings and its likely impact on the determination of that issue. As we have already pointed out, the fact (if it is so) that the Kittel appeals were struck out as a result of Mr Kishore’s lack of funds was a relevant factor to weigh in the balance as part of the fifth of the guidelines derived from the Data Select case." (Kishore v. HMRC [2020] UKUT 233 (TCC), Zacaroli J and Judge Raghavan)
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- Not abusive where taxpayer did not realise he could argue in the alternative
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“taking into account all the facts and circumstances of the case, in particular,
(1) that neither the paragraph 92 nor the undertaking argument has been previously considered by the Tribunal;
(2) that it was clearly not possible for Judge Brannan to have regard to the views expressed by Lord Glennie in Spring Salmon & Seafood Limited, almost 18 months after his decision was released;
(3) that Mr Thomas did not realise that he could argue in the alternative; and
(4) as Lord Bingham observed in Johnson v Gore Wood & Co, in the passage cited by Henderson J in Littlewoods (see paragraph 5, above), just because a matter could have been raised in earlier proceedings it does not follow that it should have been so as to render the raising of it in later proceedings necessarily abusive,
I have come to conclusion that the Company is not misusing or abusing the process of the Tribunal by seeking to advance the paragraph 92 argument and/or the undertaking argument.” (Spring Capital Ltd v. HMRC [2017] UKFTT 465 (TC), §16, Judge Brooks).
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- Not abusive where HMRC allege dishonesty in penalty appeal and could have raised it in substantive tax appeal (but did not need to)
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"[40]...Once it is accepted that there is no obligation to issue a penalty prior to the two year period in section 77 of VATA 1994 (as we must in the light of Kishore) it cannot be said that HMRC has an obligation to treat the Kittel proceedings as if a penalty had been issued. To do so would have the same effect as saying that HMRC could issue a penalty but not rely on dishonesty in any appeal, despite that being central to upholding a notice pursuant to section 60 or section 61. Even if that were strictly correct, this is a strong reason for rejecting the submission that dishonesty should have been raised in Kittel proceedings. This is because it is artificial to distinguish between attacking the issuing of the penalty and attacking the reliance upon dishonesty. In reality, they are the same complaint and would amount to saying that whilst HMRC had the power to issue a penalty or director's liability notice, they are under an obligation not to do so if they have not laid the groundwork first by alleging dishonesty in any previous Kittel appeal. This would in effect be a fetter on the issue of such a penalty or notice which does not appear in the legislation and would cut down the benefit of the time period (and be wholly inconsistent with) the time limit in section 77.
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[44] We agree with Mr Pickup that the reason for not pleading dishonesty earlier does not matter. However, we do not accept that Mr Trees is prejudiced such that it is an abuse for HMRC to rely upon dishonesty in this appeal. This is for the following reasons.
[45] First, we agree with Mr Hayhurst that Mr Trees' complaint about his inability to explore all facts at the same time as a consideration of dishonesty is really a complaint about his inability to relitigate the matters in the 2020 Decision as a result of the 2023 Decision. Given that it has already been held to be an abuse of process for him to reopen the 2020 Decision, it follows that it is not an abuse of process for him not to be able to do so." (Trees v. HMRC [2024] UKFTT 516 (TC), Judge Chapman KC)
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(3) Collateral attack on decision of a court of competent jurisdiction
"[44] Lord Diplock laid down what has since been regarded as the governing rule on this subject ([1982] AC 529, 541):
"The abuse of process which the instant case exemplifies is the initiation of proceedings in a court of justice for the purpose of mounting a collateral attack upon a final decision against the intending plaintiff which has been made by another court of competent jurisdiction in previous proceedings in which the intending plaintiff had a full opportunity of contesting the decision in the court by which it was made."
By "collateral" Lord Diplock meant an attack not made in the original proceedings which gave rise to the decision which the subsequent proceedings sought to impugn: an attack, in other words, which was not made by way of appeal in those original proceedings. Lord Diplock's statement of the relevant principle was not confined to collateral attacks on criminal convictions, and the authorities on which he relied were concerned with collateral challenges to previous decisions in civil proceedings." (Mueen-Uddin v. Secretary of State for the Home Department [2024] UKSC 21)
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"[122] More recently, in Tinkler v Ferguson [2021] EWCA Civ 18, the Court of Appeal (Peter Jackson LJ, with whom Dingemans LJ and Sir Richard McCombe agreed) confirmed (at [62]) that there is a group of cases, admittedly rare, where litigation may be abusive and therefore vulnerable to being struck-out even though not formally between the same parties or their privies. Peter Jackson LJ identified several mischiefs and relevant factors:
(1) Collateral attack;
(2) Overlap;
(3) Risk of inconsistent verdicts;
(4) Manifest unfairness to a Defendant;
(5) The public interest in the propriety of duplicative litigation.
[123] In my view, and applying the binding guidance outlined above, the present appeals are abusive and should be struck-out:
(1) The transactions are the same ones already considered and adjudicated on by the Tribunal in the Wilmslow Decision;
(2) These appeals do now seek, quite openly, to mount a collateral attack on those findings;
(3) The evidence would be the same as already considered by the Tribunal in the Wilmslow Decision;
(4) There is only the prospect of 'further' (sic) witness evidence from Messrs Grundy. This does not, in my view, constitute 'new' or 'fresh' evidence of a kind which could entirely change the aspect of the case, or which would justify allowing these appeals to go forward.
[124] There are also justice and public policy elements.
[125] As to justice: Recognising the caution in deploying my strike-out powers, I am nonetheless of the view that the interests of justice are justified in striking out these appeals. They are relitigation, using valuable (and scarce) public resources, many years after the relevant events, and thereby concerning matters which are, on any view, extraordinarily stale." (Mediability Limited v. HMRC [2023] UKFTT 315 (TC), Judge McNall)
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- Collateral attack on criminal conviction not permitted
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"[139] RB’s evidence and the case put forward at his criminal trial was that LPIP had treated the sale of the units to Anthology as taxable and accordingly VAT was payable. Clearly if no VAT was payable then there could have been no fraudulent evasion of it, contrary to section 72 (1) VATA.
[140] RB was the person controlling LPIP and the Tribunal did not find it credible that that he and LB, based on their statements made for their trial, thought ‘consistently’ that no tax was payable as the sale was instead a TOGC and only said the tax was payable at the Crown Court, and again at the Criminal Court of Appeal, on ‘the advice of their legal defence team’.
[141] Similarly, the Tribunal did not find it credible that LPIP had paid £535,000 to HMRC because of ‘the advice of their legal defence team’ that this was necessary to “avoid a custodial sentence”, as this payment was made only the day after BB were arrested.
[142] As stated by the Vice-Chancellor in Court of Appeal in Secretary of State for Trade and Industry v. Bairstow;- “ a collateral attack on an earlier decision of a court of competent jurisdiction may be, but is not necessarily, an abuse of the process of court if “the parties to the latest civil proceedings were not parties to or privies of those who were parties to the earlier proceedings then it will only be an abuse of process of the court to challenge the factual findings and conclusion of the judge and jury in an earlier action if (i) would be manifestly unfair to the party to the later proceedings that the same issues should be relitigated or (ii) to permit such re-litigation would bring the administration of justice into disrepute.
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[147] The administration of justice depends upon the evidence being given to any court or tribunal being the “truth, whole truth and nothing but the truth”. The evidence given to both the Crown Court and the Criminal Court of Appeal had, therefore, to be truthful and not subject to perjury. Whereas the Crown Court has not made any binding ruling on HMRC, and nor could it, it did hold a trial whose whole basis was that there was fraudulent behaviour in relation to tax due to HMRC.
[148] Accordingly, the Tribunal considers that if the FTT were to decide that a hearing should take place to reassert the very basis on which a court and a jury had been led to believe by BB was the basis of a transaction would bring the administration of justice into disrepute.
[149] The Tribunal does not accept that the legal tax issues were ‘not considered’ when in fact they were to the extent that tax was self-evidently considered to be payable.
[150] The Tribunal could not see that there was any ‘fresh evidence’ available now that was not available at the time: - a) the transaction was treated as taxable on exchange, b) at the time of the Crown Court hearing and c) at the time of the appeal to the Criminal Court of Appeal.” (Binfield v. HMRC [2022] UKFTT 364 (TC), Judge Gemmell)
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- Unless there is fundamental new evidence that could not have been obtained with reasonable diligence
"[45] Lord Diplock also made it clear at p 545 that there could be exceptions to "the general rule of public policy that the use of civil actions to initiate collateral attacks on final decisions against the intending plaintiff by criminal courts of competent jurisdiction should be treated as an abuse of the process of the court". In particular, he acknowledged that an exception would be justified where the plaintiff had come into possession of fresh evidence which was not available in the original proceedings and could not with reasonable diligence have been obtained then, but which entirely changed the aspect of the case. That exception was derived from the speech of Lord Cairns LC in Phosphate Sewage Co Ltd v Molleson (1879) 4 App Cas 801, 814." (Mueen-Uddin v. Secretary of State for the Home Department [2024] UKSC 21)
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Similar principle applies to foreign decisions and convictions
"[47] Hunter was concerned with proceedings impugning a decision taken in earlier criminal proceedings in this country. It is not in dispute on this appeal that the Hunter principle can also apply where a decision in foreign proceedings is impugned. However, whereas the risk that two inconsistent decisions of courts in the United Kingdom might bring the administration of justice into disrepute is evident, the risk may be less evident where the previous decision is that of an overseas court. Accordingly, it was submitted on behalf of the claimant that the Hunter principle could not be applied to foreign convictions without qualifications." (Mueen-Uddin v. Secretary of State for the Home Department [2024] UKSC 21)
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- As long as the person had a full and fair opportunity of contesting the decision in the proceedings
"[63] In the light of these authorities, it is plain that the present proceedings cannot be regarded as an abuse of process of the kind described in Hunter. As I have explained, Lord Diplock's statement of the relevant principle, cited at para 44 above, included as an essential element that the plaintiff "had a full opportunity of contesting the decision [in the previous proceedings] in the court by which it was made". That requirement was met in Hunter: the plaintiff had participated fully in the criminal proceedings against him and had an unrestricted ability to appeal against his conviction. The fairness of the proceedings was unimpeached. The same was true in subsequent cases where the principle laid down in Hunter was applied. In the present case, on the other hand, the claimant was tried in absence before the ICT. He could not realistically be expected to attend the trial or any subsequent appeal, since he faced a real risk of execution. Counsel appointed to represent him was seemingly either unwilling or unable to obtain his instructions. It is unclear what grounds, if any, he might have advanced on appeal, since he was debarred by the 1973 Act from relying on the procedural guarantees contained in the Bangladesh Constitution or on the Criminal Procedure Code or the Evidence Act, and was unable to challenge the ICT's decisions as to the admission of evidence (para 13 above). Furthermore, it is said on behalf of the claimant, without contradiction, that success in any appeal would in all likelihood have resulted in a retrial, at which he would again have been unable to appear because of the risk of execution, and at which the rules of evidence would again have been disapplied. In these circumstances, he did not have a full opportunity of contesting the decision of the ICT in the proceedings in which it was made. Accordingly, the fact that the present proceedings involve a challenge to the outcome of the trial before the ICT cannot render them an abuse of process." (Mueen-Uddin v. Secretary of State for the Home Department [2024] UKSC 21)
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- Difficult of now proving the relevant facts not a reason for a different approach
"[66] In the present case, the majority of the Court of Appeal considered that it was manifestly unfair for the Secretary of State to have to prove the claimant's guilt, so long after the events in question, in order to establish a defence of truth. I am unable to agree. But for the fact that the courts below reached a different conclusion, I should have regarded the Secretary of State's submission that the claimant's action is an abuse of process because it is difficult for him to establish his proposed defence as unarguable. It is difficult to accept that, if the Secretary of State is unable to establish the truth of his allegations against the claimant, therefore he can defame the claimant with impunity." (Mueen-Uddin v. Secretary of State for the Home Department [2024] UKSC 21)
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OTHER
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Promissory estoppel does not apply to statutory discretions
“value added tax is to a large extent a self assessing tax. It is often of great importance that a taxpayer should be able to seek guidance on his position vis-a-vis the Commissioners, so as to be able to comply with the many provisions of the statutes and regulations relating thereto. In our judgment, however, having regard to the authorities to which we have referred, and to the mandatory nature of sections 1 and 2, an estoppel cannot lie against their provisions. Moreover, having regard to the passage from the judgment of Lord Parker CJ quoted above, we have reached the conclusion that an estoppel cannot lie so as to hinder the exercise of a statutory discretion. In our judgment, therefore, no estoppel can lie under the fourth ground of appeal.” (GUS Merchandise Corporation Ltd [1978] VATTR 28)
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General principle: a party may not approbate and reprobate
“There is a principle of law of general application that it is not possible to approbate and reprobate. That means you are not entitled to blow hot and cold in the attitude that you adopt. A man cannot adopt two inconsistent attitude towards another: he must elect between them and, having elected to adopt one stance, cannot thereafter be permitted to go back and adopt an inconsistent stance.” (Express Newspapers plc v. News (UK) Ltd [1990] 1 WLR 1320 at 1329).
“I agree that those words can be made to apply in the present case. The way in which it works is obvious. Having relied on the availability of the recovery of CFA additional liabilities in this class of litigation, the defendant now seeks to rely on the absence of that recovery in the present application. That is a classic approbation and reprobation. It is an inconsistency which should not be allowed. An alternative way of looking at it would be to view it as an abuse of process, which in my view it is. But whichever label one chooses to give it, the present stance is one which MGN should not be allowed to adopt.” (8 Representative Claimants v. MGN Ltd [2016] EWHC 855 (Ch), §34)
Statutory estoppels
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- Income tax assessments/decisions conclusive for CGT purposes
“Any assessment to income tax or decision on a claim under the Income Tax Acts, and any decision on an appeal under the Income Tax Acts against such an assessment or decision, shall be conclusive so far as, under any provision of this Act, liability to tax depends on the provisions of the Income Tax Acts.” (TCGA 1992, s.284)
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Does not allow the Tribunal upon determining an income tax appeal to adjust the taxpayer’s CGT liability
“We do not think that s 284 TCGA has effect to enable us or anyone else to amend the self-assessment. It is, we think, merely establishing what the correct amount of any chargeable gain is. It means for example that a person cannot say that an amount falls to be excluded under s 37 TCGA which is greater than the amount 42 that ends up ,the conclusiveness of the income tax decision is given effect to.” (Norman v. HMRC [2015] UKFTT 303 (TC), Annex 2, §21).
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- Conclusive effect of amount stated in company tax return that cannot be altered
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See B7: Calculation of Tax
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Confiscation orders do not give rise to any form of estoppel
“The first reason is that the Confiscation Order is not itself necessarily final. Under section 171 POCA, the amount of a confiscation order can be revisited if there is evidence which was not available to the prosecutor. It seems to me, therefore, that the decision of the Crown Court would not give rise to res judicata or an issue estoppel so as to bind HMRC. The decision would not have the necessary element of finality to do so.” (Martin v. HMRC [2015] UKUT 161, §56).
Arbitration decisions
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- Only binding on the parties
"[18] Any arbitral award will not bind HMRC as it was not a party to the arbitration." (Scrimshaw Wealth Management Limited v. HMRC [2024] UKFTT 637 (TC), Judge Baldwin)
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