CM Utilities Ltd v Revenue and Customs (PROCEDURE : Other) [2016] UKFTT 358 (TC)

FTT-Tax
CM Utilities Ltd v Revenue and Customs (PROCEDURE : Other)
[2016] UKFTT 358 (TC) · 2016-05-13
[15]“… He [Henderson J] also observed (again, in my view, entirely correctly), at paras 115-116:"115. There is a venerable principle of tax law to the general effect that there is a public interest in taxpayers paying the correct amount of tax, and it is one of the duties of the Commissioners in exercise of their statutory functions to have regard to that public interest. [The judge then considered changes in the tax system and continued] …116. …” 20. However, in order to properly consider Mr Vallat’s argument that the position in Elmhirst survived the transfer to the Tribunal it is necessary to consider what Henderson J said at [115] of his decision rather than rely on “The judge then considered changes in the tax system and continued” in Lord Walker’s square brackets, which was:[115]“This principle [ that there is a public interest in taxpayers paying the correct amount of tax] finds expression in cases such as R v Income Tax Special Commissioners, ex parte Elmhirst [1936] 1KB 487 (CA), and in the need for special legislation (now contained in section 54 of TMA 1970) to enable tax appeals to be settled by agreement between the parties without the need for a hearing. The precise nature and scope of this principle in the 21 st century is a controversial topic, having regard in particular to changes which have taken place over the years in the functions of the General and Special Commissioners, and to the introduction in 1994 of procedural rules regulating appeals to both tribunals. Furthermore, the whole question may become academic when appeals to the Commissioners are replaced next year by appeals to the new Tax Tribunal.” 21. Describing the role of the Special Commissioners in 1936, Lord Wright MR, in the Court of Appeal in Elmhirst , (on the appeal from the Divisional Court) said, at 493:
“… the Commissioners are exercising statutory authority and a statutory duty which they are bound to carry out. They are not in the position of judges deciding an issue between two particular parties. Their obligation is wider than that. It is to exercise their judgment on such material as comes before them and to obtain any material which they think is necessary and which they ought to have, and on that material to make the assessment or the estimate which the law requires them to make. They are not deciding a case inter partes; they are assessing or estimating the amount on which, in the interests of the country at large, the taxpayer ought to be taxed.”
He continued, referring to following the “very short passage” in Inland Revenue Commissioners v Sneath [1932] 2 KB 362 where Romer LJ said at 390-91:
“The duty of the Commissioners, as I read the provisions of the Income Tax Acts, is to form an estimate in each year of assessment of the amount of the income of the taxpayer on which the surtax imposed for that year is to be charged. For this purpose the taxpayer is required to make a return of his income from all sources as defined by s. 5 of the Income Tax Act, 1918. With this to guide them, the Special Commissioners have then to form their own estimate of the total income and to make an assessment accordingly. If the taxpayer is not content with such assessment he can bring the matter before the Special Commissioners by way of appeal. But the proceedings on the appeal are still merely directed towards ascertaining the income upon which the taxpayer is to be charged with surtax for the particular year of assessment, and the Special Commissioners may, if they think fit, increase the assessment made by them in the first instance. The appeal is merely another step taken by the Commissioners, at the instance of the taxpayer, in the course of the discharge by them of their administrative duty of collecting the surtax.” 22. The functions of the Commissioners as an appellate body and those of an inspector of taxes as the officer responsible for making assessments were separated in 1964. Further changes occurred in 1994 when procedural rules were introduced by the Special Commissioners (Jurisdiction and Procedure) Regulations 1994 and General Commissioners (Jurisdiction and Procedure) Regulations 1994, although neither had provision for the withdrawal of a case. The Commissioners were abolished in April 2009 as a result of the reforms implemented by the Tribunals Courts and Enforcement Act 2007 and their functions transferred to the Tax Chamber of the First-tier Tribunal under the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009. 23. The current position in relation to appeal proceedings is therefore quite different from that at the time of Elmhirst and, in contrast to a Special Commissioner then, a Tribunal Judge in a tax appeal is clearly “in the position of a judge deciding an issue between two particular parties”, a taxpayer and HMRC, in an adversarial process with its practice and procedure governed by the Procedure Rules which, unlike the procedural rules of the Special and General Commissioners, does have a specific provision, in rule 17, relating to withdrawal. 24. Given these significant changes I do not accept Mr Vallat’s submission that Tower MCashback , itself an appeal from the Special Commissioner, can be regarded as authority for the proposition that the principle in Elmhirst has survived and that the appeal process once commenced “cannot be stopped by the whim of an appellant”
. Rule 17 of the Procedure Rules clearly envisages that an appellant, as a party, may unilaterally withdraw its case without any provision for the other party to apply for that appeal to be reinstated. This may be contrasted with Part 38.4 of the Civil Procedure Rules which does allow a party to apply for reinstatement of a claim that has been discontinued by the other party. 25. Moreover, the ability of a party to withdraw its case is not inconsistent with the “venerable principle of tax law”, to which Henderson J referred and Lord Walker endorsed in Tower MCashback , (ie “that there is public interest in taxpayers paying the correct amount of tax”) to which the Tribunal has a duty to have regard in the application of s 50(6) or (7) TMA. This is apparent from a VAT context where, notwithstanding the provision in rule 16 of the Value Added Tax Tribunal Rules 1986 which permitted an appellant to “withdraw his appeal or application”, Carnwath LJ (as he then was), giving guidance to the Tribunal on its approach when faced an appeal against a VAT “best judgment” assessment in Pegasus Birds Ltd v HMRC [2004] STC 1509 said, at [38]:
“The Tribunal should remember that its primary task is to find the correct amount of tax, so far as possible on the material properly available to it, the burden resting on the taxpayer.” 26. The effect of the withdrawal of a case by an appellant under rule 17 of the Procedure Rules was considered by the Tribunal in Orchid Properties v HMRC [2012] UKFTT 651 (TC) . As Judge Sinfield recognised, at [1], that case concerned: “… an unusual application. The Respondents ("HMRC") applied to the Tribunal to set aside the withdrawal of an appeal by Orchid Properties (“Orchid”). Orchid opposed the application despite the fact that, by withdrawing its appeal, Orchid became liable to pay an amount of tax which Orchid maintains is not due. Orchid had withdrawn its appeal following receipt of an amended statement of case (“the Amended SoC”) from HMRC which stated that the tax in dispute was much less than previously discussed between the parties. Orchid claims that, by virtue of section 54 of the Taxes Management Act 1970 (“TMA”), the amount of tax now payable to HMRC is the amount set out in the Amended SoC. HMRC disagree: they maintain that the disputed tax was understated in error and, if the appeal is not reinstated, Orchid is liable to pay the amount of tax which was originally subject to appeal.” 27. After observing, at [25] that a withdrawal under rule 17 of the Procedure Rules: “…does not require any decision by the Tribunal and, indeed, the Tribunal cannot do anything other than accept a withdrawal if it is validly made.” and at [31] that: “The Amended SoC was … was part of the pleadings in the appeal and did not invite any acceptance by Orchid but was predicated on the existence of a dispute between the parties.”
Judge Sinfield went on to dismiss HMRC’s application for the appeal to be reinstated. He also concluded, at [32], that: “… there was no agreement under section 54(1) of the TMA to settle the appeal. As a consequence of withdrawing the appeal in the absence of an agreement, Orchid has made itself liable to pay the tax due on the basis of HMRC’s alternative argument [ie the decision originally subject to appeal] with no opportunity to appeal against that decision.” 28. Although it is possible to distinguish Orchid on the facts as, unlike the present case, HMRC did not object to the withdrawal by Orchid of its case under rule 17 of the Procedure Rules, the finding by Judge Sinfield that in the absence of an agreement under s 54(1) TMA the original decision appealed against stood is, in my judgment, clearly applicable to the present case where the Company has withdrawn its case, under Rule 17 of the Procedure Rules, and where, albeit by reason of HMRC’s objection to that withdrawal, there is no agreement under s 54(1) TMA. 29. Although Mr Vallat relies on the fact that rule 17 of the Procedure Rules refers to the withdrawal of a party’s “case” as opposed to an “appeal” it is clear from the decision in Orchid , and Vaultdown Ltd and others v HMRC [2015] UKFTT 383 (TC) to which he refers in his skeleton argument, that such a distinction carries little, if any, significance in the context of a withdrawal, where the withdrawal of a case by one party brings the proceedings to a close on the basis of the position applying before the proceedings commenced as though its claim had failed. 30. Such a situation is manifestly different from that of a respondent barred from taking further part in proceedings under rule 8 of the Procedure Rules, the parts of which are relevant to this case provide: 8 Striking out a party’s case (1) – (6) … (7) This rule applies to a respondent as it applies to an appellant except that— (a) a reference to the striking out of the proceedings must be read as a reference to the barring of the respondent from taking further part in the proceedings; and (b) a reference to an application for the reinstatement of proceedings which have been struck out must be read as a reference to an application for the lifting of the bar on the respondent taking further part in the proceedings. (8) If a respondent has been barred from taking further part in proceedings under this rule and that bar has not been lifted, the Tribunal need not consider any response or other submissions made by that respondent, and may summarily determine any or all issues against that respondent. 31. It is clear from its terms, in particular rule 8(8), that rule 8 of the Procedure Rules envisages a continuation of proceedings, albeit with one party barred from taking part and against which the Tribunal may summarily determine any or all issues. In contrast, the withdrawal by a party or the striking out of its case disposes of the proceedings. 32. Therefore, as in Orchid I am not able do anything other than accept that a withdrawal has taken place and accordingly cannot accede to HMRC’s request to increase the determinations and decisions in line with the revised figures in paragraph 48 of the Statement of Case. Right to apply for Permission to Appeal 33. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. JOHN BROOKS TRIBUNAL JUDGE RELEASE DATE: 23 MAY 2016

Cited in 1 later judgment