Football Mundial Ltd v Revenue and Customs (PROCEDURE : Other) [2016] UKFTT 736 (TC)

FTT-Tax
Football Mundial Ltd v Revenue and Customs (PROCEDURE : Other)
[2016] UKFTT 736 (TC) · 2016-07-25
[40]I was told that the Brief replaced a previous Revenue & Customs Brief 04/11. I was not taken to its terms but for the sake of completeness I note that an extract was referred to as follows by the F-tT in Goals:
“ [HMRC] consider that the supplies made by sports league providers consist of a bundle of elements, which are integral to each other, but that it cannot be said that there is one principal element to which all others are ancillary. In these circumstances, it is necessary to establish the character of the overarching supply to determine whether it falls within the exemption. In HMRC’s view, the overarching supply is of participation in a sports league, not a supply of land. It is therefore HMRC’s view that the supplies made by commercial sports league providers are liable to the standard rate of VAT. ” 41. As noted above, ISA emailed Ms Bansal on the same date as the Brief was published raising the multiple supply argument and enclosing draft amended grounds of appeal. ISA then emailed Ms Bansal on 25 February 2014 following release of the Brief. The email was expressed to be without prejudice save as to costs. In light of the Brief ISA sought to clarify that the Respondents accepted that 1) from 6 February 2013 onwards there were clearly two separate supplies and the value of standard rated supplies were below the de-registration threshold, and 2) prior to that date it made two separate supplies. He continued: “ Therefore whilst we remain of the opinion that the Tribunal will accept our primary argument, ie that our client makes a composite supply of which any ancillary elements are so insignificant to render the supplies it makes … wholly exempt … a practical solution to our client’s appeals would be for both the Commissioners and our client to agree a mutually acceptable way forward in line with the Brief 08/14 … ” 42. Thereafter negotiations continued and eventually the appeals were settled on the basis that there were two separate supplies and on the basis of an agreed apportionment. In the event the agreed repayment was in the sum of £534,396. The Appellant did not de-register because in the event, as I understand it, charges for referee fees were included in the Appellant’s standard rated supplies which meant it remained over the de-registration threshold. 43. Finally I should say something in relation to the Respondents’ policy review. For the purposes of the present application the Appellant asked the Respondents to disclose “the internal timetable of discussions which went on within HMRC after the Goals decision, until the issue of Business Brief 08/14”
. The Respondents declined to disclose any details of their policy review including the timeline on the grounds of confidentiality. Reasons 44. Having set out the progress of the appeals in detail, the Appellant’s case is relatively straightforward. It says that the Respondents ought to have applied to stay the proceedings as soon as the appeals were notified pending the result of their policy review. Alternatively the Respondents ought to have informed the Appellant that they were conducting a policy review in which case the Appellant would have applied for a stay. The failure to do one or the other was unreasonable. The Respondents were in breach of Rule 2(4) of the Tribunal Rules which requires the parties to help the Tribunal to further the overriding objective of dealing with cases fairly and justly. The Respondents’ failure led the Appellant to incur costs in pursuing the appeals which would otherwise have been avoided. 45. Tribunal Rule 2(2) provides that the overriding objective of dealing with cases fairly and justly includes:
“ (a) Dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties… ” 46. Mr Toone submitted that the overriding objective was the touchstone of reasonableness. In the present case the Appellant had been kept out of significant sums of money in the period since 2001 in what was a highly competitive business. The Respondents ought to have had regard to the Appellant’s resources and applied for a stay. Their failure to do so led the Appellant to incur costs in proceeding with the appeal, including the advice of Mr Toone and ISA and preparation and service of its witness statements. 47. The focus of Mr Toone’s submissions was the policy review being undertaken by the Respondents. He did not suggest that the Respondents should have disclosed the contents of the policy review, but that they should have disclosed to the Appellant the fact that it was taking place and for the purposes of this application the dates on which it was taking place. In the absence of information from the Respondents as to the dates of the policy review he invited me to accept that the policy was being reviewed at least some time prior to notification of the appeals in 2013 and that the policy review continued until the issue of the Brief. 48. Mr Winkley submitted, that the Respondents are “entitled to do their thinking in private”
. I accept that broad submission. However Mr Toone was not concerned with identifying the Respondents’ thought processes in conducting their policy review. He invited me to assume for the purposes of this application that the policy review was in progress at the time the Appellant lodged its notices of appeal, and that it continued until the new policy was publicly announced. I shall proceed on that basis. 49. Mr Toone relied on the decision of the Special Commissioners in Carvill v Frost, in particular the extract cited at [12] of Marshall & Co v Commissioners for HM Revenue & Customs. The reference to a review in that extract was not to a policy review applicable to taxpayers generally. It was to an internal review of specific assessments. It seems to me that the relevance of Carvill v Frost is simply as part of the development of the law which led to Tarafdar and MORI. 50. The three stage test set out by the Upper Tribunal in Tarafdar requires some modification in the present context. This is not a case where the decisions appealed against were simply withdrawn. The Respondents are not criticised for resisting an obviously meritorious appeal instead of withdrawing earlier. The Appellant’s case at the time the appeals were lodged was that there was a single exempt supply. The Respondents’ case was that there was a single standard rated supply. The appeals were settled on the basis of separate exempt and standard rated supplies. The real issue before me is the reasonableness or otherwise of the Respondents conduct in relation to obtaining a stay pending the outcome of their policy review. I consider that I should approach that issue by reference to the following matters: (1) What were the circumstances in which the appeals proceeded and in which the parties came to settle the appeals? (2) Having regard to those circumstances, should the Respondents have applied for a stay of the appeals pending the outcome of their policy review prior to the time when the appeals were settled? Alternatively should they have notified the Appellant that they were undertaking a policy review? (3) If so, was it unreasonable of the Respondents not to have applied for a stay of the appeals, or at least notified the Appellant that they were undertaking a policy review. 51. It can be seen by inference from my primary findings of fact that what ultimately prompted the settlement was the issue of the Brief in February 2014. I have set out the circumstances in which the Brief came to be issued, albeit without regard to the internal policy processes of the Respondents. Neither party invited me to have regard to such internal policy processes or to the way in which the policy might have developed. Indeed there was no evidence before me in that regard. 52. On the basis that there was a policy review in progress at the time the appeals were lodged it was clearly an option for the Respondents to apply for a stay of the appeals, or to notify the Appellant that the policy review was taking place. My experience in this tribunal is that on occasion such applications are made by the Respondents. An application for a stay was made on 12 September 2013. Whilst that application made no reference to a policy review, it was clear that the Respondents were at least considering the application of Goals to a number of businesses in the relevant sector with appeals before the F-tT. The reason the application was withdrawn was because the Solicitor’s Office considered that they would have enough time before service of the Statement of Case to review those appeals including the Appellant’s appeals. 53. Mr Toone did not accept that the October Letter set out the Respondents’ position clearly, nor that it expressed the same position as was later set out in the Brief. He pointed to the fact that the Statement of Case served 4 weeks later alleged that the Appellant’s circumstances were not identical to Goals and that the supply made by the Appellant was a single standard rated supply. The allegation of a single standard rated supply contradicted the policy later set out in the Brief. Further, the Respondents did not accept in the October Letter that the Appellant’s supplies should be apportioned. Mr Toone also submitted that it was not clear whether there had been a policy change between October 2013 and February 2014. 54. I accept that the October Letter required appellants to establish that they were making two separate supplies if income was to be apportioned between exempt and standard supplies. The reference to “an appellant” throughout the letter clearly shows that it was a pro forma letter and was being sent not only to the Appellant but also to other appellants in the same business sector. 55. The October Letter was inviting the Appellant to substantiate its claim that it was making two separate supplies. In other words the Respondents were not accepting that the Appellant did make two separate supplies. However the letter clearly stated in paragraph (1) that the Respondents were adopting a position in line with Goals. In other words subject to the facts, appellants were being given an opportunity to demonstrate that they were making separate exempt and standard rated supplies. It is clear from the October Letter that such an approach would apply not only for the future but in relation to assessments for previous accounting periods and in relation to decisions on registration and de-registration. It is also clear from paragraph (2) of the October Letter that the Respondents would not accept that any traders made single exempt supplies. 56. Mr Spencer’s response on the same date as the October Letter was:
“I think I know what the outcome will be”
. Assuming that to mean that the Appellant was rejecting the view being put forward by the Respondents, the response suggests that the Appellant was steadfastly maintaining its argument of a single exempt supply. 57. I do not find the October Letter “difficult to follow” which was a criticism made of the letter by ISA in their written response. It is evident from ISA’s written response on 21 October 2013 that they understood the Respondents were changing their policy with regard to small sided football league businesses. The decisions under appeal did not suggest in terms that Goals was wrongly decided and certainly there had been no appeal against the decision in Goals. Instead the decisions sought to factually distinguish the Appellant’s position from that of Goals. Be that as it may, I cannot see why ISA considered that paragraph (1) of the October Letter related only to the question of de-registration, in other words the position for the future. Paragraph (1) said in terms that the Respondents would accept an apportionment of income in settlement of any outstanding assessments where separate supplies were being made. 58. Paragraph (2) of the October Letter concerned only the argument being made by appellants that there was a single exempt supply. In their written response ISA stated that they would address this aspect separately. For some reason ISA considered that paragraph (2) applied to the decisions other than de-registration, which I take to mean the repayment claim and the decision not to cancel the registration with effect from 2001, in other words the historical position. In the event ISA never wrote separately in relation to paragraph (2). 59. It seems to me that ISA misconstrued the October Letter. It was not simply looking at the future, it was looking at the past. Paragraph (1) was not limited to the question of the registration. It was also relevant to the repayment claim. 60. The last paragraph of the October Letter expressly asked the Appellant to confirm whether it wished to proceed with the appeal on the grounds as stated in the notices of appeal. It is unfortunate that the Appellant did not address at that stage the question of whether it wished to amend its grounds of appeal to pursue the multiple supply case. It is not clear what prompted the Appellant to seek to amend its grounds of appeal on 17 February 2014 if, as I have assumed it was not the Brief. 61. The Respondents sought to make clear that the content of the October Letter related to the historical position in their letter dated 12 November 2013. They understandably wanted to clarify the Appellant’s position as between single exempt supplies and multiple supplies and as between the past and the present. Apparently there was no response to that letter. 62. I accept that the Respondents’ Statement of Case served a few weeks later included as the Respondents’ primary argument that there was a single standard rated supply. It seems to me that their approach in the Statement of Case reflected the grounds of appeal which the Appellant was pursuing, namely that there was a single exempt supply. Having said that, the Respondents put forward an alternative case that there were multiple supplies. To the extent therefore that the primary argument contradicts the policy as ultimately stated in the Brief, it does so in circumstances where the Appellant was maintaining a single exempt supply. 63. Mr Toone submitted that the contents of the Brief came as a complete surprise to the Appellant and that it was a complete departure from the Respondents’ case hitherto. I do not accept that was the case. 64. The Brief accepted the application of Goals to all traders operating in “circumstances akin to Goals”. That is entirely consistent with the October Letter. The Brief also stated that evidence to support the apportionment of a single price to exempt and standard rated supplies would be required. Again, that is consistent with the October Letter. 65. In my view the position taken by the Respondents in the October Letter was no different, in any material sense, to the policy announced in the Brief. 66. The Brief did expressly provide that traders hiring premises from third parties would be treated as akin to Goals. However it did not say anything about circumstances where a trader had a single contract for the supply of services. Goals involved two separate contracts for pitch hire and league management services whereas until 6 February 2013 the Appellant had a single contract. The extent to which the Appellant might be said to be operating in circumstances akin to Goals therefore remained to be negotiated. 67. The Appellant’s application in February 2014 to amend its grounds of appeal recognised the difference between a transaction involving two separate supplies taxable at different rates and a transaction involving a single supply but where different rates apply to different elements in that supply. The latter situation is based on the decision of the CJEU in Talacre, referenced by the F-tT in Goals. Procedurally, however, this was the first time that the Appellant had put forward an alternative case that it made separate exempt and standard rated supplies. 68. I agree with Mr Toone that there was no sensible reason to object to the proposed amendment. But that is not a criticism relied upon by the Appellant in the present application as being unreasonable. 69. It is clear that the Appellant’s argument until February 2014 was that it was making a single exempt supply. That was the argument the Respondents were meeting in their Statement of Case. The Respondents identified an alternative position that there may, in the circumstances, be two separate supplies. However it was only when the Appellant applied to amend its grounds of appeal that it sought to put forward the alternative argument of two separate supplies. Even then, correspondence shows that the primary argument remained a single exempt supply. 70. I do not consider it was unreasonable for the Respondents to press on with the appeal without applying for a stay when they were meeting the Appellant’s argument that there was a single exempt supply and no alternative argument had been put forward. 71. The October Letter ought to have been viewed as an invitation to enter into negotiations with the Respondents about multiple supplies and apportionment. Unfortunately ISA did not construe it as such. In light of the October Letter I consider that the Appellant was at that stage in as good a position as the Respondents to seek a stay of the appeal whilst the parties entered into negotiations. 72. If the Appellant was in any doubt that the Respondents were open to negotiations then such doubt ought to have been dispelled when Ms Bansal wrote on 12 November 2013 seeking to clarify the Appellant’s position. Again, it is unfortunate that there was no substantive response to that letter. 73. Mr Toone submitted that none of this is of any significance in considering the Appellant’s application for costs. I do not agree. The Appellant’s case is that the Respondents ought to have applied for a stay pending the policy review or notified the Appellant that there was a policy review. There has never been any realistic suggestion that the policy review might have led the Respondents to accept that any appellants could be making single exempt supplies. The Respondents’ position in that regard had been made clear in Goals and in the October Letter. On that basis the Respondents were entitled to continue to defend the appeals. More importantly, a stay would have served no purpose in circumstances where the appeals were being pursued on the basis of a single exempt supply, or a single supply which was partly exempt and partly standard rated relying on Talacre. 74. In the circumstances I am not satisfied that the Respondents should have applied for a stay of these appeals pending the outcome of their policy review, nor that it was unreasonable not to notify the Appellant that it was conducting a policy review. 75. I reach that conclusion without considering as a matter of principle whether the Respondents are entitled to keep confidential the fact that they are conducting a policy review. I can see reasons why that might be desirable but I did not hear full argument on the point. It seemed to me when Mr Winkley submitted that the Respondents are entitled to do their thinking in private he was addressing his submission to the disclosure sought by the Appellant as to the timeline of the policy review. Clearly if the Respondents were expected to apply for a stay because a policy review was being conducted they would have to disclose the existence of that policy review. 76. Finally, even if I was satisfied that the Respondents had been unreasonable in not applying for a stay or notifying the Appellant that it was conducting a policy review I would still have to consider whether, as a matter of discretion, I should direct them to pay any part of the Appellant’s costs. Taking all the circumstances into account I would not make such a direction. If the Appellant had fully engaged with the October Letter then I see nothing in the position of either party which would have prevented a settlement at that stage along the lines of the settlement which was eventually agreed. Conclusion 77. For the reasons given above I refuse application for costs. 78. 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. JONATHAN CANNAN TRIBUNAL JUDGE RELEASE DATE: 1 NOVEMBER 2016