"The analysis of the Tribunal in [the Wilmslow Decision] failed to take into account that, even if the economic and commercial reality is that it was Wilmslow PLC and not Karacus which made the supplies of loan broking, nevertheless, analysed on their own account, Mediability's supplies were properly made to Karacus. The finding made in relation to Wilmslow/Karacus is consistent with a finding that the advertising services received by Karacus from Mediability must therefore have been resupplied by Karacus to Wilmslow (which would have resulted in Wilmslow having to apply a reverse charge ..."
"If a legal rule requires a fact to be proved (a 'fact in issue') a judge or jury must decide whether or not it happened. There is no room for a finding that it might not have happened. The law operates a binary system in which the only values are zero and one. The fact either happened or it did not. If the tribunal is left in doubt, the doubt is resolved by a rule that one party or the other carries the burden of proof. If the party who bears the burden of proof fails to discharge it, a value of zero is returned and the fact is treated as not having happened. If he does discharge it, a value of one is returned and the fact is treated as having happened."
"[a]s a general principle, that a transaction between two parties, in judicial proceedings, ought not to be binding upon a third; for it would be unjust to bind any person who could not be admitted to make a defence, or to examine witnesses, or to appeal from a judgment he might think erroneous; and therefore the depositions of witnesses in another cause in proof of a fact, the verdict of a jury finding the fact, and the judgment of the court upon facts found, although evidence against the parties, and all claiming under them, are not, in general, to be used to the prejudice of strangers. There are some exceptions to this general rule, founded upon particular reasons, but, not being applicable to the present subject, it is unnecessary to state them."
"This is true, not only of convictions, but also of judgments in civil actions. If given between the same parties they are conclusive, but not against anyone who was not a party."
"199. In the alternative, HMRC submit that the scheme was contrary to the doctrine of abuse of law. The sole purpose was to obtain a tax advantage. Furthermore, it was contrary to the purpose of the relevant provisions in that the structure was artificial, not in accordance with commercial reality and therefore contrary to the purpose of the VAT regime. It was also contrary to the place of supply provisions which impose VAT on consumption; the advertising supplies were received in the UK and therefore VAT should be incurred in the UK on those supplies. 200. The advertising was in the UK media and not Gibraltar therefore only designed for UK customers and therefore consumed in UK. It was commissioned by Karakus but based on content which was directed and approved by the Appellant. HMRC submit it would be contrary to the purpose of legislative provisions to avoid non-taxation if this loan broking business which was substantially conducted in the UK was able to compete with other loan broking businesses in the UK but without incurring irrecoverable VAT on the related advertising costs. 201. HMRC contend that the essential aim of the structure was an artificial means by which to avoid irrecoverable VAT arising on the advertising services procured and to allow recovery of VAT on the Appellant’s overheads; there is no credible evidence of any commercial purpose of rationale in splitting the business between the UK and Gibraltar and the arrangements were conceived and implemented by the Appellant as a VAT saving mechanism. 202. Mr Gibbon submitted, relying on Pendragon, that the clear inference to be drawn from the Court’s comments is that it is difficult to set a blanket, standard or general “normality” to measure transactions against, given that parties are free to contract as they wish and according to their own commercial aims and objectives; where the law leaves options open to a taxpayer, it is not abusive to take one of those options. 203. I accepted Mr Gibbon’s submissions regarding the authorities. The Supreme Court confirmed that business arrangements are not, of themselves, abusive where a taxpayer chooses one of a number of normal commercial options, none of which run counter to the purpose of the legislation. The CJEU in Newey T/A Ocean Finance held that the effect of the principle of abuse of rights was to bar artificial arrangements which did not reflect economic reality and were set up with the sole aim of obtaining a tax advantage. 204. However, having considered all of the evidence available, I preferred the submissions on behalf of HMRC that the scheme was manifestly contrary to the purpose of VAT by virtue of its artificiality and abusive structure. The use of the special purpose vehicle in Gibraltar added expense to the business which was commercially unnecessary other than to obtain a tax advantage. The scheme required profits from the business to be used to cover the expenses of Karakus which performed none of the necessary elements of the loan broking business from a commercial perspective. 205. I found that the commercial reality was that all marketing, processing and provision of vetted applications for loans was performed by the Appellant. As distinct from Newey T/A Ocean Finance, the Appellant sent the completed applications directly to the lenders giving Karakus no opportunity to object. There was no evidence that the directors of Karakus had any experience in loan broking nor that they had any meaningful involvement in it. 206. Although there were changes to the ownership and apparent control of Karakus I found that it did not operate independently of the Appellant at any point throughout the relevant period. I agreed with HMRC’s submission, applying the authorities, that it is not necessary for a finding of artificiality for it to be established that the Appellant or Mr Webb retained a connection with Karakus after the transfer of Mr Webb’s shares to the Ark Trust. However, in the absence of any credible explanation for the transfer, I was satisfied that it was reasonable to draw such an inference on the basis of the evidence and my findings thereon. The gifting of the shares for no consideration was manifestly uncommercial and the debenture entered into by Karakus reinforced my finding on the basis of the substantial leverage it provided to the Appellant which I concluded evidenced the Appellant’s continued control. 207. I found that the Agreements lacked key details which would be expected in genuine commercial arrangements between arm’s length parties. By way of example the 1997 contract provides no terms dealing with the negotiation and provision of content for advertising yet this was carried out by the Appellant without payment. 208. I accepted HMRC’s submission that the 2004 Agreement contained rights given to the Appellant which no genuine principal would agree to whilst also limiting Karakus’ remedies, for instance Karakus was granted royalty free and without time limit, a licence to the Appellant to use customer data which it could in turn sub-licence “without prejudice to any other provision of this Agreement”; such data would be both valuable and sensitive and it is wholly lacking commerciality for a loan broking principal to grant its processor the right to sub-licence such data without strict controls in place. CONCLUSION ON ISSUE (2) ABUSE 209. Having considered all of the evidence I found that the arrangements which form the subject of this appeal were highly uncommercial, did not reflect the economic or commercial reality and were contrived to result in a tax advantage. I was satisfied that the essential aim was to avoid irrecoverable VAT and that the structure of the arrangements was contrary to the purpose of VAT by its artificiality."
"It was also contended by [the taxpayer] that it would be wrong to characterise the Scheme as an abuse because it involves inappropriately considering the Scheme as a whole, whereas questions relating to VAT are to be determined by reference to individual transactions – i.e. by treating each step in the Scheme separately. Thus, he argued in his written submissions that the "abuse test is not satisfied by WHA viewed alone"
" The need to exercise caution in relation to any power to strike out proceedings prior to a full hearing is obvious. But it is a consideration which goes to the exercise of the power rather than to whether such a power exists. The Upper Tribunal in its decision at [55] did not take Mr McDonnell to have submitted that there was no power to strike out for abuse of process but in any event, in my view, the power contained in Rule 8(3)(c) is wide enough in its terms to include a strike out application based on those grounds. Such an application, if successful, would result in the First-tier Tribunal concluding that the relevant part of the appellant's case could not succeed. A power to strike out could also be said to be part of the power of regulation by the First-tier Tribunal of its procedure under Rule 5(1) (which was the view of the Upper Tribunal), but Rule 8(3)(c) is enough. There is no need to imply a power. It is worth observing that the equivalent provision inCPR 3.4 (2) separates out a case where a statement of case discloses no reasonable grounds for bringing or defending the claim from a case where the statement of case is an abuse of the court's process. But for the First-tier Tribunal the Tribunal Procedure Committee has chosen a different but composite criterion of no reasonable prospect of success, which is wide enough to cover appeals which are legally hopeless as well as appeals which can be said to amount to an abuse of process. There is in my view express power to strike out on both grounds."
"The law discourages relitigation of the same issues except by means of an appeal. The Latin maxims often quoted are nemo debet bix vexari pro una et eadem causa and interest rei publicae ut finis sit litium. They are usually mentioned in tandem but it is important to notice that the policies they are state are not quite the same. The first is concerned with the interests of the defendant: a person should not be troubled twice for the same reason. This policy has generated the rules which prevent relitigation when the parties are the same ... The second policy is wider: it is concerned with the interests of the state. There is a general public interest in the same issue not being litigated over again. The second policy can be used to justify the extension of the rules of issue estoppel to cases in which the parties are not the same but the circumstances are such as bring the case within the spirit of the rules."