“With regards (sic) supplies of welfare services made by non-state regulated private welfare institutions to local authorities, as noted by the Tribunal in Life Services there can be no breach of fiscal neutrality, as the charging of VAT on such supplies would not increase the cost to the end user (local authorities being able to recover any such VAT charged to them). Accordingly such supplies are properly subject to VAT.”
“Section 83(p) of the 1994 Act provides both for an appeal ‘with respect to … an assessment under section 73(1)’ and for an appeal ‘with respect to … the amount of such an assessment’. That distinction reflects the two distinct questions which may arise where an assessment purports to have been made under section 73(1) of the Act. First, whether the assessment has been made under the power conferred under that section; and, second, whether the amount of the assessment is the correct amount of VAT for which the taxpayer is accountable.”
“13. …I was not referred to it but the authorities on the CPR on this say as follows: [185] It is important to appreciate that there are two principles in play. The first is a matter of pleading. The function of pleadings is to give the party opposite sufficient notice of the case which is being made against him. Lord Millett in Three Rivers District Council v Bank of England[2001] UKHL 16 : ‘The need for extensive pleadings including particulars should be reduced by the requirement that witness statements are now exchanged. …This does not mean that pleadings are now superfluous. Pleadings are still required to mark out the parameters of the case that is being advanced by each party. In particular they are still critical to identify the issues and the extent of the dispute between the parties. What is important is that the pleadings should make clear the general nature of the case of the pleader. This is true both under the old rules and the new rules.’ Lord Woolf MR in McPhilemy v Times Newspapers Ltd[1999] 3 All ER 775 , 792J-793A … 18. … If the person with the burden of proof was required to prove everything, even those matters which the other party had not clearly disputed, then preparation for, and hearings of, appeals would be much longer and a great deal of time and money would be wasted. Moreover, trial by ambush is not justice: each party should be able to prepare to meet the other party's case in advance of the hearing to increase the likelihood that the outcome of the appeal will be in accordance with the true facts of the case. Each party must therefore state in advance in summary terms what is in dispute and why. 19. It was not cited to me but the decision of the Upper Tribunal in Fairford Groupplc [2014) UKUT 329 (TCC)seems in point here. In that case, it was accepted that HMRC had the burden of proof. The taxpayer's attitude had been to state that HMRC was put to strict proof of every part of its case. The Upper Tribunal said: [48] …Accordingly, an appellant putting a positive case must disclose his hand in advance; we see no reason why one merely putting HMRC to proof should be in a better position. If there is a real challenge to HMRC's evidence it should be identified; if there is not, the evidence should be accepted. We see no reason why an appellant who does not advance a positive case should be entitled to require HMRC to produce witnesses for cross-examination when their evidence is not seriously disputed. Such a course is wasteful not only of HMRC's resources but also of the resources of the FTT, since it increases the length of hearings and adds to the delays experienced by other tribunal users. 20. In other words, it is not procedurally fair for the party without the burden of proof to do no more than say the other party must prove every part of their case. Both parties should set out the key parts of their legal and factual case in advance. … 25. For the reasons given above, my conclusion is that it is not enough for HMRC to say that the appellant bears the burden of proof and must prove everything, including those matters which are neither expressly nor impliedly in issue in HMRC's statement of case. On the contrary, HMRC's statement of case should outline the issues which are disputed and outline the facts relied on to support their position.” [185] It is important to appreciate that there are two principles in play. The first is a matter of pleading. The function of pleadings is to give the party opposite sufficient notice of the case which is being made against him. Lord Millett in Three Rivers District Council v Bank of England[2001] UKHL 16 : ‘The need for extensive pleadings including particulars should be reduced by the requirement that witness statements are now exchanged. …This does not mean that pleadings are now superfluous. Pleadings are still required to mark out the parameters of the case that is being advanced by each party. In particular they are still critical to identify the issues and the extent of the dispute between the parties. What is important is that the pleadings should make clear the general nature of the case of the pleader. This is true both under the old rules and the new rules.’ Lord Woolf MR in McPhilemy v Times Newspapers Ltd[1999] 3 All ER 775 , 792J-793A [48] …Accordingly, an appellant putting a positive case must disclose his hand in advance; we see no reason why one merely putting HMRC to proof should be in a better position. If there is a real challenge to HMRC's evidence it should be identified; if there is not, the evidence should be accepted. We see no reason why an appellant who does not advance a positive case should be entitled to require HMRC to produce witnesses for cross-examination when their evidence is not seriously disputed. Such a course is wasteful not only of HMRC's resources but also of the resources of the FTT, since it increases the length of hearings and adds to the delays experienced by other tribunal users. 4. By its expressly pleaded Grounds of Appeal both “New” and original the Appellant made plain that it had not appealed the whole of “an assessment” but rather “the amount of such an assessment”. 5. The first intimation that the Appellant sought to appeal the whole of the sums assessed in respect of the Disputed Periods was in the application dated10 November 2022 and there was nothing to that effect in the pleadings. 6. The original Grounds of Appeal expressly limited the remit of the appeal to the sum of£1,587,898.11 in respect of output tax due on supplies made to privately funded individuals. 7. The New Grounds of Appeal do not further address the scope of the appeal. Paragraphs 1 to 12 set out an overview and the background to the dispute. Paragraph 13 re-iterates the limited basis of the appeal as issued. Paragraphs 14 to 18 refer only to privately funded individuals. 8. Paragraph 19 criticises the argument on time bar at paragraphs 65-67 of HMRC’s Statement of Case but does not advance any arguments in relation to any additional sums that have been appealed. In particular, paragraph 19 does not extend the appeal to include output tax relating to publically funded individuals. It references section 80(7) VATA but the Appellant has consistently argued that section 80 VATA is not relevant to either the preliminary issues or the First Appeal. 9. The Appellant’s pleaded case means that only the£1,587,898.11 is in dispute. In terms of the Disputed Periods, the balance relates to supplies to publically funded individuals and that has not been appealed. In summary there is no extant appeal in relation to supplies to publically funded individuals and thus that is not a matter that is before the Tribunal. 10. HMRC rely upon Chandra v Brooke North and Another[2013] EWCA Civ 1559 (“Chandra”) citing paragraph 92 for the propositions that one must compare the original Ground of Appeal with any “new” ground and that the wording of paragraph 92, which reads as follows, applied in this instance. “92. On the other hand once the Claimant serves particulars of claim on a Defendant, he pins his colours to the mast as against that Defendant. Particulars of claim are normally narrower in their scope than the original claim form. Those particulars then constitute the ongoing claim against that Defendant. If the Claimant applies to amend as against that Defendant, what the court has to do is to compare the original particulars of claim with the proposed amendments. If the Claimant is seeking to add a new claim after expiry of the limitation period, he cannot escape from the tentacles of s 35(3) to (5) of the 1980 Act by relying upon the broad wording contained in his original claim form.”
“The resolution of this appeal will involve a review of Court of Appeal decisions under the former Rules of the Supreme Court (“RSC”) and consideration of whether the principles stated in those decisions remain valid under the Civil Procedure Rules (“CPR”).”
“37. …Fairness does not require, for example, that to advance an argument not present in its statement of case or the notice of appeal a party must always formally apply to amend its earlier pleading. On the other hand it does require that the other party is given adequate opportunity in the circumstances to meet the point, whether by argument or with evidence. 38. If a new argument is a pure point of law it might be addressed, as the case may be, after: a few minutes’ thought; an evening’s consideration; or one or more days’ research. Provided that the other party has an appropriate opportunity to meet the point, it would generally not be unfair for the tribunal to take that argument into account.”
“…We would add that how those propositions fall to be applied, and the particular level of detail which will enable an appellant to properly prepare, will depend on the circumstances of the particular appeal”
“…the absence of reference by the appellants to the competence and time limit issues in their respective grounds of appeal, meant that those issues, on which HMRC’s case depended, did not have to be determined in their favour. Those matters formed an essential element of HMRC’s case, on which HMRC bore the burden of proof, and which if not proved would fail to displace the general rule that the assessments could not validly have been made.”
“49. The assertions on behalf of the appellants … may not have been expressed in the form of challenges to the competence and time limit issues, but it should have been clear to HMRC that that was their effect.”
“On balance, it seems to us that we should grant Mr Denley permission to rely on the further grounds of appeal. The issues he seeks to raise are essentially legal ones and can be addressed with no evidence beyond that which was before the FTT and is available to us. In the circumstances, it seems to us to be just, and not unfair to HMRC, to exercise our discretion to allow Mr Denley to amend his grounds of appeal in the way he wishes.”
“37. In relation to the legislative framework, it is the case that… objections to the making of an assessment may only be made on an appeal against the assessment…. We do not construe those provisions, however, as mandating that, for competence or time limits to be in issue, an appellant is required to make an express objection or challenge to the validity of the making of an assessment. We agree with Mr McDonnell that those provisions are properly to be understood as confining the forum for such disputes to an appeal before the tribunal. They do not prescribe the manner in which such issues may be brought before the tribunal.”
“My Lords, I shall now permit myself a general observation. Once that it is fixed that there is liability, it is antecedently highly improbable that the statute should not go on to make that Liability effective. A statute is designed to be workable; and the interpretation thereof by a Court should be to secure that object, unless crucial omission or clear direction makes that end unattainable. Now, there are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex hypothesi, has already been fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay.” (Emphasis added)
“38. S 73(1) states that an assessment under that section is of ‘the amount of VAT due’. Accordingly, unless the assessment determines the net amount of VAT due it cannot be an assessment for the purpose of s 73(1). Similarly, in s 73(6) the assessment is described as an assessment ‘of an amount of VAT due’. Thus there cannot be an appeal against an assessment under s73(1) unless it assesses that there is a net amount of VAT due… 39. Indeed there are reasons for concluding that in some contexts VATA uses the expression ‘amount of the assessment’ and ‘assessment’ interchangeably…. … 41. However, the critical figure for the purpose of the assessment remains the bottom line figure – the amount of VAT due. The figures for input tax and output tax are of course legally significant, and this is recognized in s 83, dealing with appeals. Those figures form part of an assessment but they are not the figures that make the act of the Commissioners an assessment for the purposes of s 73(1).”
“59. The result, viewed objectively, may appear unsatisfactory. Each of the appellants has been found by the FTT to have seriously understated their taxable income over an extended period. That taxable income will remain untaxed. It must be recognised, on the other hand, that the assessment system that Parliament has legislated for is designed to provide a balance between HMRC and the taxpayer. Part of that balance is the requirement, in relation to … assessments outside the normal time limits, that HMRC satisfy the FTT that the relevant conditions for those assessments to have been validly made have been met. If HMRC fail to do so, for whatever reason, the fact that a taxpayer might escape tax that would otherwise have been due is simply the consequence of the operation of a system that provides such a balance. It is not for this tribunal to seek to achieve any result other than that prescribed by the law.”