BGC Services Holdings LLP v The Commissioners for HMRC [2025] UKFTT 700 (TC)

[2025] UKFTT 00700 (TC)Case No TC09548
FIRST-TIER TRIBUNAL
TAX CHAMBER
Date Judgment date: 9 June 2025
Decided on the papers
Appeal reference: TC/2024/02638
Procedure – HMRC issue determinations for £96m without any reasons – Appellant appeals to the Tribunal - HMRC apply for appellant to provide further and better particulars – application refused – HMRC’s Statement of Case does not include reasons for determinations – Appellant applies for Statement of Case to be properly particularised – application allowed – HMRC applies for permission to appeal to the Upper Tribunal against those two case management decisions – application refused
Before
TRIBUNAL JUDGE ANNE REDSTON
Between
BGC SERVICES HOLDINGS LLPAppellantTHE COMMISSIONERS FORRespondentHIS MAJESTY’S REVENUE AND CUSTOMSRespondentDECISION

Introduction

[1]On 8 March 2024, HMRC issued the Appellant with determinations totalling £96,037,893 for the tax years 2017-18 through to 2019-20 (“the Determinations”). HMRC did not include any reasons in the text of the Determinations, or in the covering correspondence.[2]The Appellant appealed the Determinations to the Tribunal, and HMRC applied for the Appellant to provide further and better particulars of its grounds of appeal (“the F&B Application”). I refused the F&B Application in a case management decision issued on 5 March 2025 (“the First Decision”).[3]HMRC issued its Statement of Case (“SoC”) on 26 March 2025. The SoC did not give reasons for the Determinations. On 2 April 2025, the Appellant applied for HMRC properly to particularise its SoC (“the SoC Application”). On 17 April 2025 I allowed that Application by a second case management decision and issued Directions to HMRC (together, “the Second Decision”).[4]On 30 April 2025, on behalf of HMRC, Mr Joshua Carey and Mr Sam Way, both of Counsel, applied for permission to appeal against the First and Second Decisions (“the PTA Application”). This is my decision refusing the PTA Application.

Publication of this decision

[5]PTA applications are rarely made after case management decisions, at least in part because of the related case law, see §33. The vast majority of PTA applications relate to substantive decisions which are already in the public domain. In contrast, most case management decisions are not published because they are of interest only to the parties and relate to the steps taken by the Tribunal as it seeks to move an appeal towards a hearing of the substantive dispute. The First and Second Decisions were not published.[6]However, given the facts of this case, the grounds set out in the PTA Application and the possibility that HMRC will renew the application by applying to the Upper Tribunal (“UT”) against two unpublished case management decisions, I decided it was in the interests of justice to publish this PTA Decision, and incorporate within it the First and Second Decisions in relation to which HMRC has sought permission to appeal.[7]That approach meets the requirements of open justice as set out in Dring v Cape Intermediate Holdings Ltd [2019] UKSC 38 at [2], where the Supreme Court approved the following passage from Toulson LJ’s judgment in R (Guardian News and Media Ltd) v City of Westminster Magistrates' Court [2013] QB 618:
“Open justice. The words express a principle at the heart of our system of justice and vital to the rule of law. The rule of law is a fine concept but fine words butter no parsnips. How is the rule of law itself to be policed? It is an age old question. Quis custodiet ipsos custodes—who will guard the guards themselves? In a democracy, where power depends on the consent of the people governed, the answer must lie in the transparency of the legal process. Open justice lets in the light and allows the public to scrutinise the workings of the law, for better or for worse.”

The Salaried Member Rules

[8]Finance Act 2014 introduced new provisions relating to salaried members of limited liability partnerships (“LLPs”) known as the Salaried Member Rules (“SMR”). They are set out as ss 863A-863G of the Income Tax (Trading and Other Income) Act 2005 (“ITTOIA”). Their purpose is to tax as employees, those members of LLPs who are providing services on terms essentially similar to employees.[9]Within those provisions, ITTOIA s 863A(1)-(2) provides that a member is to be treated as employed by the LLP where each of Conditions A-C are met in respect of that member, so if one of the Conditions is failed, the SMR do not apply. ITTOIA s 836G is a targeted anti-avoidance provision, which provides that no regard is to be had to any arrangements, the main purpose, or one of the main purposes of which is to secure that the SMR does not apply to one or more of the members.

The Compliance Check

[10]On 11 July 2016 HMRC wrote to the Appellant setting out the effects of the SMR and asking for details of the work undertaken to determine the application of the SMR to its members since those provisions came into force in 2014. That was the beginning of a long-running compliance check. The Appellant summarised the position as follows:
“During the course of the SMR Compliance Check, the Respondents have asked 81 individual questions concerning the application of the SMR and have been sent over 1,000 pages of detailed and relevant evidence. The Appellant has answered all of the Respondents’ questions relating to the SMR addressed to it prior to the notification of the present Appeal to the Tribunal. To place this in the context of the Wider Partnership Enquiries, 284 questions have been asked by HMRC and in excess of 4,000 pages of evidence has been provided to HMRC.”
[11]The Appellant provided a bundle of over 1,000 pages, which included some 850 pages of correspondence between the parties (“the Bundle”), the bulk of which consisted of information provided by the Appellant to HMRC. It included:(1) the LLP agreements, both in the original form and the updated form dated 2 April 2014;(2) the Appellant’s view of the “relevant period” within the meaning of the SMR;(3) the methodology for allocating profits;(4) a list of LLP members;(5) the profit allocated to each member and how it was allocated;(6) copies of letters sent to new members;(7) samples of profit allocations sent to members for the purposes of completing their SA returns; and(8) details of capital contributions made by members and information about any “forgivable loans”.[12]For HMRC’s part, a succession of officers appear to have had responsibility for the compliance check (six different individuals sent out letters to the Appellant), and many of HMRC’s later requests repeat those already answered previously.[13]One of the matters about which the parties corresponded concerned the fraud perpetrated by the Appellant’s former tax manager and others. The key facts were provided to me by the parties, but a helpful summary was recently set out by Dias J in Tower Bridge International Services LP v Michael Viney [2025] EWHC 1184 (KB): “[15] The BGC Group carries on business in the provision of financial services and is one of the world’s largest inter-dealer brokers. TBIS [Tower Bridge International Services]is part of the BGC Group and provides administrative back-office services to other parts of the BGC Group. Prior to his suspension and subsequent dismissal, the defendant was employed by TBIS as an “Employee Tax Advisor” responsible for preparing the tax returns for the partnership entities within the BGC Group and ensuring correct payments were made to HMRC. In this role, he was a senior employee in a position of significant trust. At the time of the fraud, the defendant’s girlfriend was Ms King, the third defendant in the main action. The defendant and Ms King are now married. [16] In late 2020, the BGC Group discovered it had been the victim of a substantial and sophisticated fraud perpetrated by the defendant and another, Xavier Alcan, the second defendant in the main claim. The fraud dated back to January 2015. The latest known fraudulent payment occurred on 17 November 2020 and thus extended over four years. In total, the defendant and Xavier Alcan stole approximately £23.5 million by diverting payments that were due to or from the BGC Group. Primarily, but not exclusively, the payments were received from, or were due to be paid to, HMRC. … [22] In his Defence dated 26 May 2021 the defendant admitted that he was liable to reimburse TBIS the sums of £14,261,584.59 and $665,217.52 in relation to misappropriated payments that he admitted receiving directly or indirectly. He also admitted numerous allegations, as set out in the Particulars of Claim, that he had made false representations (including to HMRC), doctored emails and created false documents as part of the fraud. [23] As a matter of law, the defendant was liable for the full amount of the fraud. Therefore, TBIS applied for summary judgment against him on 21 January 2022. On 3 May 2022, shortly before the hearing of TBIS’s summary judgment application, the defendant and Ms King consented to judgment in the terms set out in the Judgment Order of HHJ Walden Smith dated 3 May 2022 (“the Judgment Order”). Of significance, pursuant to the Judgment[14]On 8 March 2024, HMRC issued the Appellant with the Determinations for the tax years 2017-18 through to 2019-20; the total assessed was £96,037,893. Each Determination was headed “Notice of Regulation 80 Determination”, and continued:
“This is a notice of tax determined issued under Regulation 80 of the Income Tax (Pay As You Earn) Regulations 2003. About this determination This determination shows the amount of tax we consider is due from you as an employer. It has been made to the best of our judgement. The notice is addressed to you as required by law. The tax due under Regulation 67G of the Income Tax (Pay As You Earn) Regulations 2003 is shown below [followed by the sum for each year].”

About this determination

[15]HMRC’s covering email stated that “the accompanying determination letters are self-explanatory”. No explanation was given as to the basis of calculation or why HMRC considered that the Determinations for 2017-18 and 2018-19 met the time limit requirements in the Taxes Management Act 1970 (“TMA”). HMRC subsequently accepted that the Determinations were not “fully particularised” at the time they were issued. The Appeal[16]On 5 April 2024, PricewaterhouseCoopers (“PwC”), on behalf of the Appellant, appealed to HMRC against the Determinations. The appeal grounds were as follows:
“Although not set out in the Determinations themselves, we understand from previous correspondence that the Determinations are to collect PAYE from BGC Services Holdings LLP (“BGC”) on the basis that amounts allocated to the members of the LLP as profit allocation, fall to be taxed as if Sections 863A-863G of the Income Tax (Trading and Other Income) Act 2005 applied to those members (“the Salaried Member Rules”). We appeal on the basis that we do not consider that the Salaried Member Rules apply to any of the members set out in the schedules to the Determinations. As HMRC have not set out the basis upon which they consider that the Salaried Members Rules apply, we reserve the right to make further detailed arguments as the appeal progresses. We further appeal on the basis that even if the Salaried Member Rules were to apply, the quantum of the Determinations is also incorrect. In relation to the periods 2017/18 and 2018/19, we also appeal on the basis that BGC do not satisfy the criteria set out at section 36 Taxes Management Act 1970 and as such HMRC are not able to assess under the extended time limit. We note that the Determinations do not stipulate the basis upon which HMRC believes that they are able to assess beyond the 4 year time limit and as such BGC reserves their right to make further detailed arguments as the appeal progresses. We consider that the Determinations overcharge BGC to tax and or the amount of tax set out in the Determinations is excessive as no additional PAYE is due at all; as such, we apply for the amount set out in the Determinations to be postponed under section 55 of the Taxes Management Act 1970.”
[17]On 8 April 2025, PwC filed a Notice of Appeal to the Tribunal, which included the following grounds of appeal:
“The Appellant understands that the Determinations seek to charge them to Income Tax (PAYE) in respect of allocations of profit made to their members. The Determinations do not particularise why the Commissioners have concluded that additional Income Tax (PAYE) is chargeable against the Appellant. The Appellant appeals on the basis that the Determinations are incorrect in both fact and law and no additional amounts of Income Tax (collected via PAYE or otherwise) are due from the Appellant.”

The F&B Application

[18]On 13 February 2025, HMRC made the F&B Application, which included an application for an extension of time (“EoT”) to provide their SoC. Attached was a small bundle of documents, which included the Appellant’s grounds of appeal and recent correspondence between HMRC and PwC.[19]The F&B Application contained three grounds. Ground 1 was that:
“The Appellant should be required, as is standard where they bear the burden of proof, to clearly set out why it is that they say that the Appeal is brought and specify why they say the Respondents’ decision is not correct. It will not do to inverse the burden of proof and then allege the Respondents have failed to particularise their conclusion.”
[20]Ground 2 began by saying that “The Appellant has known or at least now knows for certain that HMRC considers that tax is due under the Salaried Member Rules”, and then said:
“The Appellant is in a far more favourable position to particularise which of the three conditions [A to C] they assert are not met in their grounds of appeal, thus narrowing the issues in the appeal.”
[21]The Ground continued by saying that “it was impossible for HMRC to respond to the Appellant’s case” and it was “highly prejudicial to HMRC that they do not know the case that they have to meet”. HMRC cited Rapid Brickwork v HMRC [2015] UKFTT 190 (“Rapid Brickwork”), an earlier decision of mine; Bluecrest v HMRC [2025] EWCA Civ 23 (“Bluecrest”), and Unicorn Shipping Ltd v HMRC [2017] UKFTT 464 (TC).[22]Ground 3 was that, although HMRC accepted that the burden was on them to justify the out of time determinations, the Appellant was nevertheless “required to say why they consider the determination to be out of time” (HMRC’s emphasis). The First Decision[23]On 5 March 2025, I issued the First Decision refusing the F&B Application and the EoT application. As the PTA Application relates only to the former, I have not set out details of my reasons for refusing the EoT application.[24]The reasons given in the First Decision were as set out below (using the original text from that case management decision) with minor typographical amendments. The case law[25]Under the heading “the case law”, I said this:
“The circumstances here are entirely different from those in the case law to which HMRC has made reference. In Rapid Brickwork[2015] UKFTT 190there were two appeals. In relation to the first,as I said at [23] of that judgment: “HMRC issued a closely typed letter, running to over six pages with two appendices. The letter set out the detailed reasons for the assessment under the headings “Remuneration Trust” and “Factoring Scheme”.”
In relation to the second appeal in Rapid Brickwork, HMRC had sent the company “a detailed analysis of the points at issue, being the “remuneration trust” and the “factoring scheme”, see [39] of the judgment. In response, Rapid Brickwork’s grounds of appeal merely said that “the company's arguments ‘are well documented throughout more than six years of correspondence…”; Rapid Brickwork also denied it had been told “the basis of the liability”, see [28] and [40]. I held that those replies were “manifestly inadequate” responses to HMRC’s detailed reasoned decisions. Here, it is HMRC that has not explained the reasons for its assessments, so the position is very different. In Bluecrest v HMRC [2025] EWCA Civ 23, the Court of Appeal decided the case on the basis of a point which had not previously been in dispute between the parties, see [95] of that judgment. The Court then had to deal with the procedural issue, that “in a complex tax appeal to the FTT, the issues between the parties are defined by their respective statements of case” (or, in most cases, by the appellant’s grounds of appeal and HMRC’s Statement of Case). The Court held that it could (and should) nevertheless expand the issues to encompass the meaning of Condition B, and also held that the appellant was not thereby prejudiced, because it had the burden of proof and could have taken the point had it so wished (see [96] and [108]). There is no parallel with this case, because the appellant in Bluecrest was well aware of the reasons why HMRC had issued the Determinations, see the FTT’s substantive decision published under reference [2022] UKFTT 204 (TC) and the earlier closure notice application, published under [2014] UKFTT 644 (TC).” “HMRC issued a closely typed letter, running to over six pages with two appendices. The letter set out the detailed reasons for the assessment under the headings “Remuneration Trust” and “Factoring Scheme”.”

Schedule 36

[26]Under the heading “Schedule 36”, I said this:
“HMRC have statutory powers to obtain information under FA 2008, Sch 36; these were deployed on 24 January 2024, and complied with in March and October 2024. There is no suggestion in the [F&B] Application that the Appellant did not provide the information required, but HMRC do not explain why, despite that compliance, it is seeking F&B particulars before filing and serving its Statement of Case.”

Duty to give reasons and Reg 80

[27]Under the heading “Duty to give reasons”, I said:
“A failure to give reasons can be a breach of HMRC’s public law duty. In HMRC v Bupa Purchasing [2007] EWCA Civ 542 (“Bupa Purchasing”), Arden LJ, giving the only judgment with which Auld and May LJJ both agreed, said at [31] that the Commissioners “accept that there have to be reasons as a matter of public law, and that they would be subject to judicial review if reasons were not given”
. At [44] she recorded:
“It is common ground that as a matter of public law the Commissioners must provide the basis on which they make an assessment. In other words, they must supplement the assessment with a notification of the reasons. But this duty is grounded in public law, and not in the statute.”
She also considered why there was no requirement in the relevant statute for HMRC to give reasons (the statutory provision was VATA s 73). She said at [46]:
“VATA makes no reference to the obligations of the Commissioners under public law to give reasons as such for an assessment under s 73(1). There may be good reasons for this. First, it is unnecessary for Parliament to set out a duty grounded in public law. Secondly, to set it out in the statute might well preclude the courts from developing it further. Thirdly, if it is included in a statute the taxpayer may obtain additional remedies over and above those to which he is entitled under public law. In other words, there may well be good reasons why Parliament should not wish to put the public law duties of the Commissioners into s 73(1).”
Relevantly, s 73(1) requires that any assessment made by HMRC be ‘to the best of their judgement’; the position is the same in relation to assessments under Reg 80 of the PAYE Regs.” “It is common ground that as a matter of public law the Commissioners must provide the basis on which they make an assessment. In other words, they must supplement the assessment with a notification of the reasons. But this duty is grounded in public law, and not in the statute.” “VATA makes no reference to the obligations of the Commissioners under public law to give reasons as such for an assessment under s 73(1). There may be good reasons for this. First, it is unnecessary for Parliament to set out a duty grounded in public law. Secondly, to set it out in the statute might well preclude the courts from developing it further. Thirdly, if it is included in a statute the taxpayer may obtain additional remedies over and above those to which he is entitled under public law. In other words, there may well be good reasons why Parliament should not wish to put the public law duties of the Commissioners into s 73(1).”

The Tribunal Rules

[28]Under the heading “the Tribunal Rules”, I said:
“The Appellant filed its grounds of appeal in accordance with Rule 20 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the Tribunal Rules). The grounds were put forward on the basis of the information available to the Appellant, which was not derived from the Determinations or a covering letter. The Appellant did all it could. There is thus no basis for the Tribunal to direct that the Appellant provide F&B particulars. Rule 25 headed “Respondent’s Statement of Case”, and so far as relevant, reads (emphasis added): “A respondent must send or deliver a statement of case to the Tribunal, the appellant and any other respondent so that it is received— (a)-(b) ,,, (c) in a Standard or Complex case…within 60 days after the Tribunal sent the notice of appeal or a copy of the application notice or notice of reference. (2) A statement of case must— (a) in an appeal, state the legislative provision under which the decision under appeal was made; and (b) set out the respondent's position in relation to the case.”
Thus, once the Appellant has satisfied Rule 20, HMRC “must” set out its position.” “A respondent must send or deliver a statement of case to the Tribunal, the appellant and any other respondent so that it is received— (a)-(b) ,,, (c) in a Standard or Complex case…within 60 days after the Tribunal sent the notice of appeal or a copy of the application notice or notice of reference. (2) A statement of case must— (a) in an appeal, state the legislative provision under which the decision under appeal was made; and (b) set out the respondent's position in relation to the case.”

Overall conclusion

[29]I ended the First Decision with the following conclusion:
“HMRC are required to give reasons for their decisions, as a matter of public law. It is thus not sufficient for HMRC to say, as they now do, that once they have made an assessment, the burden rests on the Appellant, and it is then the Appellant which must provide F&B particulars in relation to the application of the Salaried Member Rules. To use colloquial language, HMRC have made a broad brush decision, and are now asking the Tribunal to assist them in requiring the Appellant to colour in the detail.

(b) ”

The PTA application in relation to the First Decision

[30]Having received the PTA Application, I first considered in accordance with Rule 40 of the Tribunal Rules whether to review the First Decision, but decided not to undertake a review as I was not satisfied that it contained an error of law.[31]I then considered the first part of the PTA Application, made under Rule 39 of the Tribunal Rules. It is only possible to appeal to the Upper Tribunal if:(1) there is an error of law in the Decision; and(2) one or more grounds of appeal give an applicant a reasonable prospect of succeeding before the Upper Tribunal.[32]For the reasons set out below, I find that there is no error of law in the First Decision and none of the grounds of appeal gives HMRC a reasonable prospect of success.

The case law

[33]The approach to appealing case management decisions was summarised by Sales J (as he then was) in HMRC v Ingenious Games LLP [2014] UKUT 62 (TCC), [2014] STC 1416 at [56] and approved at [52] of the subsequent Ingenious Games judgment of Henderson J (as he then was), published under reference [2015] UKUT 0105 (TCC):
“The Upper Tribunal should not interfere with case management decisions of the FTT when it has applied the correct principles and has taken into account matters which should be taken into account and left out of account matterswhich are irrelevant, unless the Upper Tribunal is satisfied that the decision is so plainly wrong that it must be regarded as outside the generous ambit of discretion entrusted to the FTT: Fattal v Walbrook Trustees (Jersey) Ltd [2008] EWCA Civ 427 at [33], [2008] All ER (D) 109 (May) at [33]; Revenue and Customs Comrs v Atlantic Electronics Ltd [2013] EWCA Civ 651 at [18], [2013] STC 1632 at [18]. The Upper Tribunal should exercise extreme caution before allowing appeals from the FTT on case management decisions: Goldman Sachs International v Revenue and Customs Comrs … [2009] UKUT 290 (TCC) at [23] – [24], [2010] STC 763 at [23] – [24].”
[34]Similar statements have been made in subsequent judgments; for example in Fairford Group plc v HMRC [2014] UKUT 329 (TCC) (“Fairford”) at [28], the UT said:
“The right to appeal derives from s 11 of the Tribunals, Courts and Enforcement Act 2007, and is confined to a point of law. The Upper Tribunal should only interfere if it concludes that a decision is wrong in law or, to the extent that the FTT exercised a discretion, in doing so it failed to act reasonably and in a judicial way, see Mobile Export 365 Ltd and another v HMRC [2009] EWHC 797 (Ch) [2007] STC 1794 Sir Andrew Park at [13] and CCE v Young [1993] STC 394 at 397, Richards J. The FTT is conferred with a broad discretion in making case management decisions and this impacts on the degree of critical scrutiny which the Upper Tribunal will bring to bear.”

The Grounds of the PTA Application

[35]In so far as it related to the First Decision, the PTA Application put forward a number of different grounds; these were not numbered but for ease of reference I have added numbers. Many of the points are similar but I have dealt with them individually.

Ground 1: Rule 20

[36]HMRC submitted that the Tribunal had “failed to consider” whether Appellant had not complied with its obligation under Rule 20(2)(f) to set out “the grounds for making its appeal”. Plainly, I did consider whether the Appellant had complied with that Rule, see the text at §28 above, and found that it had done so.[37]HMRC supported their submission by referring to various judgments, including Bluecrest and Allpay Ltd v HMRC [2018] UKFTT 273. The latter said that an Appellant must provide sufficient detail in its grounds of appeal to:
“give the party opposite sufficient notice of the case which is being made against him; what is important is that the pleading should make clear the general nature of the case of the pleader; pleadings are critical to identify the issues and extent of the dispute between the parties.”
[38]That is of course correct: the same approach formed the basis of my decision in Rapid Brickwork on which HMRC relied when making the F&B Application. However, that normal position is predicated on HMRC having first made a reasoned decision against which the appellant has appealed.[39]The position is different where, as here, HMRC have given no reasons at all for their decisions. In that situation, the Appellant can only do its best on the basis of what HMRC has provided, and that is what has happened in this case. There was no error of law in my finding that the Appellant had satisfied the requirements of Rule 20.

Ground 2: duty to give reasons

[40]HMRC also submitted that the First Decision was “founded on” HMRC’s public law obligations, and that (my emphasis) “these public law duties do not apply in the context of the detailed procedural rules applicable to the institution of proceedings before the First-tier Tribunal”, and I had thus made an error of law.[41]There was no error of law. The Decision was not “founded on” HMRC’s failure to comply with its public law obligations, but on the Appellant’s compliance with Rule 20. However, that compliance had to be understood against the factual background of the unreasoned Determinations issued by HMRC and their failure to comply with their public law obligations.[42]HMRC’s assertion that in the context of the Tribunal Rules, their “public law duties do not apply” (my emphasis) is incorrect. Instead, as Arden LJ said in Bupa Purchasing, those duties exist whether or not they are set out in the particular legislative provision. Just as the duties did not need to be referred to in VATA s 73, which was considered in Bupa Purchasing they similarly do not need to be referred to in the Tribunal Rules (which are secondary legislation), in order to be binding on HMRC.

Ground 3: burden of proof

[43]HMRC’s third ground is that the First Decision contained an error of law because I failed properly to take into account that the burden of proof is on the Appellant in relation to all except the out-of-time issue.[44]It is not an error of law to hold, as I did in the First Decision, that where HMRC have failed to give reasons, they cannot simply rely on the burden of proof and require the Appellant to provide F&B particulars to “colour in the detail” of HMRC’s own decision.[45]Moreover, as I pointed out in that Decision, determinations issued under Reg 80 must be “to the best of [HMRC’s] judgement”. In Kingsley Douglas v HMRC [2021] UKUT 0163 (TCC) at [6], the UT agreed that the burden of showing that this was the case rests on HMRC, in other words, it is for HMRC to show they have “fairly consider[ed] all material placed before them and, on that material, come to a decision which is one which is reasonable and not arbitrary as to the amount of tax which is due”, see Van Boeckel v C&E Commrs [1981] STC 290. It is only when they have done so that “the burden passes to the taxpayer to establish on the balance of probabilities that the assessment is excessive”.

Ground 4: positive case

[46]HMRC’s fourth ground is that I failed to properly to take into account the Appellant’s statement in its Grounds of Appeal that it had appealed on the basis that “the Determinations are incorrect in both fact and law”. HMRC submitted that this statement constituted “a positive case”, and in reliance on Fairford at [48], went on to say that the Appellant therefore had an obligation to “set out that case” and “disclose [its] hand in advance”.[47]Again, the position in Fairford was very different. In that case, HMRC had provided the appellants with a detailed decision and served witness statements, see [33] and [11] of that judgment. Here it is HMRC which have failed to disclose their hand: the Determinations contained no reasons, and the Appellants have merely guessed at the reasons by considering HMRC’s previous correspondence. There is again no error of law. Ground 5: case management of

The Appeal

[48]The fifth ground is that I failed to take into account that the details of the Appellant’s case are “foundational to the proper case management of the appeal” and the failure to provide those details meant that the issues in the appeal are entirely undefined”.[49]Those observations would be correct in the normal case, where HMRC have issued a reasoned decision. But that is not what happened here. The case management challenges of this appeal have not been caused by the Appellant, but by HMRC’s failure to explain the legal and factual basis for their decisions that the Appellant is liable to tax of some £96m. Again, there is no error of law.

Ground 6: 4Site

[50]The sixth ground was that the First Decision contained an error of law because:
“The Tribunal was required to consider whether ‘the statement of case (taken together with the witness statements) enable the Appellant in this case to know the case it has to meet?’ (per 4Site Services London Ltd and Ors v HMRC [2024] UKFTT 143 [“4Site”] at para 34).”
[51]It was not clear to me what point HMRC were making in this passage, as the F&B Application was made before the Statement of Case and witness statements had been filed. However, I assumed HMRC meant me to read the passage as a reference to a requirement that, in deciding the F&B Application, I was required to consider whether the grounds of appeal enabled HMRC to know the case they had to meet (rather than that the SoC and witness statements enabled the Appellant to know the case it had to meet).[52]Even on that assumption, there is no parallel between the position in 4Site and that of the Appellant. In 4Site, HMRC had first set out the reasons for their decision and the evidence on which it was based. Here, HMRC have provided no reasons for the Determinations.

Ground 7

[53]A further ground in the PTA Application is that I made an error of law by not following the approach in CPR 18. That Rule applies to court proceedings, and allows the court at any time to order a party to give information about any matter which is in dispute. The Tribunal has similar powers under Rule 5 of the Tribunal Rules.[54]I was unable to understand why the approach taken to the First Decision was said to be an error of law in the context of Rule 5 (or CPR 18). The issue I had to decide related to this particular Appellant’s grounds of appeal, and there was no breach of Rule 5. Overall conclusion on the PTA Application relating to

The First Decision

[55]For the reasons set out above, I made no error of law in refusing the F&B Application and none of the grounds of appeal give HMRC a reasonable prospect of success. Permission to appeal against the First Decision is therefore refused.

The Statement of case

[56]HMRC filed and served the SoC on 26 March 2025. It ran to 14 pages. The first six pages set out various legal provisions, and the next six contained HMRC’s summary of the correspondence, followed by the Appellant’s Grounds of Appeal.[57]Under the heading “HMRC’s Case” were two paragraphs about the burden of proof, followed by three paragraphs which say that the Appellant:(1) failed to provide ”the full information requested”;(2) “did not provide during the course of the enquiry evidence to suggest that any of the required conditions were failed”;(3) has “singularly failed to provide any evidence of what the SMR position is”;(4) accepted in correspondence that the SMR had been incorrectly applied; and(5) relied on the “inaccuracy of the information provided to HMRC by Michael Viney and possibly also Xavier Alcan”, when those employees had acted fraudulently and it should be inferred that the information they provided was incorrect.[58]In relation to time limits, HMRC said at [71] of the SoC that:
“It is to be inferred from the circumstances in which those assessments were made and the Appellant’s failure to provide the requested information relating to the correct application of the SMR that those assessments [sic] were deliberate, alternatively were careless.”

The SoC Application

[59]The Appellant’s SoC Application was filed and served on 2 April 2025; the Bundle referred to at §11 above was attached. The essence of the SoC Application was contained in the following passage:
“The Respondents have still failed: (a) to particularise the facts upon which they have relied; (b) how they contend that each requirement of the SMR legislation applies to the Appellant; (c) which partners the legislation is said to apply to, and (d) how the amount of the assessment has been calculated. Further, the Statement of Case also fails to properly set out the basis for their assertions of careless or deliberate behaviour despite the burden of proof resting on them (Burgess v HMRC [2015] UKUT 57).”
[60]The SoC Application continued by saying that unless HMRC provided the basis on which they had arrived at the Determinations, the Appellant would be required to prove its case:
“without knowing the case it has to meet (i.e. there will be litigation by ambush), contrary to the basic requirements of procedural fairness in connection with an assessment which amounts to nearly £100m.”
[61]The Appellant also asked that:(1) the Tribunal issue an Order requiring HMRC to provide certain information, which was set out in draft form; and(2) for HMRC to be barred from further participation in the appeal under Rule 8(1) if they failed to comply with the Order. The Second Decision[62]On 17 April 2025, I issued the Second Decision.

The law

[63]After introductory paragraphs, I began by citing the following passages from Kingston Maurward College v HMRC [2023] UKUT 00069 (“Kingston Maurward”):
“9. The starting point is Rule 25(2) of the FTT Rules which requires the statement of case must: “…(a) in any appeal, state the legislative provision under which the decision under appeal was made, and (b) set out the respondent’s position in relation to the case” 10. The interpretation of that rule was elaborated on by Judge Mosedale in Allpay Limited v. HMRC [2018] UKFTT 273 (TC). The context was an appeal where the appellant’s success in its appeal against various VAT decisions and assessments made in relation to its bill payment services depended on it falling within the VAT exemption for financial services. To fall within the exemption the appellant’s services had to: 1) be “payment services” but 2) fall outside the exclusion for “debt collection”
. The parties’ pleadings had focussed on issue 2) “debt collection”. The FTT ultimately concluded HMRC were not allowed to dispute issue 1) “payment services”, because on proper analysis HMRC had conceded that issue. However, it first considered whether the FTT had to consider whether issue 1) needed to be pleaded in order for HMRC to raise it, and in doing so analysed the requirement for HMRC to “set out [its] position”. At [14] it explained:
“The Tribunal’s rules require HMRC to set out its position in respect of a case; what that means is that HMRC should explain its position in sufficient detail to enable the appellant to properly prepare its case for hearing. Anything less may lead to injustice” 11. Judge Mosedale went on to reject HMRC’s argument in that case that HMRC did not have to plead anything as burden of proof was on the appellant on the basis of the following reasoning (at [18]): “ And there is no logic or justice in HMRC’s suggestion in any event. 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.” 12. She also extracted the following proposition from the Upper Tribunal’s decision in Fairford Group plc v HMRC [2014] UKUT 329 (TCC): “[20] … 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.” 13. We agree with the above propositions, as do the parties. We would add that how those propositions fall to be applied, and the particular level of detail which will be sufficient to enable an appellant to properly prepare, will depend on the circumstances of the particular appeal.” 10. The interpretation of that rule was elaborated on by Judge Mosedale in Allpay Limited v. HMRC [2018] UKFTT 273 (TC).” “…(a) in any appeal, state the legislative provision under which the decision under appeal was made, and (b) set out the respondent’s position in relation to the case” “The Tribunal’s rules require HMRC to set out its position in respect of a case; what that means is that HMRC should explain its position in sufficient detail to enable the appellant to properly prepare its case for hearing. Anything less may lead to injustice” “ And there is no logic or justice in HMRC’s suggestion in any event. 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.” “[20] … 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.”

HMRC’s case

[64]I then considered each of HMRC’s reasons for issuing the Determinations, as set out in the paragraphs of the SoC under the heading “HMRC’s case”, see §57.

Failure to provide full information?

[65]In relation to HMRC’s statement that the Appellant had failed to provide “the full information requested”, I said I had considered the correspondence between the parties, and I referred to that set out at §11 of this PTA Decision. I went on to cite the Appellant’s summary of the position, again already set out at §10, namely that:(1) In the course of the SMR compliance check, HMRC had asked 81 individual questions.(2) The Appellant sent HMRC over 1,000 pages of detailed and relevant evidence.(3) The Appellant had answered all the questions asked of it, before the appeal was made to the Tribunal.(4) In the context of the wider Partnership enquiries, 284 questions have been asked by HMRC and in excess of 4,000 pages of evidence has been provide by the Appellant to HMRC.[66]I then said that although I had “not been provided with all the correspondence between the parties, it is clear from the foregoing that this not a case where HMRC have not been provided with full information”.

Failure to provide “any evidence of what the SMR position is”

[67]In relation to this part of HMRC’s “case”, I said: “[16] My understanding from having considered the papers in the Bundle, is that having taken advice from Tax Counsel and Ernst & Young (now EY), the Appellant concluded that the SMR did not apply because:(1) the LLP Members failed Condition A (see page 200ff of the Bundle, and in particular para 16 at page 202); and(2) for 2018-19 it was expected that Condition C would also be failed. [17] Those conclusions were retested and confirmed after the discovery of the fraud, albeit the Appellant made a without prejudice offer in relation to 11 LLP members on a hindsight basis (which is not how the SMR are required to be applied). [18] The Appellant also provided further information, in particular: (1) its letter of 16 September 2022 (page 670 of the Bundle) and Appendices 5 and 6 to that letter; and (2) its letter of 28 April 2023 (page 786) and the related Appendix.” (1) the LLP Members failed Condition A (see page 200ff of the Bundle, and in particular para 16 at page 202); and (2) for 2018-19 it was expected that Condition C would also be failed. (1) its letter of 16 September 2022 (page 670 of the Bundle) and Appendices 5 and 6 to that letter; and[68]I concluded that I was “unable to understand why HMRC have said in the SoC that the Appellant has failed to provide “any evidence of what the SMR position is”.

Acceptance in correspondence that the SMR had been incorrectly applied?

[69]In relation to HMRC’s third reason, I said I had checked the correspondence and identified that after the fraud had been discovered, the Appellant had retested and confirmed the SMR position, although it had made a without prejudice offer using hindsight in relation to eleven LLP members.[70]However, I went on to say:(1) that offer did not mean the original SMR position was incorrect, because SMR is required to be tested on a forward looking basis; and(2) the Appellant’s careful review and subsequent disclosure to HMRC does not provide a basis for dismissing as unreliable all the information it had provided.

Reliance on the fraud?

[71]Under this heading I said I was “unable to understand the basis on which HMRC have decided that because Mr Viney and Mr Alcan have been charged with fraud, that the information about the SMRs for the LLP members is incorrect and unreliable, given that the Appellant and connected companies were the main victims of the fraud”. I added that it was “also unclear why HMRC appear not to have accepted the Appellant’s detailed analysis of the tax-related consequences of the fraud”.

Out of time Determinations

[72]HMRC said in the SoC that the Appellant’s deliberate or careless behaviour could be inferred from “the circumstances” in which the Determinations were made and from “the Appellant’s failure to provide the requested information”.[73]I said that, despite having the burden of proof:(1) HMRC have not specified the “circumstances” to which they are referring, and(2) the Appellant has provided HMRC with information.

Overall conclusion

[74]I ended the Second Decision by concluding that HMRC had failed to set out “key parts of their legal and factual case” and that further particularisation was required, and referred to Kingston Maurward and Allpay.

Directions

[75]Having considered the draft Order put forward by the Appellant, together with the information in the Bundle and that in the SoC, I directed that HMRC explain:(1) why they consider some or all of LLP members do not fail Condition A, and if so which members and why;(2) why they consider some or all of the LLP members do not fail Condition C, and if so, which members and why;(3) whether they consider some or all of the LLP members do not fail Condition B, and if so, which members and why;(4) the basis on which they calculated the amounts assessed in the Determinations;(5) whether they had considered the interaction with the tax paid by LLP members via self-assessment; and(6) by reference to specific facts, the basis on which they decided that the Appellant acted either carelessly or deliberately in relation to 2017-18 and 2018-19.[76]I then said that when HMRC had complied with these Directions, I would consider whether a case management hearing was required further to clarify the position. I did not link compliance with the Directions to a barring order, as the Appellant had requested.

PTA Application in relation to the Second Decision

[77]Having received the PTA Application in relation to the Second Decision, I first considered in accordance with Rule 40 of the Tribunal Rules whether to review that Decision, but decided not to undertake a review as I was not satisfied that it contained an error of law. I then considered the PTA Application, made under Rule 39 of the Tribunal Rules.[78]As noted above, it is only possible to appeal to the Upper Tribunal if:(1) there is an error of law in the Decision; and(2) one or more grounds of appeal give an applicant a reasonable prospect of succeeding before the Upper Tribunal.[79]For the reasons set out below, I find that there is no error of law in the Second Decision and none of the grounds of appeal gives HMRC a reasonable prospect of success.

A bare assertion?

[80]The PTA Application started from the position that, because the Appellant said in its Grounds of Appeal that the Determinations were “incorrect in both fact and law”, this was the case to which HMRC had to respond, and they had complied with that obligation.[81]I disagree. As the UT said in Kingston Maurward at [13], how HMRC is required to comply with its obligation under Rule 25 and “the particular level of detail which will be sufficient to enable an appellant to properly prepare, will depend on the circumstances of the particular appeal”. As already set out earlier in this PTA Decision, the Appellant was unable to provide more detailed grounds because HMRC had given no reasons at all for the Determinations.[82]Moreover, HMRC assume that the starting point for a tax appeal is the grounds submitted by an appellant, read in isolation from the decision being appealed. That is not correct, as can be seen from the TMA, from the case law and from HMRC’s duty to give reasons. I explain the position in the next following paragraphs

The TMA

[83]The Appellant appealed to the Tribunal under TMA s 49D, which provides that “if the appellant notifies the appeal to the tribunal, the tribunal is to decide the matter in question”, and TMA s 49I defines “the matter in question” as “the matter to which the appeal relates”. The appeal plainly relates to the decision which has been made. It is not possible to consider the grounds of appeal without also taking into account the decision.

The case law

[84]In King v Walden [2001] TC 822, Jacob J said:

The case law

“[57]…Assessments to tax are, in the first instance, made by an inspector (see s.29 of the TMA as it stood before amendment in 1994, now s.30A). If the taxpayer is unhappy, he may appeal within 30 days. If he does not appeal, the assessment stands. So the taxpayer's only method of challenge to an assessment is by way of ‘appeal’. Thus an appeal is essentially a defensive step, rather than offensive. [58] In these circumstances I think it is artificial to say that proceedings areinstigated by the taxpayer. It is the assessments which instigate theproceedings which come before the Commissioners, not the appeal itself.”
[85]In KSM Henryk Zeman Sp Zoo v HMRC [2021] UKUT 0182 (TCC), a judgment of Adam Johnson J and

Judge Hellier, the UT similarly said at [37]:

“Although technically the taxpayer is a claimant in the proceedings ratherthan a defendant, in substance he is defending part of an enforcement actionby HMRC.”
[86]In other words, an appellant’s grounds of appeal are a response to a decision made by HMRC.

Duty to give reasons

[87]As Arden LJ said in Bupa Purchasing, HMRC are required as a matter of public law to:
“provide the basis on which they make an assessment. In other words, they must supplement the assessment with a notification of the reasons”
.

Discerning the Appellant’s case?

[88]The PTA Application also refers to the part of the Second Decision set out at §73 above. HMRC submit that in those passages I had “discerned the Appellant’s case from documents outside of the Grounds of Appeal” and that as the Appellant had not referred to its understanding of the SMR position in its grounds of appeal, it was an error of law for the Tribunal to “extract” the Appellant’s case.[89]That submission misunderstands and mischaracterises that part of the Second Decision. The passages relate to the statement in the SoC that the Appellant had “failed to provide any evidence of what the SMR position is”.[90]In considering that statement, I first set out my understanding of the evidence already provided to HMRC as to what the Appellant considered the SMR position to be, and concluded by saying I was unable to understand why HMRC had said that the Appellant had not provided that evidence. Those passages and they do not “discern” or “extract” the Appellant’s case, and there is no error of law.

The Directions

[91]The PTA Application then appears to link the submissions referred to above with the Directions issued at the end of the Second Decision, saying it was an error of law “to require HMRC to respond to such arguments raised of the Tribunal’s own volition”.[92]The Tribunal is required by the Tribunal Rules to seek to give effect to the overriding objective when it exercises any power under those Rules, including requiring a party to provide “documents, information or submissions to the Tribunal or a party”, see Rules 2(3) and 5(3)(d). It is plain that until HMRC explain the basis on which it decided that the Appellant was liable to pay £96m in PAYE (or say that they are unable to explain that basis), neither the Appellant nor the Tribunal can move forwards towards a hearing. The purpose of the Directions was to outline the information which appeared to me to be of most relevance when case managing this appeal.

Barring Order

[93]The PTA Application also submits that it was an error of law for me to decide the SoC Application on the papers, because the SoC Application included a request for a debarring order.[94]The Rules allow, but do not require, case management issues to be decided at a hearing, see Rule 5(3)(f). It is only where the decision is one which “disposes of the proceedings, or a part of the proceedings” that a hearing is required, see Rule 29(1).[95]The Tribunal receives many applications for HMRC to be barred from the proceedings, but rarely makes such an order. If a hearing was required whenever an appellant asked the Tribunal to bar HMRC, there would be numerous unnecessary hearings, with consequential delays to the progress of the appeals.[96]The position is likely to be different when a judge considers that HMRC’s conduct is such that a barring order may be required, but that was not the position in this case: I was clear that the next step was to issue the Directions: there was no need for a barring order. The Appellant’s inclusion of that request in the SoC Application does not mean that I was required to hold a hearing. There was no error of law.

Other submissions

[97]HMRC also submit that that “any reasonable Tribunal would have considered” that the SoC Application should be determined at a hearing, and that if the Tribunal was going to decide it on the papers, the Tribunal should have advised the parties in advance and given them the opportunity to object or make further submissions.[98]In deciding the SoC Application, I took into account the delays which have already occurred; the key points were summarised in the First Decision and it was unnecessary to repeat them in the Second Decision, but they were as follows:(1) The Compliance Check began in July 2016, nearly nine years ago, and related to the periods after the introduction of the SMR in 2014, over ten years ago.(2) The Determinations covered the years 2017-18 through to 2019-20, so those periods began eight years ago.(3) They were issued on 8 March 2024, over a year before either Decision was made.(4) The Appellant filed its appeal with the Tribunal on 8 April 2024. The Tribunal Rules require that HMRC file and serve a SoC within 60 days, see Rule 25(1)(c).(5) After the Appellant filed its Notice of Appeal, HMRC applied for a stay before filing its SoC; the Appellant consented, and the stay was granted.(6) On 13 February 2025, the Appellant refused to agree to a further stay suggested by HMRC.(7) HMRC filed and served their SoC on 26 March 2025; this was thus around ten months later than the date which would normally be required under the Tribunal Rules.[99]I also took into account that the SoC Application was a response to the SoC, and the SoC turn followed the First Decision; in other words, it had already been made clear to HMRC by the First Decision that the SoC needed to set out their reasons for issuing the Determinations. However, it was plain from the wording of the SoC that HMRC had failed to do so. Thus, the Second Decision did not relate to a new issue, and the SoC Application was not a free-standing application.[100]A relevant factor when considering the procedural fairness of the Second Decision is that the parties were told that once HMRC had complied, I would “consider whether a case management hearing was required further to clarify the position”. It was plainly premature to hold such a hearing before HMRC had explained the basis on which they issued the Determinations.

Other

[101]The PTA Application also includes a further ground which was cross-referenced to internal paragraph 8, but that cross-reference was erroneous. I thought the ground might instead reference to 4site,and to applications made under CPR 18, but if so, for the reasons given earlier, neither assists HMRC. Overall conclusion on PTA of

The Second Decision

[102]For the reasons set out above, I refuse permission to appeal against the Second Decision.

Next steps

[103]HMRC also applied at the end of the PTA Application for the case to be stayed “pending determination of this appeal”. There was a delay of 19 days before the PTA Application was passed to me by the Tribunal Service, and further time passed before I was able to consider and decide that Application. I thus extend HMRC’s compliance date for the Directions to 35 days from the date of issue of this PTA Decision.[104]I considered whether to stay the appeal further, pending any future onward PTA application to the UT, but decided that it would not be in the interests of justice to do so. As explained above, there have already been significant delays in this case, and waiting for the UT to determine a PTA application relating to these two case management decisions may take many months, given the workload of that Tribunal. In addition, it was no part of the PTA Application that any of the Directions would not assist the parties and the Tribunal to move the case towards a hearing.

Onward appeal rights

[105]If HMRC are dissatisfied with the outcome of their PTA Application, they have a right to apply to the Upper Tribunal for permission to appeal.[106]Such an application must be made in writing to the Upper Tribunal at 5th Floor, Rolls Building, 7 Rolls Building, Fetter Lane, London EC4A 1NL no later than one month after the date of this Notice and must include the information explained in the enclosed guidance booklet Appealing to the Upper Tribunal (Tax and Chancery Chamber). RELEASE DATE: 09th JUNE 2025

Order

(1) By paragraphs 1 to 8, it was declared that numerous properties and assets in the name of the defendant and/or Ms King were held on trust for TBIS, and that those assets were to be sold and the proceeds paid to TBIS in satisfaction of the judgment debt;(2) By paragraph 14, the defendant agreed to pay TBIS the sum of £23,650,010.67 (with credit to be given for sums realised on accounts and inquiries);…” (1) By paragraphs 1 to 8, it was declared that numerous properties and assets in the name of the defendant and/or Ms King were held on trust for TBIS, and that those assets were to be sold and the proceeds paid to TBIS in satisfaction of the judgment debt; (2) By paragraph 14, the defendant agreed to pay TBIS the sum of £23,650,010.67 (with credit to be given for sums realised on accounts and inquiries);…” The Determinations

Cited in 2 later judgments