CIS-Pay Limited v The Commissioners for HMRC [2025] UKFTT 751 (TC)

[2025] UKFTT 00751 (TC)Case No TC09558
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 3 April 2025Date Judgment date: 19 May 2025
By remote video hearing
Appeal reference: TC/2023/00432
PROCEDURE – Human Rights – Right to a fair trial - Application for disclosure – Penalties – Does Article 6 apply to all aspects of penalty? Yes – Should disclosure be directed? Yes – application granted in principle
Before
TRIBUNAL JUDGE MALCOLM FROST
Between
CIS-PAY LIMITEDAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentDavid Bedenham KC, instructed by Jurit LLP for AppellantBen Hayhurst of counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs for RespondentsDECISION

Introduction

[1]This decision relates to an application by the Appellant for disclosure by HMRC.[2]The Appellant seeks a direction that HMRC disclose all material within their possession that might assist the Appellant’s case or undermine HMRC’s case. This is sometimes referred to as “CPR disclosure with a Namli qualification”, following Serious Organised Crime Agency v Namli [2012] Lloyd’s Rep FC 139, CA.[3]Subject to a reservation as to the exact form of direction (discussed below), I am content to grant the application.

Background

[4]The wider appeals in this case relate to HMRC’s decision to deny input tax totalling £8,192,686 on supplies HMRC say were connected with a mini umbrella company arrangement.[5]The denial is in accordance with the ruling of the European Court of Justice in the joined cases of Axel Kittel v Belgian State and Belgian State v Recolta Recycling SPRL (C-439/04 and C440/04), in which the court stated that where a taxable person knew or should have known that it was participating in a transaction connected with fraudulent evasion of VAT, that taxable person’s right to deduct input tax should be refused. The substantive appeal in relation to the denial of input tax deduction is referred to in this decision as the “Kittel Appeal”.[6]HMRC has also assessed the Appellant to a penalty of £2,457,805 under section 69C Value Added Tax Act 1994 (“VATA”). The appeal in relation to the penalty is referred to as the “Penalty Appeal”.[7]It is common ground between the parties that the Kittel Appeal would normally be subject to a disclosure process based upon the regime provided for in Rule 27 of the Tribunal Rules (The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, as amended). That is to say, HMRC would only be required to disclose the documents upon which they intended to rely.[8]It is also common ground between the parties that penalties under s 69C VATA are criminal charges for the purposes of Article 6 of the European Convention on Human Rights (“Article 6”).

Legislation

[9]Article 6 provides:
“ARTICLE 6 - Right to a fair trial 1. In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be pronounced publicly but the press and public may be excluded from all or part of the trial in the interests of morals, public order or national security in a democratic society, where the interests of juveniles or the protection of the private life of the parties so require, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice. 2. Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law. 3. Everyone charged with a criminal offence has the following minimum rights: (a) to be informed promptly, in a language which he understands and in detail, of the nature and cause of the accusation against him; (b) to have adequate time and facilities for the preparation of his defence; (c) to defend himself in person or through legal assistance of his own choosing or, if he has not sufficient means to pay for legal assistance, to be given it free when the interests of justice so require; (d) to examine or have examined witnesses against him and to obtain the attendance and examination of witnesses on his behalf under the same conditions as witnesses against him; (e) to have the free assistance of an interpreter if he cannot understand or speak the language used in court.” (a) to be informed promptly, in a language which he understands and in detail, of the nature and cause of the accusation against him; (b) to have adequate time and facilities for the preparation of his defence; (c) to defend himself in person or through legal assistance of his own choosing or, if he has not sufficient means to pay for legal assistance, to be given it free when the interests of justice so require; (d) to examine or have examined witnesses against him and to obtain the attendance and examination of witnesses on his behalf under the same conditions as witnesses against him; (e) to have the free assistance of an interpreter if he cannot understand or speak the language used in court.”
[10]VATA s 69C provides (so far as is relevant): “69C Transactions connected with VAT fraud(1) A person (T) is liable to a penalty where— (a) T has entered into a transaction involving the making of a supply by or to T (“the transaction”), and (b) conditions A to C are satisfied.(2) Condition A is that the transaction was connected with the fraudulent evasion of VAT by another person (whether occurring before or after T entered into the transaction).(3) Condition B is that T knew or should have known that the transaction was connected with the fraudulent evasion of VAT by another person.(4) Condition C is that HMRC have issued a decision (“the denial decision”) in relation to the supply which— (a) prevents T from exercising or relying on a VAT right in relation to the supply, (b) is based on the facts which satisfy conditions A and B in relation to the transaction, and (c) applies a relevant principle of EU case law (whether or not in circumstances that are the same as the circumstances in which any relevant case was decided by the European Court of Justice).(5) In this section “VAT right” includes the right to deduct input tax, the right to apply a zero rate to international supplies and any other right connected with VAT in relation to a supply.(6) The relevant principles of EU case law for the purposes of this section are the principles established by the European Court of Justice in the following cases— (a) joined Cases C-439/04 and C-440/04 Axel Kittel v. Belgian State; Belgium v. Recolta Recycling (denial of right to deduct input tax), and (b) Case C-273/11 (b)Mecsek-Gabona Kft v Nemzeti Adó- és Vámhivatal Dél-dunántúli Regionális Adó Főigazgatósága (denial of right to zero rate), as developed or extended by that Court in any other cases relating to the denial or refusal of a VAT right in order to prevent abuses of the VAT system which were decided before the coming into force of section 42 of TCTA 2018.(7) The penalty payable under this section is 30% of the potential lost VAT.” (a) T has entered into a transaction involving the making of a supply by or to T (“the transaction”), and (b) conditions A to C are satisfied. (a) prevents T from exercising or relying on a VAT right in relation to the supply, (b) is based on the facts which satisfy conditions A and B in relation to the transaction, and (c) applies a relevant principle of EU case law (whether or not in circumstances that are the same as the circumstances in which any relevant case was decided by the European Court of Justice). (a) joined Cases C-439/04 and C-440/04 Axel Kittel v. Belgian State; Belgium v. Recolta Recycling (denial of right to deduct input tax), and (b) Case C-273/11 (b)Mecsek-Gabona Kft v Nemzeti Adó- és Vámhivatal Dél-dunántúli Regionális Adó Főigazgatósága (denial of right to zero rate),[11]VATA s 70 provides for a power for the penalty to be mitigated. It provides (so far as is relevant):
“70 Mitigation of penalties under sections 60, 63, 64, 67, 69A and 69C. (1) Where a person is liable to a penalty under section 60, 63, 64, 67, 69A or 69C or under paragraph 10 of Schedule 11A, the Commissioners or, on appeal, a tribunal may reduce the penalty to such amount (including nil) as they think proper. (2) In the case of a penalty reduced by the Commissioners under subsection (1) above, a tribunal, on an appeal relating to the penalty, may cancel the whole or any part of the reduction made by the Commissioners.”

Basis for application

[12]Mr Bedenham, for the Appellant, puts his argument thus:(1) Section 69C penalties are calculated at 30% of the alleged potential lost VAT (see s69C(7) VATA 1994) which in this case amounts to £2,457,805. Mr Bedenham submits that penalties of that nature are clearly criminal charges given their severity and given they are not intended to be pecuniary compensation of costs incurred by the taxpayer’s conduct but are instead intended to encourage compliance with tax obligations and to punish breaches of those obligations (see paragraphs 64-71 of Janosevic v Sweden (2004) 38 EHRR 22).(2) Where the criminal offence heading of Article 6 is engaged, the person charged (here the Appellant) must be given a fair trial. What fairness requires will depend on the circumstances of the case including the issues in dispute and the seriousness of the matter (see CF Booth v HMRC [2022] UKUT 00217 (TCC).(3) Disclosure “is not an end in itself but a means to an end, namely to ensure that the tribunal has before it all the information which the parties reasonably require the tribunal to consider in determining the appeal” (see paragraph 40 of Smart Price Midlands Limited v HMRC [2019] EWCA Civ 841).(4) In Rowe and David v the United Kingdom (16 February 2020, No 28901/95), a murder case, which Mr Bedenham accepts entails different procedural considerations, the European Court of Human Rights stated at paragraphs 60-61: “Article 6.1 requires, as indeed does English law (see paragraph 34 above), that the prosecution authorities disclose to the defence all material evidence in their possession for or against the accused [subject to competing interests such as national security, the need to protect witnesses or the need to keep secret police methods of investigation]”(5) Mr Bedenham suggests that on any view these are serious matters and the amount of money at stake underscores that seriousness. Mr Bedenham submits that it is difficult to see how the Appellant’s Article 6 rights can properly be respected if there is material in HMRC’s possession that assists the Appellant (or undermines HMRC) and yet HMRC are not obliged to disclose that material (this is made all the more unpalatable, Mr Bedenham argues, where HMRC have conducted wide ranging investigation that would likely have generated significant material of which the Appellant is otherwise unaware).

HMRC’s arguments in reply

[13]Mr Hayhurst, for HMRC, resists the Appellants application on the following basis:(1) With respect to the Kittel Appeal, Rule 27 provides the disclosure framework.(2) When a Kittel input tax denial and tax assessment are heard concurrently with a 69C VAT penalty appeal, Mr Hayhurst avers that Article 6 does not apply to the input tax denial / tax assessment component of the 69C penalty. Mr Hayhust submits that Article 6 is engaged only as regards those specific conditions that have to be fulfilled for the imposition of a penalty and which relate to the “criminal charge”.(3) Mr Hayhurst says that, in part, this is due to questions of practicality. As a practical matter, when an underlying tax liability appeal is heard together with an accompanying penalty, the tribunal determines the underlying tax liability first (which does not engage Article 6) before going on to consider the penalty (where Article 6 is engaged). Mr Hayhurst states that if HMRC are successful with respect to the question of underlying liability, that outcome as to liability ‘passports forward’ to the penalty appeal without being relitigated.(4) When faced with proceedings that contain aspects of both penalties and tax disputes, therefore, Mr Hayhurst argues that the Tribunal must thus ask itself whether it is possible to separate those parts of the proceedings which determine a “criminal charge” from those parts which do not. This argument is based upon Jussila v Finland [2007] 45 EHRR 39 at [45], which stated “[45] It is, however, not uncommon for procedures to combine the varying elements and it may not be possible to separate those parts of the proceedings which determine a “criminal charge” from those parts which do not. The Court must accordingly consider the proceedings in issue to the extent to which they determined a “criminal charge” against the applicant, although that consideration will necessarily involve the “pure” tax assessment to a certain extent.”(5) In King v United Kingdom(2) [2004] STC 911, the Grand Chamber considered the applicability of Article 6 to long-running proceedings involving both assessments and penalty determinations. The Court said (at [920h]):
“The court would note, first of all, that the procedures concerning the assessment of tax owing by the applicant fall outside the scope of art 6(1) as neither concerning the determination of a 'criminal charge' or of any of the applicant's civil rights or obligations” (6) Mr Hayhurst submits that King is thus authority for the proposition that the concurrent existence of an assessment and penalty does not bring the whole proceedings within Article 6. (7) In Omagh Minerals v HMRC [2018] UKFTT 697 the FTT considered whether the assessment and penalty proceedings should be viewed as a whole and whether the protections of Article 6 in relation to a “criminal charge” should be applied to the entire penalty proceedings including the assessment/underlying tax liability. The FTT concluded [55-64] that whilst penalty assessments are “criminal” proceedings for the purposes of Article 6, Article 6 does not necessarily apply to the whole of the proceedings if it is possible to separate those parts of the proceedings which determined a “criminal charge” from those parts which did not. (8) If it is possible to separate, Mr Hayhurst’s position is that Article 6 is engaged only as regards those conditions that have to be fulfilled for the imposition of a penalty and which relate to the “criminal charge”. (9) With respect to the schedule 69C penalty the subject of this appeal, Mr Hayhurst submits that it is possible to separate the underlying tax liability components (e.g. the matters subject to the Kittel Appeal) which do not engage Article 6 from the bespoke penalty conditions that do. (10) Mr Hayhurst also suggests that, in the case of Sintra [2024] UKUT 346 (TCC) the Upper Tribunal recently confirmed that in concurrent proceedings Article 6 does not apply to the tax liability component of a penalty. (11) The main issue in that case was slightly different, namely whether Article 6 applied in a ‘penalty alone’ scenario (where the underlying liability has not previously been determined, was not heard ‘concurrently’ with the penalty but the taxpayer challenged the underlying tax liability in the context of penalty litigation). The Upper Tribunal ruled that Article 6 did apply to the tax liability component of the penalty in that scenario. However, Mr Hayhurst informed me that HMRC have appealed this decision to the Court of Appeal, inter alia, on the basis it directly contradicts another Upper Tribunal decision on the same point. Permission to appeal has been granted and the hearing is due to take place in October 2025. (12) Mr Hayhurst submitted that, in explaining its decision on permission, the Upper Tribunal compared the “penalty alone” scenario to the “normal” scenario, namely where an underlying tax appeal is heard concurrently with a penalty appeal, thus: “in the normal case, the assessment of the underlying liability and the penalty will be determined as part of the same proceedings applying the general rules as to the burden of proof to which the decision refers.”
[14]From the above, Mr Hayhurst argues that the Tribunal ought to recognise three distinct categories of case:(1) Category 1 - Separate liability appeal and penalty appeal proceedings. Mr Hayhurst submits that where a tax liability is decided by itself, it may be an abuse of process for the taxpayer to seek to rely on Article 6 in order to relitigate the liability in subsequent separate penalty proceedings.(2) Category 2 - The underlying liability and the penalty are heard together (as in the present case). Mr Hayhurst argues that Article 6 should only apply to the penalty insofar as the same issues do not overlap with the underlying liability.(3) Category 3 - Penalty alone cases. These are cases where litigation only concerns a penalty and there has been no separate appeal as to the underlying liability. In such cases Mr Hayhurst accepts that Article 6 would apply to the underlying liability as well as the penalty.[15]Referring this approach back to the requirements for the penalty provided for in section 69C VATA, Mr Hayhurst’s approach would mean that Article 6 rights (and in this case the disclosure sought by the Appellant) would not apply to the questions of whether conditions A, B and C set out in s 69C have been met. These are matters that would be expected to be determined as a part of the Kittel Appeal. Instead, Article 6 rights would only apply to matters that solely relate to the penalty, such as the 30% calculation of the penalty, and mitigation arguments.[16]It is worth noting at this stage that Mr Bedenham argues that in any event the mitigation arguments put forward on behalf of the Appellant include matters of good faith which have considerable overlap with conditions A to C. In particular, Condition B, being whether T knew or should have known that the transaction was connected with the fraudulent evasion of VAT by another person. The argument in mitigation being that the Appellant would say that they did not have positive knowledge, and even if HMRC establish that the Appellant ‘should have known’ the Appellant would argue that there are legitimate reasons why this may not be the case. As a result, Mr Bedenham argues, the disclosure sought in respect of mitigation would cover largely the same ground as disclosure in relation to matters covered by the Kittell Appeal.[17]In addition to arguing that Article 6 only applies to limited elements of the Penalty Appeal, Mr Hayhurst argues that, even in respect of those conditions to which HMRC accept Article 6 is engaged, the Tribunal ought not to direct the disclosure sought but instead that only Rule 27 disclosure ought to be provided.[18]Mr Hayhurst’s argument on this point is that, whilst penalty assessments are regarded as criminal proceedings for the purpose of Article 6 ECHR they do not fall within the ‘hardcore’ of the criminal law and the requirements of Article 6 do not apply with their full stringency. Mr Hayhurst referred to CF Booth Ltd v HMRC [2022] UKUT 217 (TCC) (the same authority referred to by Mr Bedenham) to support the submission that what is required is a broad assessment of whether the particular charge brought against the Appellant is dealt with in a manner which provides a fair hearing when the proceedings are viewed as a whole.[19]Mr Hayhurst submits that Rule 27 disclosure would meet the required standard of fairness. His arguments are as follows:(1) First, the Application of Rule 27 disclosure does not prejudice the Appellant. Mr Hayhurst submits that it is difficult to foresee what documents there are to disclose with respect to the specific penalty conditions; many or all of the documents would be in the Appellant’s possession in any event; the Application of Rule 27 does not prohibit the Appellant from making a specific disclosure request for a document or information under Rule 5(3)(d) and this being considered on its merits.(2) Second, Mr Hayhurst said that “there is a legitimate counter balancing aim, namely that the Rules Committee be able to frame bespoke procedural rules to enable FTT proceedings to take place with timeliness, efficiency and proportionality”. Mr Hayhurst refers me to HMRC v E Buyer UK Limited [2017] EWCA 1416 (Civ) where the Court (at [27]) noted with approval that the First-tier Tribunal rejected a disclosure application stating: “Litigation in this tribunal is intended to conform to a different model from litigation in the High Court and the Rules establish the framework within which litigation in this tribunal is to be carried on.”(3) Third, impact upon the Tribunal service. Mr Hayhurst drew my attention to the Appellant’s suggestion, that any disputes about whether a document fell to be disclosed would be determined by the Tribunal. Mr Hayhurst noted that this risked causing significantly more work for the Tribunal.(4) Fourth, Mr Hayhurst referred to the numerous other protections and safeguards within the Tribunal process that allow for a fair hearing. In particular, Mr Hayhurst noted the following: the taxpayer will receive fair notice of the case against it in the form of HMRC’s Statement of Case and evidence; both parties are legally represented; the taxpayer has the right to present its evidence and to have HMRC’s witnesses cross-examined; both parties are entitled to make submissions to the FTT on both the law and the evidence; as per current practice, the taxpayer can make a specific request for disclosure (and failing that) application under Rule 5(3)(d) if they consider HMRC has relevant documentation that has not been disclosed and this will be considered by an independent tribunal on its merits; in this case, HMRC will bear the burden of proof; the taxpayer’s case will be heard before an impartial tribunal; the FTT will give a carefully considered decision having had the opportunity to assess the evidence; the Tribunal Rules governing the FTT’s procedure require the FTT to act fairly and justly in accordance with the overriding objective and; the penalties are subject to reasonable mitigations such as section 70 VATA 1994.(5) Fifth, the regulatory nature of the penalties. Mr Hayhurst submits that, although high value, the penalty in this case is still regulatory in nature and not, as a matter of domestic law, criminal. Mr Hayhurst argues that capping the penalty at 30% of the assessment figure provides for a significant reduction compared to other penalty regimes which can be set at 100%.[20]As a final point, Mr Hayhurst also suggested that the fact that the Tribunal has previously refused a request by HMRC for specific disclosure means that the present application should be refused, on the basis of a sort of ‘equality of arms’. This argument is entirely without merit as the two applications are not the same. There is no obligation on the Tribunal to grant or refuse one party’s application purely because it has previously refused a separate application by another party. I do not consider this point further.

Discussion

[21]Much of the case law relied on by HMRC relates to questions around the shifting of the burden of proof, and whether the shifted burden of proof in a penalty case ought to result in the shifting of the burden in an associated substantive appeal.[22]Mr Hayhurst took me through a number of authorities which, he suggested, provided for a complex process for separating matters with a criminal element, and dealing with various combinations of when the criminal part was mixed with another matter.[23]To my mind, this complexity appears unnecessary.[24]When it comes to the burden of proof, it must be borne in mind that the question to be answered by a Tribunal will differ depending on where the burden of proof lies. A Tribunal is perfectly capable of directing itself as to the different questions to be answered and answering them based on the evidence before it.[25]For example, it could be the case that the burden of establishing knowledge of fraud in relation to a substantive liability appeal falls on the Appellant, but the burden of establishing that same knowledge for the purposes of upholding a penalty falls on HMRC. The point is the same, but the question to be answered by the Tribunal differs according to where the burden lies.[26]In such a case, it is perfectly possible for a Tribunal to put its mind to both the questions “has HMRC discharged their burden of establishing knowledge of fraud” and “has the Appellant discharged their burden of establishing a lack of knowledge of fraud”. In most cases, where full evidence has been put before the Tribunal, the Tribunal will be able to make clear findings of primary fact and the answers to those questions would point the same way.[27]However, where there is a lack of probative evidence, the presence of the burden may result in superficially contradictory answers on the same issue. Any such contradiction is purely superficial because the Tribunal is answering different questions. Where the question differs, the answers may differ.[28]Even if I am being overly simplistic in the right approach to be taken on a wider basis, the question before me is a simple one. This application is limited to the simple question of whether this Tribunal ought to order the disclosure sought, rather than any shifting of the burden of proof. In other words, the present application does not break new legal ground and simply seeks to have the Tribunal exercise its case management powers to direct disclosure.[29]In deciding whether to exercise those powers, this Tribunal must act in accordance with the overriding objective and take into account all the relevant circumstances, including the relative prejudice to the parties of granting or denying the application.[30]It is common ground between the parties that the Penalty Appeal relates to a criminal charge, within the meaning of Article 6. Article 6 provides for the right to a fair trial, of which disclosure of evidence is an integral part.[31]The right to a fair trial is a human right. In my view, the Tribunal ought to enable the exercise of such rights unless doing so infringes on the rights of others or is disproportionate.[32]In my view, Mr Hayhurst’s contention that Article 6 rights ought only to be available in relation to ‘penalty specific’ conditions, lacks a sound footing. The authorities he cites may support a suggestion that when criminal charges can be separated from other matters that Article 6 only applies to the criminal charges. That seems uncontroversial.[33]However, I see no basis in authority for the suggestion that where there is an overlap between criminal charges and other matters that the result ought to be that Article 6 does not apply to the areas of overlap. In particular, the case of Sintra, relied upon by Mr Hayhurst, concerns the position where there is no appeal in relation to the underlying liability such that Article 6 applies to all aspects. It does not, so far as I understand, provide support for the proposition argued for by Mr Hayhurst.[34]Further, the case of King makes it clear that assessment procedures, such as the Kittel Appeal, fall outside the scope of Article. It does not appear to suggest that the consequence of any overlap is that the penalty proceedings have their Article 6 protected status reduced to the extent of such overlap.[35]Article 6 rights are fundamental rights to be enjoyed by all those who are the subject of a criminal charge. To suggest that such rights can be removed or diminished simply because another matter that does not have Article 6 protection is being heard concurrently, suggests that human rights are a mere matter of convenience. This cannot be correct.[36]This pushes the balance of prejudice towards granting the application.[37]However, it is not the case that the existence of a criminal charge automatically carries to right to procedural safeguards such as the disclosure sought. I have therefore carefully considered the arguments put forward by Mr Hayhurst and the potential areas of prejudice to HMRC if I were to grant the application.[38]Firstly, there is the question of disturbing the balance of fairness between the parties. Material disclosed as a result of this application may be of benefit to the Appellant in relation to the Kittell Appeal (where no Article 6 protection applies) as well as the Penalty Appeal. This may put the Appellant at an advantage over the position they would be in if there were no penalty appeal.[39]In this case, Mr Bedenham puts the point succinctly - “if there is collateral benefit, so be it”. I agree with Mr Bedenham.[40]The Tribunal ought not to deprive an Appellant of Article 6 rights merely because those rights might offer advantages in other proceedings. In any event, if it did transpire that HMRC held material which fundamentally undermined their case on the Kittel Appeal, it would positively aid the interests of justice for such material to be before the Tribunal.[41]The key prejudice suffered by HMRC if the application were to be granted is the additional time and expense involved in the relevant disclosure exercise. This should not be underestimated, particularly if similar applications are made in a significant volume of other cases. The Rule 27 framework has been drawn up in order to balance the costs to the parties (including the public purse) with the other considerations relevant to the overriding objective. This framework is not to be departed from without good reason.[42]However, I have not been provided with evidence as to the level of such a burden. In general, I would expect HMRC would carry out a review of all the evidence available to it when carrying out rule 27 disclosure. Providing the disclosure sought would not, so far as I am aware, significantly alter the complexity of that exercise.[43]As to Mr Hayhurst’s suggestion that the Rule 27 disclosure should be seen as being compatible with Article 6, that does not in my view address quite the right question. The question is whether or not to grant the application before the Tribunal. It is not the case that the application should only be granted if the Rule 27 framework is incompatible with Article 6. All the relevant circumstances must be considered in the exercise of the Tribunal’s discretion.[44]I have nonetheless considered My Hayhurst’s points in relation to the adequacy of Rule 27 disclosure.[45]Mr Hayhurst makes the point that much of the material that might be disclosed would be in the Appellant’s hands, or available to the Appellant in any event. To my mind, this is not a satisfactory basis for a blanket denial of disclosure. However, it may allow for litigation to be conducted at a more proportionate cost if the disclosure sought were provided at a stage in the proceedings where HMRC are clearer as to the case put forward by the Appellant, and the material available to the Appellant. I consider this point further below[46]Mr Hayhurst’s point that the Rules Committee framed Rule 27 to enable FTT proceedings to take place with “timeliness, efficiency and proportionality” does not provide a basis for refusing the current application. The Rules Committee also provided the Tribunal with wide case management powers pursuant to rule 5, including in rule 5(3)(d) the power to permit or require a party or another person to provide documents, information or submissions to the Tribunal or a party. The disclosure sought enables exercise of the Appellants Article 6 rights within the Tribunal framework.[47]Mr Hayhurst’s point about the impact on the Tribunal service if there is a need to review documents with a view to making decisions as to the public interest in disclosure (or other disclosure disputes) does not appear to be relevant. There is no suggestion that the Tribunal is likely to be inundated with such applications. In any event, this would not be a basis for denying the application.[48]Mr Hayhurst also suggests that key parts of the overall Tribunal process, such as the provision of statements of case and the right to cross examine witnesses, already allow for a fair hearing. It is certainly true that depriving the Appellant of key elements of the Tribunal process would be likely to render a hearing unfair, but that does not provide a cogent basis for denying the disclosure sought.[49]Mr Hayhurst also drew my attention to the regulatory nature of the penalties, noting that they are not, as a matter of domestic law, criminal. I appreciate that the nature of Article 6 is that its application does not mean that domestic provisions and administrative structures should be disregarded in favour of a full criminal trial process. However, I am content that the disclosure sought is well within the procedural remit of this Tribunal.[50]Overall, I am persuaded that it would be in the interests of justice to grant the application.[51]However, as I noted above, Mr Hayhurst’s point that the disclosure sought would include material already available to the appellant is a valid one. It would not be in the interests of justice to put HMRC to the time and expense of disclosing material that is already available to the Appellant. I am also concerned that HMRC should have a full understanding of the case being put forward by the Appellant before being obliged to make such disclosure.[52]It may therefore be sensible to modify the form of the direction sought by the application, for example:(1) The direction could be worded so as to exclude material which ought to be readily available to the Appellant; and(2) The direction could provide that the disclosure be made later in the litigation process. For example, disclosure could be made after the parties have served their respective witness statements. At that stage, HMRC can be confident in assessing that material being provided assists the case put forward by the Appellant, or undermines HMRC’s case.[53]Notwithstanding the above, I do not wish for the litigation process to become unnecessarily convoluted by the insertion of multiple separate disclosure exercises, or satellite disputes as to the scope of disclosure.[54]I would therefore invite the parties to agree, if possible, the exact form of direction to be made, including the timing of disclosure and how the disclosure should fit in with the overall case management timetable. To the extent the parties are unable to reach agreement, the matter can be relisted for any further argument.

Conclusion

[55]For the reasons set out above, I grant the application in principle and direct the parties to seek to agree the exact for of direction. The parties may apply to the Tribunal if agreement cannot be reached.

Right to apply for permission to appeal

[56]This document contains full findings of fact and reasons for the preliminary decision. Any party dissatisfied with this preliminary 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. Release date: 19th MAY 2025