BGC Services Holdings LLP v The Commissioners for HMRC [2026] UKFTT 558 (TC)

[2026] UKFTT 00558 (TC)Case No TC 09838
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on 24 March 2026Date Judgment date: 02 April 2026
Taylor House, London
Appeal reference: TC/2024/02638
Determinations under Reg 80 of the PAYE Regs – whether it appeared to HMRC that there may be tax payable – application for preliminary hearing – application refused
Before
TRIBUNAL JUDGE ANNE REDSTON
Between
BGC SERVICES HOLDINGS LLPAppellantTHE COMMISSIONERS FORRespondentHIS MAJESTY’S REVENUE AND CUSTOMSRespondentSam Grodzinski KC and Barbara Belgrano of Counsel, instructed by PriceWaterhouseCoopers LLP for AppellantJoshua Carey, Sam Way, Aparajita Arya and Greg Clements, all of Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs for RespondentsDECISION

Background

[1]On 8 March 2024, Officer Andrew Swaby decided to issue BGC Services Holdings Ltd (“BGC”) with determinations under Regulation 80 of the Income Tax (Pay As You Earn) Regulations 2003 (“Reg 80” and “the Determinations” respectively. The Determinations totalled £96,037,893 for the tax years 2017-18 through to 2019-20. Officer Swaby’s decisions were authorised by Officer James Miller.[2]The text of each Determination read as follows:
“Notice of Regulation 80 determination 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 amount, tax year and reference numbers].”

About this determination

[3]As can be seen from the above, the text of the Determinations did not include any reasons for their issuance, and there was also nothing in the covering correspondence which explained why HMRC had decided to make them.[4]BGC appealed the Determinations to the Tribunal. Its grounds of appeal read:
“Although not set out in the Determinations themselves, we understand from previous correspondence that the Determinations are to collect PAYE from… 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”) [“the SMR”].”
[5]HMRC applied to the Tribunal for BGC to provide further and better particulars of its grounds of appeal. I refused that application in a case management decision issued on 5 March 2025 (“the First Decision”).[6]HMRC issued its Statement of Case (“SoC”) on 26 March 2025, but that too did not give reasons for the Determinations. On 2 April 2025, BGC applied for HMRC properly to particularise its SoC. On 17 April 2025 I allowed that application by a second case management decision, and I issued Directions to HMRC (together, “the Second Decision”).[7]On 30 April 2025, HMRC applied for permission to appeal the First and Second Decisions. I refused permission by a decision published under reference [2025] UKFTT 00700 (TC). HMRC did not renew their application to the Upper Tribunal (“UT”).[8]On 14 July 2025, HMRC filed and served a “further amended Statement of Case” which included reasoning about the application of Conditions A, B and C of the SMR, and other relevant matters.[9]A case management hearing was then listed with the aim of resolving any remaining issues, in particular as to the scope of HMRC’s pleaded case. The parties also had permission to make other related applications.

The Issues

[10]The parties filed and served skeleton arguments addressing the various points to be decided at the case management hearing. However, all but one of the matters in dispute were resolved between the parties shortly before the hearing. It is not necessary to set out those agreed issues in this decision, as they are relevant only to the directions subsequently issued to the parties.[11]The remaining issue was BGC’s application for a preliminary issues hearing. This related to the wording and application of Reg 80, which is headed “Determination of unpaid tax and appeal against determination”, and so far as relevant to this decision, reads (emphasis added):
“(1) This regulation applies if it appears to HMRC that there may be tax payable for a tax year under regulation 67G…by an employer which has neither been— (a) paid to HMRC, nor (b) certified by HMRCunder regulation 75A,76, 77, 78 or 79. (2) HMRC may determine the amount of that tax to the best of their judgment, and serve notice of their determination on the employer. (3) A determination under this regulation must not include tax in respect of which a direction under regulation 72(5) has been made; and directions under that regulation do not apply to tax determined under this regulation. (3A) A determination under this regulation must not include tax in respect of which a direction under regulation 72F has been made. (4) … (5) A determination under this regulation is subject to Parts 4, 5,5Aand 6 of TMA (assessment, appeals, collection and recovery) as if— (a) the determination were an assessment, and (b) the amount of tax determined were income tax charged on the employer, and those Parts of that Act apply accordingly with any necessary modifications.” (a) paid to HMRC, nor (b) certified by HMRCunder regulation 75A,76, 77, 78 or 79. and those Parts of that Act apply accordingly with any necessary modifications.”
[12]BGC’s original position, as set out in its application dated 14 November 2025 and in its skeleton argument, was that the Tribunal should direct a preliminary hearing to decide whether HMRC had met the two requirements set out in bold above, namely that(a) at the time the Determinisations were issued, it appeared to HMRC that there may be tax payable, and(b) the Determinations were issued to HMRC’s best judgement.[13]However, two working days before the hearing, BGC notified the Tribunal and HMRC that its application for a preliminary issue hearing would be limited to the first of those two points, and so no longer included best judgement.[14]I had the benefit of very helpful written and oral submissions from Mr Grodzinski KC and Ms Belgrano for BGC, and from Mr Carey, Mr Way, Ms Arya and Mr Clement for HMRC. I was particularly grateful for the skilful amendments to their written cases which were required by the changed scope of BGC’s application.

The parties’ positions on Reg 80(1)

[15]I set out below the positions taken by the parties on Reg 80(1).

BGC’s position

[16]BGC’s position was that the phrase “if it appears to HMRC that there may be tax payable”had to be read in the context of the PAYE Regulations as a whole, the purpose of which is to collect tax to which a person was already liable. In Mr Grodzinski’s submission, the “may” in Reg 80(1) referred to the collection of that tax from a particular employer (and not from an employee or someone else). That reading was, he said, supported by Reg 80(3A), which prevented HMRC issuing a Reg 80 direction if they had already directed that an employee was to pay the tax in question under Reg 72F.[17]Mr Grodzinski went on to say that the necessary threshold would therefore not have been met if Officer Swaby “did not know one way or the other” whether tax was due; if he had only “a suspicion that the relevant legislation may apply pending further investigation”, or if he had thought “there was some extremely low possibility” that the SMRs applied to BGC, and had issued the Determinations on a “protective” basis because he was worried about time limits. In his submission, the position was very similar to that in Go City Limited v HMRC [2024] UKFTT 00745 (TC) (“Go City”), where the Tribunal panel was myself and Ms Shillaker. We found that two VAT assessments were invalid because the HMRC officer in question “had not formed a view” as to whether the related VAT returns were “correct or incorrect”, but had issued assessments under VATA s 73 to stop the periods going out of time, see [163] and [165] of that judgment.[18]BGC’s skeleton said:
“Reg. 80(1) does not lower the statutory threshold to a point where the Respondents can issue speculative determinations, which operate as income tax assessments under Reg.80(5), simply because their further investigations may in time reveal that additional tax is due. Reg. 80 is framed using the word ‘may’in recognition of the fact that where a taxpayer has failed to operate PAYE where it otherwise should have, the relevant income tax might still have been paid to HMRC, meaning that no additional tax is actually due. The legislation still requires the Respondents to reach a positive conclusion in relation to an underassessment of tax (just as was the position in Go City), not simply issue assessments to protect their position in relation to limitation periods.”
[19]Although HMRC had not as yet disclosed any evidence relating to the making of the Determinations, Mr Grodzinski said it was likely that the threshold had not been met in this case, because:(1) in the period leading up to the Determinations, HMRC were still asking many of the same questions about the possible application of the SMR that they had been asking in prior years;(2) HMRC’s first SoC was issued on 26 March 2025, a full year after the Determinations, but still did not include any factual or legal case about the application to BGC of Conditions A, B and/or C; and(3) in response to BGC’s application for a preliminary issue hearing, HMRC had not pleaded that Mr Swaby had come to a view that the SMRs applied to BGC before issuing the Determinations.

HMRC’s position

[20]HMRC’s position was that the wording of Reg 80(1) was clear on its face. The Determinations were valid as long as “it appeared” to HMRC that tax “may” be due. Mr Carey described the threshold as “extremely low”, and said it was therefore “highly unlikely” that HMRC would not succeed in showing that it had been met.[21]Mr Carey submitted that Go City was irrelevant because it related to entirely different VAT provisions; he instead relied on CooperVision Lens Care Ltd v HMRC [2026] UKFTT 00324 (TC) (“CooperVision”) (Judge Morgan and Mr Robertson) where at [265] the FTT had held:
“On our view, on its plain and natural meaning the requirement in regulation80(1) is not intended to provide a high threshold for an HMRC officer to be able to issue a valid determination that an employer is liable to account for income tax under the PAYE rules. The condition is simply that ‘it appears’ to an officer that there ‘may be’ tax payable for a tax year.”

The Case Law guidance

[22]It was common ground that when deciding whether to allow BGC’s application, I should follow the guidance in Wrottesley v HMRC [2015] UKUT 637. The UT first said at [14]:
“The power of the FTT to order a preliminary hearing is not in doubt. The FTT has broad case management powers pursuant to rule 5 of The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the ‘FTT rules’), and rule 5(3)(e) specifically contemplates dealing with a point as a preliminary issue. As with all other powers under the rules, in deciding whether to do so the FTT must seek to give effect to the overriding objective of the FTT rules to deal with cases fairly and justly. This includes dealing with a case in ways which are proportionate to its importance, complexity and the parties’ costs and resources, and avoiding delay so far as compatible with proper consideration of the issues (rule 2).”
[23]Having considered various case law authorities, the UT then set out at [28] the following “key principles” to be applied when deciding whether or not to direct a preliminary hearing:
“(1) The matter should be approached on the basis that the power to dealwith matters separately at a preliminary hearing should be exercised withcaution and used sparingly. (2) The power should only be exercised where there is a ‘succinct,knockout point’ which will dispose of the case or an aspect of the case... (3) An aspect of the requirement that the point must be a succinct one isthat it must be capable of being decided after a relatively short hearing (ascompared to the rest of the case) and without significant delay. This isunlikely if (a) the issue cannot be entirely divorced from the evidence and submissions relevant to the rest of the case, or (b) if a substantial body of evidence will require to be considered. This point explains whypreliminary questions will usually be points of law. The tribunal should beparticularly cautious on matters of mixed fact and law. (4) Regard should be had to whether there is any risk that determination ofthe preliminary issue could hinder the tribunal in arriving at a just result ata subsequent hearing of the remainder of the case. This is clearly more likely if the issues overlap in some way - (3)(a) above. (5) Account should be taken of any potential for overall delay, makingallowance for the possibility of a separate appeal on the preliminary issue. (6) The possibility that determination of the preliminary issue may resultin there being no need for a further hearing should be considered. (7) Consideration should be given to whether determination of thepreliminary issue would significantly cut down the cost and time requiredfor pre-trial preparation or for the trial itself, or whether it could in factincrease costs overall. (8) The tribunal should at all times have in mind the overall objective ofthe tribunal rules, namely to enable the tribunal to deal with cases fairlyand justly.”
[24]In Jelly Vine Productions Ltd v HMRC [2024] UKFTT 562 (TC) (“Jelly Vine”), Judge Brown KC considered an application to direct a preliminary hearing following HMRC’s issuance of determinations for three years. She held at [56] that, in addition to the factors set out in Wrottesley:
“…the strength of the possible argument is a factor which could be taken into account when applying my discretion. If I considered that the argument had good prospects of success and was therefore more likely to deliver the knockout point asserted, it is a factor I would weigh more significantly in the balance in favour of a direction for a preliminary issues hearing.”
[25]I respectfully agree with Judge Brown that the merits are a potentially relevant factor.[26]The next section of this judgment considers each of the above points, so far as relevant, albeit not in the order set out in Wrottesley.

Mixed question of fact and law

[27]It was common ground that the Reg 80(1) issue was a mixed question of fact and law, because findings of fact would be required about whether Officers Swaby and Miller had formed the view that tax may be payable.[28]Mr Grodzinski’s position was that this did not prevent the Reg 80(1) issue being decided at a preliminary hearing, because only very limited evidence was required, namely a few documents and the statements from the two Officers.[29]Mr Carey disagreed, saying the Tribunal would also have to make findings about the Officers’ view as to the application of Conditions A, B and/or C, which would involve “multifaceted, multifactorial assessments”.[30]I agree with Mr Grodzinski: BGC are seeking to determine whether the Officers had formed a view that tax may be payable, not why they thought tax was payable. Although the UT warned that “the tribunal should be particularly cautious on matters of mixed fact and law”, here the evidence and the consequential factual findings would be clearly delineated and confined to a narrow time period. The need to find some facts therefore does not preclude allowing BGC’s application for a preliminary hearing.

Time and costs

[31]It was also common ground that if a preliminary hearing were to be directed, it could take place in July this year over a two day period. In contrast, if the appeal proceeded to a hearing on all the issues in dispute, that hearing would not take place until the autumn of 2027 at the earliest; it would last between 10 to 12 days, and would require months of expensive preparatory work.[32]A further relevant factor is that the parties cannot currently take steps to progress the SMR parts of their cases, because finalising their positions depends on the outcome of the Supreme Court judgment in HMRC v BlueCrest Capital Management (UK) LLP (“BlueCrest”). That case was heard in January this year, and the judgment may well not be published before July, when the preliminary hearing can take place. Thus, no time would be lost, and significant costs would be saved. These factors therefore strongly favour allowing BGC’s application.

Knock-out point

[33]Mr Grodzinski emphasised that whether or not “it appeared to HMRC that there may be tax payable” was a “knock-out point”. If the answer to that question was “no”, the Determinations would be invalid and the appeal decided in BGC’s favour. He noted that in Jelly Vine,

Judge Brown had recorded:

“HMRC accept that if the Determinations were invalid as being premature there would be no basis on which they could be reissued as any such Determination would be outside the statutory time limits.”
[34]Mr Carey did not dispute that the position would be the same in this case. I therefore agree with Mr Grodzinski that the issue would be “a knock-out point”. That too is a factor in favour of allowing the application.

Was the issue “succinct” or was there “overlap”

[35]It was common ground that the evidence about Officers Swaby and Miller’s actions at or around the time of issuing the Determinations would be relevant not only to the Reg 80(1) point but also to Reg 80(2), namely BGC’s challenge that the Determinations had not been made to HMRC’s best judgement. Although the preliminary hearing would not address that issue, if BGC did not succeed, the Tribunal would have to consider the self-same evidence (together with other material) at the subsequent hearing, in order to decide whether best judgement had been exercised.[36]Mr Grodzinski sought to allay my concern over this overlap in two ways. First, he said that any findings of fact made at the preliminary hearing about the views held by the Officers would be binding on the Tribunal if it subsequently had to determine the best judgement issue. He cited from Chapter 43 of Philson on Evidence under the heading “Res judicata estoppels”. This says at 43:23 that the “central principle” is as follows:
“A final adjudication of a legal dispute is conclusive as between the parties to the litigation and their privies as to the matters necessarily determined, and the conclusions on these matters cannot be challenged in subsequent litigation between them (whether in separate proceedings or at a later stage of the sameproceedings.”
[37]Unfortunately, that citation was not included in the Bundle, but read out as part of Mr Grodzinski’s oral submissions. Mr Carey very fairly did not criticise Mr Grodzinski for this, given that the issues had narrowed shortly before the hearing. However, he said that even if Mr Grodzinski was correct on this point, the Tribunal hearing the remaining issues would nevertheless have to “grapple” with how those pre-determined facts fitted with the rest of the evidence. He added that there could be other concerns: for example, if the Tribunal in the course of the preliminary hearing had found one or both of the Officers to lack credibility, that could affect the weight given to the evidence the Officers would subsequently give about best judgement. Mr Grodzinski responded to this by saying that if an Officer had not been entirely truthful at the preliminary hearing, it would be “perfectly proper” for that Officer’s subsequent evidence to be treated with caution.[38]Mr Grodzinski also sought to allay my concern about the possibility of overlap by suggesting that, were BGC to lose at the preliminary hearing, it might abandon the best judgement argument, because the threshold for setting aside an HMRC decision on the basis of best judgement was high, for example requiring bad faith by the HMRC Officer or a decision which was “finger in the air stuff, random”.[39]In order to assess the extent and reliability of any concession on that point, I considered the words used by Mr Grodzinski. He first said “it might even be that we would rethink about whether we'd be pressing for best judgement at all” and later that “whether a best judgement view will really be pursued once we get to a final hearing is probably doubtful – I can't say for sure but that seems very unlikely”. BGC therefore made no definitive concession that it would not take the best judgement point at a subsequent hearing.[40]I therefore considered for myself how likely it was that they would do so. In Van Boeckel v C&E Commrs [1981] STC 290, Woolf J set out the approach a tribunal should take when deciding a best judgement challenge in a VAT appeal. He said:
“…it is contended, that the assessment in question was not valid because the commissioners had taken insufficient steps to ascertain the amount of the tax due before making the assessment. Therefore it is important to come to a conclusion as to what are the obligations placed on the commissioners in order properly to come to a view as to the amount of tax due, to the best of their judgment. As to this the very use of the word ‘judgment’ makes it clear that the commissioners are required to exercise their powers in such a way that they make a value judgment on the material which is before them. Clearly they must perform that function honestly and bona fide. It would be a misuse of that power if the commissioners were to decide on a figure which they knew was, or thought was, in excess of the amount which could possibly be payable, and then leave it to the taxpayer to seek, on appeal, to reduce that assessment. Secondly, clearly there must be some material before the commissioners on which they can base their judgment. If there is no material at all it would be impossible to form a judgment as to what tax is due. Thirdly…[i]n my view, the use of the words ‘best of their judgment’ does not envisage the burden being placed on the commissioners of carrying out exhaustive investigations. What the words ‘best of their judgment’ envisage, in my view, is that the commissioners will fairly consider all material placed before them and, on that material, come to a decision which is reasonable and not arbitrary as to the amount of tax which is due. As long as there is some material on which the commissioners can reasonably act then they are not required to carry out investigations which may or may not result in further material being placed before them.”
[41]I decided I could not rule out the possibility that (were BGC to lose on the preliminary issue) it would maintain its best judgement challenge in the subsequent hearing. I came to that conclusion because:(1) Mr Grodzinski was only able to say that BGC “might” withdraw its best judgement challenge;(2) I had not seen any evidence relating to the issuance of the Determinations by Officers Swaby and Miller, so could not know whether it would support a best judgement argument; and(3) BGC’s position was that the Officers failed to provide reasons for the Determinations because they did not know enough about the possible application of the SMR to BGC (see §19(1) and §19(2) above), and the lack of reasons is consistent with a best judgement challenge.[42]In my view therefore, BGC may well seek to argue that the Officers had not “fairly consider[ed] all material placed before them and, on that material, [had not] come to a decision which is reasonable and not arbitrary”.[43]Were that to happen, I agree with Mr Grodzinski that the Tribunal at that subsequent hearing would be bound by the findings made at the preliminary hearing, for the reasons set out in Phipson. However, I also agree with Mr Carey that the FTT would then have to “grapple” with how to treat those findings. That might be a simple matter, but it could be a more complex exercise, for the following reasons:(1) Whether an officer has exercised “best judgement” will involve additional evidence, in addition to that which would have been considered at the preliminary hearing. Instead of the Tribunal at that subsequent hearing making all its findings on the basis of all the evidence, it would need to take into account binding findings of fact made in reliance on only some of that material.(2) Although it would be desirable for the same Tribunal panel to sit at both the preliminary hearing and the subsequent hearing, that cannot be guaranteed, given that there would be an intervening period of at least 15 months. If the panel was different, the judge and member would not have heard for themselves the evidence given by the Officers at the preliminary hearing. It is clearly preferable that all the findings on an issue (here, best judgement) be made by the same Tribunal considering the evidence for itself.(3) There would also, as Mr Carey said, be an additional difficulty if the Tribunal at the preliminary hearing found that the evidence given by one or both of the Officers lacked credibility. However, I place little weight on that possibility, which I consider to be remote.[44]Thus, if the best judgement issue remains in contention, which in my view is clearly possible, the preliminary hearing issue “cannot be entirely divorced from the evidence and submissions relevant to the rest of the case”.[45]The UT in Wrottesley described the fourth factor as follows (my emphasis):
“Regard should be had to whether there is any risk that determination of the preliminary issue could hinder the tribunal in arriving at a just result at a subsequent hearing of the remainder of the case.”
[46]The UT did not say that the Tribunal should have regard to whether there is a “significant risk” that determining the preliminary issue would “prejudice” or “prevent” the Tribunal from arriving at a just result at the subsequent hearing of the remainder of the case. Instead, it set a much lower bar.[47]That is consistent with the fact that the judge deciding whether to direct a preliminary issues hearing has limited information. Specifically, in this case I have no evidence about either the Reg 80(1) issue or the Reg 80(2) issue, and of course I do not know what will happen at trial.[48]Taking all the above into account, the risk of overlap with the best judgement issue is a factor pointing away from allowing BGC’s application.

The Merits

[49]The likelihood of BGC succeeding is also, as Judge Brown said, a relevant factor. She focused on cases where “the argument had good prospects of success and was therefore more likely to deliver the knockout point asserted”. The opposite is also true: it is plainly not in the interests of justice to direct a preliminary hearing on an issue which has a very low chance of success, because the most likely outcome is that the parties are put to the time and expense of a wholly unnecessary hearing when the point could have been dealt with more efficiently at the same time as the other issues in dispute.[50]BGC’s case in a nutshell is that Reg 80(1) has to be understood in the context of the rest of the PAYE regulations; their purpose is to collect tax to which a person is liable, and HMRC can only use the power given by Reg 80(1) if they have first come to a view that the there is a liability to tax which may be payable by the person in question. I agree with BGC that this point is arguable, and HMRC did not submit to the contrary. However, it is difficult to estimate the chances of success, and I therefore find only that this “merits” point does not weigh in the balance against BGC.

Onward appeal

[51]One of the factors listed in Wrottesley is “the possibility of a separate appeal on the preliminary issue”.:[52]Mr Carey was clear that if HMRC were to lose the Reg 80(1) issue at a preliminary hearing, they were extremely likely to appeal, because other taxpayers may seek to rely on an adverse judgment.[53]He invited BGC to say whether they would concede if it lost at the Tribunal, but Mr Grodzinski did not confirm the position one way or the other. He said:
“It cannot be that the possibility of an appeal by the losing party precludes there being a preliminary hearing if it's otherwise appropriate,otherwise there would never be a preliminary hearing.”
[54]I have thus taken it that whoever wins at the Tribunal, there is a risk of an onward appeal, with the probability rising to a near-certainty were HMRC to lose.[55]In my judgment, if the losing party were to apply for permission to appeal, it is likely that the application would be allowed. That is because there is no clear case law on the issue. In Go City, the Tribunal considered different legislation: whether it appeared to the HMRC officer in question that the taxpayer’s VAT returns were “incomplete or incorrect”, not whether “there may be tax payable”. In CooperVision, Reg 80(1) was considered together with the Reg 80(2) best judgement issue, rather than as a free-standing point, see [262], [263] and [265] of that decision.[56]Thus, although a hearing of the preliminary issue can be neatly timetabled to take place while the Supreme Court is finalising its judgment in BlueCrest, that is very unlikely to be the end of the matter. Moreover, an appeal to the UT might be followed by onward appeals to the Court of Appeal and even to the Supreme Court. If, at the end of that process, BGC were to lose, its appeal would have been delayed for at least a year and possibly as long as four years. That is a factor against allowing BGC’s application.

Split hearings

[57]Mr Carey submitted that were I were to direct a preliminary hearing on this issue, this could open the floodgates not only to appellants applying for preliminary hearings on Reg 80(1) and/or Reg 80(2) determinations, but also to recipients of discovery assessments and VAT assessments. He said allowing BGC’s application risked “disaggregating cases that are, properly, matters that could and should be heard together”.[58]In relation to VAT assessments, my position remains as set out in Go City at [191]:
“In the vast majority of cases involving [VATA] s 73(1), the assessing officer (and HMRC more generally) are clear that the taxpayer’s return is incorrect, and issue the assessment using their best judgement, based on the information they have. [The position in Go City] is an entirely different and unusual situation, in which at the time the Assessments were issued it did not appear to the Commissioners that the Appellant’s returns were incorrect.”
[59]Mr Carey did not explain how allowing a preliminary hearing on Reg 80(1) could open the floodgates in relation to discovery assessments, which have their own different legislative provisions, and I have therefore not considered this further.[60]There is already binding case law about preliminary hearings on best judgement, see in particular Pegasus Birds Ltd v HM Customs & Excise [2004] EWCA Civ 1015. It is therefore unlikely that allowing BGC’s application would encourage appellants to apply for a preliminary hearing on Reg 80(2) alone.[61]I accept however that allowing BGC’s application might encourage other recipients of a determination to apply for a preliminary hearing on Reg 80(1). However, the number of applications is likely to be limited, because in the majority of cases it will be clear from the correspondence that HMRC formed a view before issuing the determinations, so the point will not be arguable on the facts.[62]In the few cases where that is not the position, an appellant would only make a preliminary hearing applications were BGC to succeed. Then, as Mr Grodzinski said, severing the Reg 80(1) issue and determining it on the facts would save time and money for the parties and the Tribunal, and so would not be a negative factor.[63]For the above reasons, this factor does not weigh in the balance against BGC.

The position so far

[64]Pausing there, the factors in favour of allowing BGC’s application are as follows:(1) The preliminary issues hearing can be listed in July this year. The FTT could thus hear and decide the issue while the SMR issues are stayed pending the publication of the Supreme Court judgment in Bluecrest.(2) That would represent a significant saving in time and cost, because preparing for the hearing of all the issues in dispute will take many months and cost a significant sum, while the hearing itself will last between 10 and 12 days, with the attendant costs.(3) The issue is a knock-out point of law, albeit there is an evidential overlap with best judgement.[65]The factors against allowing BGC’s application are as follows:(1) HMRC are almost certain to appeal an adverse decision, and BGC may appeal. An appeal would inevitably cause delay, which could last between one and four years.(2) If BGC were to lose, the costs of the preliminary issues hearing would be additional to those of the main hearing, and witness evidence on the SMR issue may have deteriorated in the meantime.(3) There is an evidential overlap with the best judgement issue, and I cannot safely conclude that BGC will abandon that issue were they to lose on Reg 80(1).[66]Thus, although there are significant savings in time and cost when the preliminary hearing is considered in isolation, the high risk of onward appeals changes the position, and the evidential overlap with best judgement is a further negative factor. The scales are thus tipped towards refusing BGC’s application. I now turn to the remaining factor.

Exercised with caution

[67]The UT’s guidance in Wrottesley begins by saying that “the power to deal with matters separately at a preliminary hearing should be exercised with caution and used sparingly”. This echoes the frequent warnings given by other courts: Mummery J (as he then was) said in NUT v St Mary’s School [1995] ICR 317 at p 323 that there were “dangers in taking what looks at first sight to be a short cut but turns out to be productive of more delay and costs than if the dispute had been tried in its entirety”. In Tilling v Whiteman [1980] AC 1 at p 25, Lord Scarman similarly said that preliminary points of law “are too often treacherous short cuts. Their price can be…delay, anxiety, and expense”. In Wentworth Sons Sub-Debt SARL v Lomas [2017] EWHC 3158, Hildyard J said at [29]-[31]:
“…preliminary issues often look more appealing and definitive in the early days of a case than when they come on later to be adjudicated. That which appeared to be conclusive, when a preliminary issue was directed, is not infrequently subsequently revealed to raise further questions; and that which appeared to be capable of discrete determination is often found later to be inextricably linked to issues whether of fact or law or both which cannot safely and satisfactorily be summarily determined. Furthermore, where the issues are of both novelty and importance, the prospect of appeals is real; and a bifurcated process may result, with the preliminary issues on appeal and the trial which may or may not become necessary, being stalled in the meantime. It is a truism that preliminary issues are often a source of regret, as being an apparent short cut to what turns out to be a longer journey in the end.”
[68]When that guidance is considered together with my summary at §64-66, I am in no doubt that BGC’s application must be refused.

Directions and Right to apply for permission to appeal

[69]I have issued directions for the main appeal separately. If BGC were to appeal this decision, those directions will not be suspended but will instead remain in full force and effect unless or until BGC succeeds in overturning this decision.[70]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to "Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)" which accompanies and forms part of this decision notice. Release date: 02 April 2026

Cited in 1 later judgment