© 2024 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
Procedure.Tax
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K1: Existence of a decision
General principle: need to discern a legislative intention that decision open to challenge in a statutory appeal
“The central issue, as I see it, is whether there can be discerned a legislative intention that a refusal of an application for relief under section 392 should be open to challenge in a statutory appeal to the Tribunal, albeit in the limited circumstances of an appeal under section 31 TMA 1970.” (HMRC v. Dhanak [2014] UKUT 0068 (TCC), §47, David Richards J).
“The right question is….whether on a true construction of the various provisions which I have already set out the trader is given a right of appeal to the tribunal against an exercise of the commissioners’ discretion.” (CEC v. Corbitt [1980] STC 231 at 239, Lord Lane).
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No appeal unless there is a HMRC decision
“As the letter does not bear to convey any decision by HMRC as to whether VAT was properly chargeable on supplies of services by CG to ET, there is in my opinion no basis in law for an appeal under section 83(1)(b).” (HMRC v. Earlsferry Thistle Golf Club [2014] UKUT 250 (TCC), §20, Lord Tyre).
“We respectfully agree with both judgments [in Marks & Spencer Plc v CCE [1997] VATTR 15302 and Olympia Technology Ltd v HMRC [2006] VATTR 19984], and find that the Tribunal only has jurisdiction if HMRC has made a decision.” (Donsaw Ltd v. HMRC [2016] UKFTT 471 (TC), §35).
“I agree with HMRC that they have not issued a decision that attracts a right of appeal. Consequently this Tribunal does not have jurisdiction in relation to the proceedings. It follows that the ‘appeal’ must be struck out…At the hearing it was explained to the Appellant that he should submit a self-assessment tax return for 2015-16, at which point any issues arising can be addressed. He could also make a claim to HMRC for overpaid tax if he believed that to be the case. If HMRC declined his claim he could then appeal that decision, but he should consider the provisions of s 370 ITTOI Act 2005 which makes it clear that interest is taxed on the full amount arising in the year of receipt.” (Kelly v. HMRC [2016] UKFTT 419 (TC), §§16…17)
“[3] By binding authority and by application of logic, therefore, I agree that there is no appeal to this Tribunal under s 83(1)(b) unless it is against a decision made by HMRC on the VAT chargeable on the supply of any particular goods or services.” (Mather v. HMRC [2014] UKFTT 1062 (TC), Judge Mosedale)
FTT has no power to direct a decision
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“[54]...the appellant’s position is that, if I am not satisfied that the Letter amounted to a decision, then I must direct HMRC to issue a decision letter, as the Tribunal did in Morfee…
[55] I do not consider that I have power to do anything of the kind. It is clear that this Tribunal has no inherent jurisdiction…and cannot issue a writ of mandamus.” (Mather v. HMRC [2014] UKFTT 1062 (TC), Judge Mosedale)
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Duty to give a decision
VAT treatment of supply
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HMRC’s view: duty to supplier but not to recipients
“[25] HMRC’s position is that, while they do have a duty to reach decisions, when provided with the requested information, on repayment claims made by taxpayers…they have no duty to make a decision on application for a liability ruling by the recipient of a supply, as in this case.” (Mather v. HMRC [2014] UKFTT 1062 (TC), Judge Mosedale)
HMRC’s view: only where there is genuine uncertainty
“The letter is addressing a different point – Mr Morfee had asked for a ruling on the VAT liability on supplies made by Ableson. HMRC were advising him that such a ruling would not be given, because it could only be relied upon by the recipient and, further, HMRC would only issue a ruling in a case of genuine uncertainty which they did not regard the present case to be.” (Morfee v. HMRC [2016] UKFTT 601 (TC), §70).
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Existence of a decision
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- Issue sufficiently crystallised to constitute a decision
“Applying such an approach to the present case there is an issue between the parties, ie whether, as stated in the 29 October 2012 letter, NTJ should be registered for VAT as a result of the supplies it is said to have made from a fixed establishment in the UK. That issue, which is stated in writing, is not in the abstract or on a hypothetical basis (if it were it is clear from Odhams that Tribunal would not have jurisdiction). As such, I consider it to be sufficiently crystallised to constitute a decision “in respect to” the registration of NTJ within s 83(1)(a) VATA.” (NT ADA Ltd v. HMRC [2016] UKFTT 642 (TC), §15).
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“…in order for the Tribunal to have jurisdiction there must be an issue between the parties which has been sufficiently crystallised to constitute a decision falling within one of the paragraphs of section 83. Such decision will normally be in writing and be clearly expressed as a decision subject to appeal whether or not the word decision is used. Where a determination is not expressed as an appealable decision it may nevertheless constitute such a decision in the light of its contents and the surrounding circumstances. There may on analysis be a clear determination although there is no mention of the right of appeal.” (Olympia Technology Ltd v HMRC [2006] VATTR 19984, §12).
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- Sufficient to identify a type of VAT supply rather than specific supply for VAT liability decision
"[57] Secondly, I agree that more recent cases do not refer to Morrisons but the principles in Morrisons can be seen in a number. For example, Judge Berner and Judge Herrington in the Upper Tribunal in HMRC v SDI (Brook EU) Ltd and Another [2017] UKUT 327 (TCC) (“SDI”) stated at paragraph 47:-
“It is clear that appeals are not confined to cases where HMRC have decided the precise amount of VAT to be charged. Cases may proceed on questions of principle which are related to the chargeability of VAT, such as questions as to the nature of particular class of supply and whether those supplies are standard rated, exempt or zero rate. Section 83(1)(b) cannot therefore be construed narrowly; it must be construed broadly so as to encompass any issue between taxpayer and HMRC, in respect of which HMRC has made a decision, which is material to the chargeability of the taxpayer to VAT.”
Of course, that decision binds this Tribunal.
[58] In 2013, Judge Berner in Iveco Limited v HMRC [2013] UKFTT 763 (TC) had expressly addressed section 83(1)(b) VATA and the Tribunal’s jurisdiction at paragraphs 55 et seq. Specifically he stated at paragraph 59:-
“In my view, s 83(1)(b) is capable of encompassing appeals on all questions relating to the chargeability of supplies of goods and services. It is wide enough to include such questions arising from the direct application of a VAT Directive, in so far as those questions bear upon the chargeability of a taxable person to VAT, which includes questions as to the manner in which domestic provisions may be applied, or construed in applying, to the proper charge to tax as provided for under either domestic or EU law.”
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[85] I agree with Ms Yang that, as SDI makes clear, cases can proceed on a question of principle. BB had identified the nature of the supply and the principles involved. The case law to which I have referred above and with which I agree makes it clear that there is no need to identify a specific supply or for an amount of VAT to have been determined. There is a need to identify, and it has been identified, the chargeability to VAT, or not, of a type of supply. There is actual tax chargeable and actual supplies are made." (Isle of Wight NHS trust v. HMRC [2023] UKFTT 23 (TC), Judge Anne Scott)
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- Finality required
"[63] The key issue is what constitutes a decision. Both parties cited and relied upon Judge McNall in Iqbal t/a Platinum Executive Travel v HMRC [2015] UKFTT 215 (TC) (“Iqbal”) where he found at paragraph 11 that:
“The Oxford English Dictionary defines a decision as ‘the final and definite result of examining a question; a conclusion; the making up of one’s mind on any points or on a course of action; a resolution or determination’. All these definitions share a theme, which is one of finality. On occasion, the courts have been called upon to determine the meaning of decision, and have held it to be a popular and not a technical word, meaning little more than a concluded opinion: see, for instance,[1891] 1 QB 75.
I agree." (Isle of Wight NHS trust v. HMRC [2023] UKFTT 23 (TC), Judge Anne Scott)
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“The Oxford English Dictionary defines a decision as ‘the final and definite result of examining a question; a conclusion; the making up of one's mind on any points or on a course of action; a resolution or determination’. All these definitions share a theme, which is one of finality.” (Iqbal t/a Platinum Executive Travel v HMRC [2015] UKFTT 215 (TC), §11).
“The Tribunal having considered the content and form of the document of 23 August are wholly unable to consider that as being a decision letter. It contains no reference to the matter of finality or of appeal and, worse, no letter from the Respondents in this case purported to be either final or to comply with the internal guidelines for officers of the Respondents in relation to decisions or reconsiderations. No finality would be deduced from any of the Respondents letters dealing with the merits of the claims as submitted, and that despite the terms of the Appellant's letter of 11 October. HMRC made invitations on all the correspondence to discuss further.” (John Martin Group v HMRC [2005] VATTR 19257)
Inviting further comments indicates no final decision
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"[64] However, in the following paragraph [in Iqbal t/a Platinum Executive Travel v. HMRC], on the facts in that case he explains that the Tribunal found that the letter in question expressed nothing more than a provisional view on the basis of the evidence and information supplied to HMRC. It did not definitively rule out a claim for input tax. The very last sentence “I await your comments” was an invitation to further dialogue giving the taxpayer the opportunity to respond before any decision is reached." (Isle of Wight NHS trust v. HMRC [2023] UKFTT 23 (TC), Judge Anne Scott)
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Clear statement that HMRC do not share taxpayer's view sufficient
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"[84] The crucial words are indeed “For the avoidance of doubt, HMRC does not share the views set out in your letter/report.” Had those words been omitted HMRC would have had a very much stronger case for the Applications. Taken with the wording of the rest of that paragraph and the preceding paragraph, it is clear that the technical submission had been considered and rejected. That sentence clearly expresses a “concluded view” and a considerable element of “finality” in relation to the VAT treatment of the supply of locum doctors. “For the avoidance of doubt” is an unequivocal statement. It does not invite further dialogue." (Isle of Wight NHS trust v. HMRC [2023] UKFTT 23 (TC), Judge Anne Scott)
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Not a decision on maladministration
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"[79] However, I agree with [the taxpayer] that the reason why it [Morfee v. HMRC [2016] UKFTT 601 (TC)] was decided that the letter in question was not a decision in that case is set out at paragraph 69. It was because an HMRC Complaints Officer was addressing an issue of possible maladministration on HMRC’s part, not any issue of VAT liability." (Isle of Wight NHS trust v. HMRC [2023] UKFTT 23 (TC), Judge Anne Scott)
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- No decision where HMRC say checks are ongoing and reserve rights to deny input
"[18] As I communicated in the hearing I determined that the appeal reference TC/2022/13652 should be struck out. I am not satisfied that the terms of the letter represent a decision regarding the amount of input tax to be credited and the letter expressly indicates that HMRC have not made the decision to deny input tax. The letter itself is sufficiently clear that the repayment return as rendered would not, at that time, be paid and the fact of the tax loss notification letter did not preclude an assessment being raised to deny the input tax credit referenced in the letter. It is not therefore a decision as to the amount of any input tax allowable nor does it concern the attribution/apportionment of input tax. I do not consider either that it is a decision capable of meeting any of the other decisions listed in section 83(1) VATA with the consequence that any appeal against it is one in respect of which the Tribunal has no jurisdiction and which therefore I must strike out under rule 8(1) FTT Rules." (Foundry Supplies UK Limited v. HMRC [2023] UKFTT 656 (TC), Judge Brown KC)
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- Determined objectively
“[4] Both parties were agreed, and I agree with them, that the issue of whether the Letter was a decision letter is a matter to be determined objectively. They were also agreed, as I am, that the Letter had to be seen in its context, and its context included the letter to which it was a reply.” (Mather v. HMRC [2014] UKFTT 1062 (TC), Judge Mosedale)
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- Total silence (uncertain status)
“Although almost inconceivable, total silence in response to a repayment claim must constitute a refusal. Equally, repeated refusals to give a straight answer will amount to a refusal. It would be surprising if a trader’s only remedy was to obtain an order from the High Court directing a formal decision. In my view such a refusal would amount to an appealable decision.” (Colaingrove Ltd v. CEC VTD16981 (2000), §10).
But:
“[22] The High Court decision in Touchwood is a clear indication that it is not appropriate to treat HMRC’s refusal to give a decision as a decision against the taxpayer; doing so by-passes HMRC’s discretion when making a decision, effectively making their decision for them; it also treats them as making a decision when they may have a discretion not to make a decision…” (Mather v. HMRC [2014] UKFTT 1062 (TC), Judge Mosedale)
- Inferred from surrounding circumstances
“However, we agree with the Tribunal in Olympia that we should also consider the “surrounding circumstances”. Ms Donovan blocked repayment of £32,169.88 out of the £32,188.33 reclaimed on Donsaw’s 12/12 VAT return. We infer from this that she not only knew the amount of import VAT contained with that period’s VAT return, but also decided to refuse repayment of that import VAT. We make the further inference that repayment was refused for the reasons given in Ms Donovan’s letter.” (Donsaw Ltd v. HMRC [2016] UKFTT 471 (TC), §45).
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- No broadening the definition of decision
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“[31] ...if the customer has an effective right to claim in the civil courts against its supplier, and in default of its supplier, against HMRC, there is binding Upper Tribunal authority that I should not give an unnaturally wide definition of ‘decision’ in order to allow the customer to bring a case in this Tribunal. The customer has an effective remedy in the civil courts…
“[45] I do not think it right for this Tribunal to effectively by-pass the public law issue of whether HMRC ought to issue a decision to Mr Mather, by deeming HMRC’s refusal to issue a decision to be a decision.” (Mather v. HMRC [2014] UKFTT 1062 (TC), Judge Mosedale)
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Not hypothetical matters
" I agree with Judge Mosedale in Mathers, at paragraph 96, where she said:-
“It is well established that the courts do not determine hypothetical matters or matters simply of interest to a person. There must be a real legal interest in the matter for the court to have jurisdiction”." (Isle of Wight NHS trust v. HMRC [2023] UKFTT 23 (TC), Judge Anne Scott)
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HMRC advice is not a decision
"[49] I was not referred to it but HMRC are absolutely correct when they state in their Guidance on Non-Statutory Clearances that “There’s no general right of appeal against advice given by HMRC, except where rights to appeal are set out in statute.” I say that because, in essence, HMRC argue that the Reply and the September letter amounted to advice." (Isle of Wight NHS trust v. HMRC [2023] UKFTT 23 (TC), Judge Anne Scott)
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Decision as to VAT zero-rating sufficient to raise issue of reduced rating
"[63] [The taxpayer] invites me to consider the decision of the Upper Tribunal (Judges Roger Berner and Timothy Herrington) in HMRC v SDI (Brook EU) Limited and another [2017] UKUT 0327 (TCC). There, the Upper Tribunal remarked (at Para [47]), in relation to section 83(1)(b):
"It is clear that appeals are not confined to cases where HMRC have decided the precise amount of VAT to be charged. Cases may proceed on questions of principle which are related to the chargeability of VAT, such as questions as to the nature of a particular class of supply and whether those supplies are standard-rated, exempt or zero-rate. Section 83(1)(b) therefore cannot be construed narrowly; it must be construed broadly so as to encompass any issue between a taxpayer and HMRC, in respect of which HMRC has made a decision, which is material to the chargeability of the taxpayer to VAT".
[64] At Paragraph [52], they added:
"It is not necessary, in our judgment, that HMRC should have definitively determined that the place of supply is or is not in the UK before the FTT's jurisdiction can arise. Section 83 does not require that all questions relevant to chargeability should have been determined before an appeal will lie to the Tribunal. An appeal may be made against a decision on a substantive element which goes to chargeability that is capable of being determined without reference to other elements. That is particularly the case where the determination of an appeal of that particular element is capable, depending on the outcome, of being determinative of that whole question of chargeability"
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[67] In my view, on the evidence available to me, HMRC did make a decision about zerorating - the works did not qualify - but did not make any decision as to reduced-rating.
[68] Applying the above guidance (which is binding on me) HMRC has made a decision "which is material to the chargeability of the taxpayer to VAT". The Notice of Appeal identifies the dispute as being one about "the rate of VAT chargeable on the work of our subcontractor", and the secondary submission set out in the Grounds of Appeal was that the work should be reduced-rated. Indeed, that seems to have been the original basis upon which Sword was corresponding with HMRC, before its change of tack in early 2020 to argue for zero-rating.
[69] The substance of HMRC's decision was that the supply was not zero-rated. The taxpayer is entitled to challenge that decision (as it has), but, having lost on the point, the issue does not remain in limbo. Given that the chargeability to VAT was in issue, the situation here is exactly the one described in SDI: it is a question "as to the nature of a particular class of supply and whether those supplies are standard-rated, exempt or zero-rate".
[70] I am entitled to consider the correct rating if there is sufficient evidence before me to permit me to determine the issue. I am not bound to find that, if the rating was not zero-rating, then it should be standard-rating." (Northchurch Homes Limited v. HMRC [2022] UKFTT 201 (TC), Judge McNall)
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Seeking judicial review to obtain a decision
“There is no reason in principle, at least where the Commissioners represent to the taxpayer that they have as yet made no appealable decision and base that representation on an allegation that their enquiries are incomplete and continuing, why the taxpayer should not seek Judicial Review of such a representation. Excessive, unexplained or unnecessary delay by a public body in making a decision which is required of it is a classic and familiar area for Judicial Review.” (Touchwood Services Ltd v. HMRC [2007] EWHC 105 (Ch), §12).
“[21] The implication of the decision in Touchwood, although I cannot find a clear statement to that effect, is that Lindsay J was satisfied that the combination of s 83 where HMRC make a decision and judicial review if they delay making a decision, is a comprehensive remedy which complied with European Law requirement that taxpayers have an effective judicial remedy.” (Mather v. HMRC [2014] UKFTT 1062 (TC), Judge Mosedale)
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Contrary to human rights to be unable to challenge treatment
“However, I am bound by the decision in Ferrazzini and have to conclude that s 3 HRA does not require s 83(1) to be interpreted in such a way to give this Tribunal jurisdiction in order to give effect to rights under Article 6 of the Convention… In addition to the European Convention on Human Rights there is the Charter of Fundamental Rights of the European Union, which applies because this is a VAT case and the European Communities Act 1972 gives supremacy to EU law. Article 47 of the Charter grants the right to a fair trial in all matters and it does not suffer from the Ferrazzini limitation. However, s 3 HRA applies only to the Convention and not to the Charter. While the taxpayer has the right under the Charter to a fair hearing, that does not give this Tribunal the power to “interpret” legislation to grant itself the jurisdiction to give the taxpayer a fair hearing where the legislation…Therefore, while it seems it is unlawful for the UK government under the Charter (applicable in the UK because of the ECA) to impose obligations on a taxpayer without giving the taxpayer a right to challenge them, that does not permit this Tribunal to confer jurisdiction on itself in order to give taxpayers the right to challenge the obligation…While technically a person in the appellant’s position could seek to judicially review HMRC over the legality of the secondary legislation, in practice the expense and difficulty of such a course of action to a person of small resources means that this is an unreal remedy..It seems to me that the only practical way that the appellant would have of obtaining a judicial ruling on its grievance over the requirement that it must file online is to appeal any penalty imposed if it fails to comply with the law. But that, as I have said, is equally unsatisfactory as it requires the appellant to break the law in order to challenge it.” (KW Hadleigh Ltd v. HMRC [2014] UKFTT 336 (TC), §§29 – 31…34…35, Judge Mosedale, requirement to submit online VAT return was not a HMRC decision and thus did not fall within the FTT’s jurisdiction).
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No appeal where decision is withdrawn
"[43] It is irrelevant that Mr Stenhouse had a right of appeal until the penalties were reduced to nil or cancelled by HMRC before he lodged his Notice of Appeal. The FTT has no jurisdiction in relation to income tax assessments that have been withdrawn by HMRC because, in the absence of any assessment, there is nothing to appeal against and the FTT does not have any jurisdiction in relation to the circumstances of the making of an assessment that has been withdrawn before the appeal is made to it (see Hannigan v HMRC [2009] UKFTT 334 (TC)). The same considerations apply to the penalties in this case (see paragraph 14 of Schedule 56 FA 2009)." (Stenhouse v. HMRC [2023] UKFTT 635 (TC), Judge Sinfield - taxpayer was seeking compensation)
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