© 2024 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
Procedure.Tax
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Q1: Error of law
Distinction from CPR appeals
“The crucial point of difference from Terluk is that decisions of the ET can only be appealed on questions of law, whereas under the CPR the appeal is normally by way of review and the decision of a lower court can be set aside, if it is wrong, or if it is unjust by reason of a serious procedural or other irregularity in the proceedings.” (O’Cathail v. Transport for London [2013] EWCA Civ 21, §44 - 'wrong' is not limited to errors of law).
Although in practice CPR appeals adopt similar restraint
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[49] Those are strong conclusions about a fact-finding exercise at trial by an experienced judge, but the Court of Appeal made them after reminding themselves of the very real constraints facing an appellate court when invited to overturn a judge’s findings of fact at trial. For that purpose they referred to Grizzly Business Ltd v Stena Drilling Ltd [2017] EWCA Civ 94, Henderson v Foxworth Investments Ltd [2014] UKSC 41; [2014] 1 WLR 2600 and McGraddie v McGraddie [2013] UKSC 58; [2013] 1 WLR 2477. In the Henderson case the Supreme Court had said, at para 62:
“It does not matter, with whatever degree of certainty, that the appellate court considers that it would have reached a different conclusion. What matters is whether the decision under appeal is one that no reasonable judge could have reached.”
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[52] The question in the present case is not whether the Court of Appeal misstated those constraints. They may be summarised as requiring a conclusion either that there was no evidence to support a challenged finding of fact, or that the trial judge’s finding was one that no reasonable judge could have reached." (Perry v. Raleys Solicitors [2019] UKSC 5)
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All findings of FTT (even those thought unnecessary to decide appeal) stand unless shown to be wrong in law
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"(2) The legal system within which the UT operates pays particular respect to findings of fact made by the primary fact-finding tribunal, recognising that this tribunal has the advantage of having seen and heard the totality of the evidence and recognising the dangers of an appellate tribunal “island hopping in a sea of evidence” to borrow from the terminology of Lewison LJ in Fage UK Ltd v Chobani UK Ltd [2014] EWCA Civ 5 at [114]. Since the FTT consciously has sought to assist both us and the parties by making findings on factual issues relating to the Remaining Points, we consider that it would be wrong in principle for us to relegate those to the status of mere obiter dicta, thereby losing the benefit of the distinct advantage that the FTT had.
(3) We acknowledge that, looking at matters as at the date of the Decision, the FTT’s conclusions on the Staleness Point were determinative so that its conclusions on the Remaining Points did not influence the outcome. However, that does not make the FTT’s conclusions on the Remaining Points obiter now. Once it is acknowledged that the FTT’s determination of the Staleness Point was wrong in the light of the Supreme Court’s decision in Tooth, its conclusions on the Remaining Points assume central importance, as the FTT foresaw that they might. As an appellate tribunal, we should not interfere with those determinations unless satisfied that they were wrong in law." (Hargreaves v. HMRC [2022] UKUT 34 (TCC, Edwin Johnson J and Judge Jonathan Richards)
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- Greater scope for UT to reconsider findings of fact if necessary to give principled guidance
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“As we have said, Lord Carnwath [in Pendragon] has made comments about the special role of the Upper Tribunal in the (now) not so new tribunal system, in Jones and in Pendragon; in the latter case he was expressing the unanimous view of the Court. We do not, however, read his comments as an indication that the Upper Tribunal has some special exemption from the restrictions to which Lewison LJ referred. Rather, he was saying that, in the interpretation of a statutory scheme in respect of which the jurisdiction has been conferred on a Chamber of the First-tier Tribunal, or in a matter which governs the exercise of that Chamber’s jurisdiction in multiple cases, it is part of the Upper Tribunal’s function to provide guidance; and if, in order to do so effectively, it is necessary for it to reconsider the First-tier Tribunal’s findings of fact, in a case in which it has the relevant evidence available to it, it should adopt that course. The Upper Tribunal’s jurisdiction is, of course, not engaged at all if no error of law is identified; it is only then, as Lord Carnwath indicated in Pendragon at [47], that it has the power to set aside the First-tier Tribunal’s decision and re-make it, including the power to make its own findings of fact. That is a long way from saying that the Upper Tribunal may simply disregard the normal restriction on interference by an appellate tribunal with findings of fact…We do not, moreover, consider that the trade issue as it arises in this case gives rise to matters of principle on which it is appropriate for this tribunal to offer guidance.” (Degorce v. HMRC [2015] UKUT 447 (TCC), §§92…93, Hildyard J and Judge Bishopp).
Types of error of law
"[41] The UT in Perrin described by reference to relevant case-law (at [34] to [44]) how errors of law could take a number of forms which can be summarised as follows:
(1) the tribunal simply misinterprets the law and therefore reaches a wrong conclusion even though there is no dispute about the facts upon which it based its decision.
(2) the tribunal has made a direct finding of fact for which there is no evidence or which is inconsistent with the evidence or contradictory of it (per Lord Normand in Commissioners for Inland Revenue v Fraser [1942] 24 T.C. 498, 501, approved by Lord Radcliffe in Edwards (Inspector of Taxes) v Bairstow [1956] AC 14).
(3) the tribunal has made inferential findings of fact which are susceptible to challenge on the same basis.
(4) where, in relation to the tribunal’s decision on whether the facts found answer to some particular description or some particular test (such as a determination of whether a taxpayer has a “reasonable excuse”), the tribunal was wrong in law in its interpretation of the statutory phrase (this is an error falling into (1) above), or the tribunal plainly misapplied the correct law to the facts which it found.
(5) Where a statutory test involves a multi-factorial assessment based on a number of primary facts – commonly called a value judgement – an appeal court should be slow to interfere with that overall assessment (see Perrin at [41] which sets out the extracts of Jacob LJ’s judgment in Proctor and Gamble UK v Revenue and Customs Commissioners [2009] EWCA Civ 407 which in turn gathers together the relevant authorities for this proposition). In other words, as explained at [70] of Perrin: “..In making its determination, the tribunal is making a value judgment which, assuming it has (a) found facts capable of being supported by the evidence, (b) applied the correct legal test and (c) come to a conclusion which is within the range of reasonable conclusions, no appellate tribunal or court can interfere with.”" (Marlow Rowing Club v. HMRC [2020] UKUT 20 (TCC), Judge Raghavan and Judge Poole)
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Law v. Fact: Flexible distinction
“It matters little whether it is described as involving an issue of mixed law and fact, or of the evaluation of facts in accordance with legal principle. However it is described, it was clearly one which was particularly well suited to detailed consideration by the Upper Tribunal, with a view to giving guidance for future cases. Having found errors of approach in the consideration by the First Tier Tribunal, it was appropriate for them to exercise their power to remake the decision, making such factual and legal judgments as were necessary for the purpose, thereby giving full scope for detailed discussion of the principle and its practical application. Although no doubt paying respect to the factual findings of the First Tier Tribunal, they were not bound by them. They had all the documentation before the First Tier Tribunal, including witness statements, and transcripts of the evidence and submissions, and detailed written and oral submissions. It is clear that they undertook a thorough exercise involving a hearing lasting six days…Indeed, given the difficulties of drawing a clear division between fact and law, discussed by Lord Hoffmann [in Lawson v. Serco, see below], it may not be productive for the higher courts to spend time inquiring whether a difference between the two tribunals was one of law or fact, or a mixture of the two. There may in theory be a case, where it can be shown that the sole disagreement between the two tribunals related to an issue of pure fact, but such a case is likely to be exceptional.” (HMRC v. Pendragon plc [2015] UKSC 37, §§50…51, Lord Carnwath).
"Whether one characterises this as a question of fact depends … upon whether as a matter of policy one thinks that it is a decision which an appellate body with jurisdiction limited to errors of law should be able to review." (Lawson v. Serco [2006] UKHL 3, §34, Lord Hoffmann).
“A similar point was made in helpful terms by the Supreme Court of the United States in Bose Corp v Consumers Union of U.S. 466 U.S. 485 (1984), where it held: “A finding of fact in some cases is inseparable from the principles through which it was deduced. At some point the reasoning by which a fact is "found" crosses the line between application of those ordinary principles of logic and common experience which are ordinarily entrusted to the finder of fact into the realm of a legal rule upon which the reviewing court must exercise its own independent judgment. Where the line is drawn varies according to the nature of the substantive law at issue. Regarding certain largely factual questions in some areas of the law, the stakes – in terms of impact on future cases and future conduct – are too great to entrust them finally to the judgment of the trier of fact.”” (Davis & Dann Ltd v. HMRC [2016] EWCA Civ 142, §100, Arden LJ).
Construction of statute
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- Ordinary meaning is question of fact (but whether ordinary meaning intended is a question of law)
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"[18] If ‘paid’ is an ordinary word in the English language then its meaning is a question of fact but, as Lord Reid recognized, the context in which the word appears may show that it bears an unusual, which we take to mean a special or technical, meaning. If so, the meaning of the word is a question of law." (HMRC v. Sippchoice Ltd [2020] UKUT 149 (TCC), Roth J and Judge Sinfield)
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“Although the true construction of the statutory provisions is a matter of law, the ordinary meaning of the word "beverage" is a matter of fact. HMRC determined that the Product is a beverage which was, or involved, a determination of fact. It was open to Kalron to argue before the Tribunal (a) that as a matter of ordinary language, the Product is not a beverage and (b) that even if it is, beverage has a special meaning for the purposes of Group 1. Issue (a) is a pure question of fact. Issue (b) is a matter of law but once it has been decided that a special meaning is to be attributed, it will again be a question of fact whether the Product is a beverage within that special meaning.” (Kalron Food Ltd v HMRC [2007] EWHC 695 (Ch), §34, Warren J).
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- Failure to interpret statutory provision in light of purpose is error of law
"[37] Bearing the above approach in mind, it is clear from the outset, that whatever the outcome of the analysis in relation to that issue is, the FTT erred in law in failing to construe the relevant provisions in the light of their statutory purpose. That may be explained by the low prominence the appellant gave to that argument, but the omission is an error in that part of the FTT’s decision nonetheless. The error in turn 30 meant it could not be assumed that the FTT’s fact-finding with respect to the issue would necessarily encompass the facts relevant to the statutory question. In our judgment that error of approach alone means the FTT Decision must be set aside in so far as it dealt with the subsidiary issue." (Khan v. HMRC [2020] UKUT 168 (TCC), Judge Raghavan and Judge Andrew Scott)
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Construction of a document is question of law
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"[40] Further, I do not consider that this is an appeal where it would be right to give particular weight to the findings of a Tribunal. In the end, we are concerned with the interpretation of a document, and it is well established that that is a matter of law, not fact, in the courts of all parts of the United Kingdom. Of course, when there are relevant findings of primary fact (or even, at least in some cases, of secondary fact) relevant to interpretation, a Tribunal’s finding will deserve particular respect, but that does not arise in this case. Furthermore, in any event, my conclusion as to the meaning of the Contract is consistent with the view of the specialist UT, which formed its own view, because it concluded that the FTT (also a specialist tribunal) had erred in law." (Airtours Holidays Transport Limited v. HMRC [2016] UKSC 21, Lord Neuberger)
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"[25] The question whether interpretation of a contract is a question of law or of fact was considered by Lord Hoffman in Carmichael and another v National Power PLC [1999] ICR 1226, at 1233A-C:
(1) If parties intend all the terms of their contract (apart from any implied by law) to be contained in a document or documents, the meaning of those documents, and so the interpretation of the contract, is a pure question of law.
(2) The question whether the parties intended a document or documents to be the exclusive record of the terms of their agreement is a question of fact.
(3) If, however, the intention of the parties, objectively ascertained, has to be gathered partly from documents but also from oral exchanges and conduct, then the terms of the contract are a question of fact." (HMRC v. Kickabout Productions Ltd [2020] UKUT 216 (TCC), Zacaroli J and Judge Richards)
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“What HMRC said in their letters is a finding of fact; what those words should be construed to mean in the context of para 44 of Sch 36 is a question of law.” (Spring Capital Ltd v. HMRC [2017] UKUT 215 (TCC), §21, Judges Sinfield and Walters QC quoting Judge Berner with approval).
- Construction of correspondence:
"The third in this group of cases relied upon by Mr Pugh was Bunge v Kruse [1977] 1 Lloyd's Rep 492. The contract in that case contained an arbitration clause. The dispute between the parties was referred to arbitration. The sellers contended that the dispute had been settled by accord and satisfaction. The arbitrator upheld that contention. On appeal by way of special case, the sellers argued that the arbitrator's finding of fact was conclusive. Kerr J disagreed. He held that the accord and satisfaction was a question of law and his view was endorsed in the Court of Appeal. Lord Denning MR said at page 495:
"There are observations in Day and anr v McLea and anr (1889) 22 QB 610, which say that the question of accord and satisfaction is one of fact. I do not agree. At any rate, when everything is on paper, in the telexes and correspondence between the parties, it is a question of law."
The qualification is important. The construction of correspondence is always a question of law. But there is nothing in Bunge v Kruse to support the view that accord and satisfaction is a question of law in every case and still less to support the American Rule that cashing a cheque in full and final settlement is conclusive evidence of a binding agreement." (Stour Valley Builders v. Stuart [1992] Lexis Citation 2776)
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Failure to identify implied term in contract is error of law​
"[40] We must then consider whether the FTT’s failure to identify that implied term and to take it into account in deciding whether there had been unreasonable delay in giving the notification amounts to an error of law. In order to characterise that failure as an error of law, it seems to us that the omission must be such as to affect the question of whether there was unreasonable delay. In other words, the implied term must be relevant to that issue.
[41]...Part of the FTT’s reasoning for its conclusion that the further delay was unreasonable was that Mr Ketley did not instruct his advisers to look at the pensions legislation and guidance to see if anything could be done (FTT [144]). Furthermore, the FTT found at [148] that the cause of the delay was Mr Ketley instructing Mr Abrol solely in relation to the professional negligence question and not asking whether the position could be remedied. In our view it would have been relevant and indeed the FTT would itself have considered it relevant if Mr Ketley had instructed Mr Abrol expressly to consider whether there was a remedy. The position is no different if the instruction was implicit, whether or not Mr Ketley realised the scope of his instructions.
[42] We are satisfied therefore that there was an error of law as alleged in Ground 1, although we would not criticise the FTT for its approach. It was the absence of any argument on behalf of Mr Ketley to the effect that Mr Abrol was under a duty to consider the possibility of a remedy that led the FTT into error." (Ketley v. HMRC [2021] UKUT 218 (TCC), Judge Cannan and Judge Greenbank)
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Ramsay principle
- Whether statute is concerned with composite or individual transactions is question of law
[25] In our judgment, the extract relied on from Lord Brightman’s speech in Furniss v Dawon highlights that, the question whether there is a composite transaction (in the sense that one step follows in all practical likelihood from the other), and the question of purpose, are both questions of fact (or more likely inferences from fact, but fact nevertheless).
[26] But that is not the issue here. The issue is whether, in the light of the proper understanding of s385 ITTIOIA, the section is “sensitive”, as [the taxpayer] put it, to a consideration of whether transactions are to be looked at as a composite whole or whether the focus is instead on the individual transactions. In other words, the question as to whether two contracts are properly to be categorised as a single composite transaction for the purposes of s385 ITTOIA is also a question of law. Given the clear law that a realistic appraisal of the facts is by reference to the statutory purpose of the provision in question, it is difficult to see how that question could not be one of law – the tribunal needs to decide what facts are relevant in the light of its interpretation of the statute. Once it is decided the statute is “sensitive” to composite transactions the question of whether the transaction in question is a composite transaction and its purpose (so far as relevant) are then questions of fact or inferences of fact.
[27] In other words, the question of which facts to consider will depend on construing the statute, and that is clearly a question of law..." (Khan v. HMRC [2020] UKUT 168 (TCC), Judge Raghavan and Judge Andrew Scott)
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- Realistic view of purpose is a question of law where subjective purpose determined
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"[37]...[HMRC] argued that it was open to this Court to conclude that on a realistic appraisal of the facts, the Option Price was not "real expenditure" for the "real purpose" of reacquiring the Assets. That was a question of law, or possibly an inference to be drawn by this Court from the primary facts which had been found.
[38] The Taxpayers' third point involves a dispute about whether it is open to this Court to apply a Ramsay analysis to a part of the arrangements which was not directly challenged before the FTT, in circumstances where the FTT made findings about the purpose and nature of the arrangements considered compositely but did not make findings specific to the part of the arrangements now under challenge. That is, in my view, a dispute of law, not fact, and it is one which the full Court should determine. This Court would only go on to consider the merits of Ground 2 if satisfied of HMRC's case that it was open, as a matter of law, to this Court to do so." (Altrad Services Ltd v. HMRC [2023] EWCA Civ 474, Whipple, Newey LJJ)
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Examples of questions of law
- Capital v. revenue
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"[76] In Beauchamp (Inspector of Taxes) v F W Woolworth plc [1990] 1 AC 478, at 491-492, the House of Lords confirmed that the question whether expenditure is of a capital nature or not is a question of law (Lord Templeman). It is not a question of fact nor is it a question of mixed law and fact, as the Court of Appeal had thought in that case." (HMRC v. Centrica Overseas Holdings Limited [2022] EWCA Civ 1520, Singh, Newey, Henderson LJJJ)
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- VAT: Place of supply
(HMRC v. Zurich Insurance Co [2007] STC 1756, §35).
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- VAT: multiple or single supply
(CEC v. British Telecommunications plc [1999] STC 758).
- VAT: supply of goods or services
(Dr Benyon v. CEC [2004] UKHL 53).
- VAT: legal classification of a supply
“The question at issue is one of legal classification: did the facilities provided amount to the provision of a service for VAT purposes by the bank, or was there merely a borrowing by the bank? In our view that is clearly a legal question.” (ING Intermediate Holdings Limited v. HMRC [2016] UKUT 298 (TCC), §27, Morgan J and Judge Falk).
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- Existence of enquiry
“the question as to whether the steps that HMRC took in response to the claim amount to an “enquiry”…is a question of law” (Portland Gas Storage Ltd v. HMRC [2014] UKUT 0270 (TCC), §38)
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- Employment status dependent solely upon the true construction of a document
(Lee Ting Sang v. Chung Chie-Keung [1990] 2 AC 374)
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- Burden of proof incorrectly applied
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Failure to apply the burden of proof (unless a point is clearly conceded)
“The error of law is not that the FTT failed to address a relevant issue. It is that in the absence of a positive case put by HMRC in relation to the competence and time limit issues, the FTT erred in law in not finding that HMRC had failed to discharge the burden of proof in those respects such that the assessments could not be regarded as having been validly made and the appeals must accordingly be allowed…In the absence of HMRC having put a positive case to the FTT on the competence and time limit issues, the only course open to the FTT was to allow the appellants’ appeals. In those circumstances, to remit the appeals would allow HMRC to have a second bite of the cherry. That, in our judgment, would not be in the interest of justice and fairness… Nor should it be thought that our conclusion in this case places any undue burden on HMRC in cases of a similar nature. It is always open to HMRC to seek to clarify an appellant’s case, and to seek confirmation whether or not a particular matter is conceded, including where necessary by applying for a direction of the FTT.” (Burgess v. HMRC [2015] UKUT 578 (TCC), §§53…58…60, Judges Berner and Tom Scott).
Wrong burden of proof applied
“the commissioners misdirected themselves in law over the onus of proof when they made their decision. It cannot be said that the evidence was such that they would necessarily have reached the same conclusion if they had directed themselves correctly.” (Brady v. Group Lotus [1987] STC 635 at 640);
- Whether circumstances are exceptional
"[110] We disagree. Whether or not the circumstances were “exceptional” is a mixed question of fact and law. This Tribunal cannot interfere with the findings of fact made by the FTT unless there was no evidence to that effect. However, whether one or more findings of fact mean that the Taxpayer’s circumstances were “exceptional” is a question of law." (HMRC v. A Taxpayer [2023] UKUT 182 (TCC), Green J and Judge Redston)
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"The relevant question in A Taxpayer was whether certain circumstances were "exceptional circumstances beyond [the person's] control" preventing a taxpayer from leaving the UK (so as to cause the normal statutory residence test day limits to be exceeded) for the purposes of paragraph 22(4) of Schedule 45 to the Finance Act 2013. The UT in A Taxpayer held that the FTT's decision that the circumstances in that case were "exceptional" was a mixed finding of fact and law, with the question as to whether or not the circumstances were "exceptional" being a question of law to be answered by reference to the primary findings of fact.
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[57] We agree with that observation, but note that (as HMRC said) the UT in A Taxpayer was not concerned with the meaning of "reasonable excuse" but a different concept and legislative provision..." (Exclusive Promotions Limited v. HMRC [2023] UKUT 269 (TCC), Bacon J and Judge Sinfield)
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Examples of questions of fact
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- VAT: What was provided as part of the supply:
“There is no doubt that the classification for VAT purposes of the supply made by NEC is a question of law, which is addressed in the Exemption issue. But the first question that needs to be addressed in the Supply issue is simply what was provided by NEC for the 45 consideration which it received in the form of the booking fee. The answer to that question, which we consider is a purely factual one, assuming that the FTT has applied the correct legal test, may then lead to questions of law as to whether what was provided was a single or multiple supply and will then feed into the legal 10 question to be addressed in the Exemption issue. But the conclusion of the FTT that what was provided by NEC in return for the booking fee was a card processing service was itself a finding of fact.” (National Exhibition Centre Ltd v. HMRC [2015] UKUT 23 (TCC), §25, Roth J and Judge Berner).
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- Meaning of oral statement is a question of fact
"[12] After hearing submissions the judge ruled:-
"I start from the position that this evidence is prima facie admissible. Then I have considered whether I should exclude it in my discretion to exclude evidence which is more prejudicial than probative, but I do not think that it should be excluded on that basis. Its interpretation is a question of fact for the jury and I think it should be left to them."
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[18] In their Lordships’ opinion there is no substance in the submissions advanced on behalf of Furbert to the Board. His counsel did not challenge the admissibility of the alleged oral remarks on the ground that they were involuntary. The breach of the Judges’ Rules does not automatically render an oral statement made by the accused inadmissible. There can be no criticism of the judge making the notes an exhibit as defence counsel suggested that the jury should see them. The question whether a statement constitutes an admission is a question for the jury to decide. The judge correctly pointed out to them that the words attributed to Furbert were not an out and out admission and could be regarded as ambiguous and that it was for them to decide whether the words constituted an admission, and told them that they would have to be sure of that before coming to that conclusion. If the words were an admission their probative value was strong and the judge was entitled to exercise his discretion to admit them." (Furbert v. The Queen [2000] UKPC 12)
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Consider effect of error of law on decision as a whole before setting aside
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