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Contact: michael.firth@taxbar.com
Procedure.Tax
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Q9: Insufficient reasons
Missing step not the same as inadequate reasons​
"[81] ... We acknowledge that judgments are to be read as a whole and that a judge can be taken to have considered a point even if it is not expressly mentioned in the judgment. However, in this case we have concluded that on any fair reading of the Decision, the FTT made no finding on the question whether the Situation was attributable to Mr Hargreaves’ negligence. Put more simply, it seems to us that the FTT made no finding on the causation question raised by s29(4). It follows that there is a “missing step” in the FTT’s reasoning that underpins its conclusion in paragraph [121] with the result that we are not satisfied that this conclusion was available to the FTT. As such, the conclusion of the FTT on the Negligence Condition cannot be upheld." (Hargreaves v. HMRC [2022] UKUT 34 (TCC), Edwin Johnson J and Judge Jonathan Richards)
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Parties must be told why they have won or lost
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“’A judge cannot be said to have done his duty if it is only after permission to appeal has been given and the appeal has run its course that the court is able to conclude that the reasons for the decision are sufficiently apparent to enable the appeal court to uphold the judgment.’ That passage applies to the decisions of Commissioners as it does other judges. It does not impose an onerous duty. Reasons need not be lengthy. It will often be sufficient for them to be briefly stated.” (HMRC v. Kearney [2010] EWCA Civ 288, §§20 – 21).
“All that is required is that the ‘judgment must enable the appellate court to understand why the Judge reached his decision’…and that the decision ‘must contain…a summary of the Tribunal’s basic factual conclusion and a statement of the reasons which led them to reach the conclusion which they do on those basic facts’”… “the decision, read as a whole, as it ought to be, leaves the fair minded reader in no doubt as to why P&G lost the argument.” (Procter & Gamble UK v. HMRC [2009] STC 1990, §19 and §72).
“If the judgment does not make it clear why the Judge has reached his decision, it may well be impossible within the summary procedure of an application for permission to appeal to form any view as to whether the Judge was right or wrong. In that event permission to appeal may be given simply because justice requires that the decision be subject to the full scrutiny of an appeal.” (English v. Emery Reimbold & Strick Ltd [2002] EWCA Civ 605, §18).
“The duty is a function of due process, and therefore of justice. Its rationale has two principal aspects. The first is that fairness surely requires that the parties especially the losing party should be left in no doubt why they have won or lost. This is especially so since without reasons the losing party will not know (as was said in Ex p Dave) whether the court has misdirected itself, and thus whether he may have an available appeal on the substance of the case. The second is that a requirement to give reasons concentrates the mind; if it is fulfilled, the resulting decision is much more likely to be soundly based on the evidence than if it is not.” (Flannery v Halifax Estate Agencies Ltd [2000] 1 WLR 377 at 381-382)
"[30] We are not persuaded the FTT’s reasoning was inadequate so as to constitute an error of law. The reason why Mr Uddin lost, despite his argument that he had been misled, was clear. That was that, even though Mr Uddin may have relied on his accountant (and been misled into believing that everything was in order), the cursory and general enquiries he made were insufficient to displace the general rule that the taxpayer should bear the consequences of the representative’s failings. The FTT’s reasoning was such that it did not need to make express findings of fact on whether Mr Uddin was misled because it would not, in its view, have made a difference to the outcome... " (Uddin v. HMRC [2023] UKUT 99 (TCC), Judge Raghavan and Judge Baldwin)
“I do, therefore, accept that no rational basis has been shown for the particular redactions which have been put forward. Even giving every weight that I can to Lord Hope's statement that: “judicial restraint should be exercised when reasons that a Tribunal gives for its decision are being examined' [and] 'the appellate court should not assume too readily that the Tribunal misdirected itself just because not every step in its reasoning is fully set out in it." I have great difficulty, notwithstanding that guidance from Lord Hope, as picked up by Lord Justice Beatson in the Atlantic Electronics case, in seeing what it is that formed the unfairness in leaving the negative indicators in the report or in what sense taking the negative indicators out of the report is of any practical utility or benefit either to the appellant IA or to the tribunal or as something that will shorten or make less expensive the resolution of this appeal.” (HMRC v. IA Associates Ltd [2013] EWHC 4382 (Ch), §88, Nugee J).
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On every material issue
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“[HMRC] submitted that the FTT was not required in its decision to set out in detail all of the evidence before it and all of the competing arguments. With that we can concur. What the FTT must do, however, is address the contentious issues 5 between the parties and give sufficient reasons for its determination that the parties can understand the basis upon which the decision has been reached on every material issue, so that a party aggrieved at a particular decision can determine whether it has any grounds for mounting an appeal.” (Eyedial Limited v. HMRC [2013] UKUT 432 (TCC), §75, Judges Berner and Hellier).
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Failure to address a party's case directly
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"[29] As the Court of Appeal held in Weymont v Place, the FTT was not obliged to set out every submission or argument that HMRC raised or deal with all the evidence. However, a necessary component of explaining to HMRC why they had lost involved demonstrating that HMRC’s case had been addressed. Neither HMRC nor anyone else reading the Decision would realise that HMRC’s case was that aspects of the transactions and Beigebell’s participation in them gave rise to an inference that it must have known those transactions were connected with fraudulent evasion of VAT. Still less does the Decision explain why the FTT declined to draw any of the inferences that HMRC invited it to draw. We acknowledge that “judicial restraint” is called for when considering the adequacy of the FTT’s reasons. However, this is not a situation in which the FTT has simply failed to set out every step of its reasoning. Rather, the FTT has not given any reasons, even of a general nature, for rejecting the entirety of HMRC’s case." (HMRC v. Beigebell Ltd [2020] UKUT 176 (TCC), Judge Richards and Judge Cannan)
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Failure to identify and apply any test
"[74] Further, we accept [the taxpayer’s] sixth point does highlight a more fundamental error made by the FTT in admitting the letter of RSM. In both its oral reasons at the hearing and in its later written decision, the FTT failed to identify and apply any test in law for admitting the letter at the hearing. It failed to refer to Rules 2 or 15 or the conditions thereunder – at a minimum by reference to the overriding objective or the requirement of fairness, including prejudice to the Appellants in admitting the letter at a late stage. This was an error of law.
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[76]...in both its oral ruling and in its written decision, the FTT announced its conclusion that it would admit the letter and give it appropriate weight but gave no express reasons for doing so. The FTT’s reasons for admitting the document, whether oral or written, need only have been expressed very briefly – the duty to give reasons is context specific1. The FTT had made a number of observations during the hearing from which its reasons for admitting the document might, at least to some extent, be inferred – some of which might have been expressly adopted as its reasons.
[77] The failure to articulate any reasons for the grant of the application was an error of law, just like the FTT’s failure to identify and apply the correct test in law, in particular, by failing to consider fairness or the prejudice to the Appellants of admitting the evidence." (Ellis v. HMRC [2022] UKUT 254 (TCC), Judge Greenbank and Judge Rupert Jones)
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FTT should not usually rely on simply reciting the winning parties' submissions
"[33] A contributory factor to this outcome, in our view, was the way in which the FTT structured its decision, where it comprehensively recited the winning party’s submissions, yet as we have established, incompletely reflected the losing party’s contrary arguments on relevant points. The superficially attractive short-cut of reciting the winning party’s submissions at length and then simply saying that the FTT concurred with these was unlikely to lay a sound foundation for an adequately reasoned decision. It is a route we would discourage FTTs from taking." (Conservatory Roofing UK Limited v. HMRC [2022] UKUT 182 (TCC), Judge Raghavan and Judge Brannan)
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There must be reasons for findings of fact
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“I am unable to accept that the authorities to which Mr Barlow referred support the proposition that there is no requirement upon a tribunal to give reasons for its findings of fact. In many cases, such reasons might be unnecessary either because they are obvious or because they can be readily gleaned from the findings themselves. But in others, the determination of which version of events is true, or which witness is to be preferred to another, may be critical to the decision. In such circumstances it would, in my judgment, be a dereliction of duty for the judge simply to set out his conclusions without any reasoning.” (HMRC v. SDM European Transport Limited [2015] UKUT 625 (TCC), §140, Judges Bishopp and Cannan).
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The reasons must confirm that the judge properly considered and understood the evidence and submissions
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“But the relative immunity of the trial judge’s findings of fact to interference on appeal depends upon the trial process having been conducted in a way which confirms that the trial judge has properly considered and understood the evidence; has taken into account the criticisms of the evidence advanced by the parties’ legal representatives; and has reached a balanced and objective conclusion about points on which differing or inconsistent evidence has been given in making the factual findings which form the basis of his decision.” (Weymont v. Place [2015] EWCA Civ 289, §4, Patten LJ).
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Must give reasons for why it rejected evidence
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“I did not understand Mr Artis to dispute counsel for the appellants’ assertion that the tribunal had before it documentary evidence demonstrating that the vehicles provided to Mr Davies and Mr Togneri were provided by Reedon. The FtT does not identify that evidence, nor does it explain why it rejected it, as it must have done. As Mr Young submitted, Reedon is not mentioned in the tribunal’s findings in respect of Plan 2. No attempt is made to deal with the appellants’ argument that Mr Donald was Services’ company secretary, that he carried out work for that company, that he was entitled to remuneration therefor, and that the use of a car represented that remuneration. In my view, therefore, the third ground of appeal is made out…Counsel were agreed during the hearing that, in the event that I upheld this ground, the case should be remitted to the tribunal to give further reasons for its rejecting the appellants’ appeal in respect of Plan 2, and I shall do so. It follows from what I have said earlier in this judgment that the appeal on grounds 1 and 2 is dismissed.” (James H Donald (Darvel) Ltd v. HMRC [2015] UKUT 514 (TCC), §§76…77, Lord Jones).
No explanation needed for findings of fact that were not disputed
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"[31] We also agree with Ms McArdle’s submission that there was not in any case a disputed issue on the evidence requiring explanation..." (Uddin v. HMRC [2023] UKUT 99 (TCC), Judge Raghavan and Judge Baldwin)
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Summarising submissions and evidence not a substitute for reasons
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"[11] First, it is striking the FTT did not, as we would expect, include a section clearly setting out the findings of fact it made regarding the supply. Rather, such findings as there are, are dispersed through the various sections of the decision. Moreover, they are frequently embedded within statements prefaced with reports of what the appellant stated (e.g., “the appellant says that….”). We take this opportunity to reinforce the reminder the Upper Tribunal gave in Grzegorz Sczcepaniak T/A, PHU Greg-Car v The Director of Border Revenue [2019] UKUT 295 (TCC). There the Upper Tribunal noted that the “vast majority” of the decision in that case “some 78 out of 108 paragraphs” was “taken up with a recitation of evidence and submissions”. The UT continued: “We would remind First-tier Tribunals that while it is perfectly acceptable to summarise evidence and submissions, a finding of fact is made only when a conclusion, appropriately reasoned, is expressed on the evidence in the light of the submissions made.”
[12] On the basis the appellant does not challenge the lack of clear fact-finding in the Decision, we will proceed on the basis that findings of fact can nevertheless be inferred from the FTT’s recitation of the evidence." (Conservatory Roofing UK Limited v. HMRC [2022] UKUT 182 (TCC), Judge Raghavan and Judge Brannan)
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“A failure to perform reasonable checks does not, of itself, demonstrate complicity in a smuggling attempt: conceptually such a failure could be explained by incompetence, inexperience, ignorance, laziness, lack of time or many other factors. If the FTT had wanted to say that the Appellant’s failure to perform checks supported a conclusion that it was responsible for, or complicit in, the smuggling attempt, it would have needed to explain why it had reached that conclusion…We would remind First-tier Tribunals that while it is perfectly acceptable to summarise evidence and submissions, a finding of fact is made only when a conclusion, appropriately reasoned, is expressed on the evidence in the light of the submissions made. As we have explained, the Decision did not reach a clear conclusion on the accuracy or otherwise of the Respondent’s central allegation.” (Sczcepankiak v. Director of Border Revenue [2019] UKUT 295 (TCC), §§23…32, Judge Herrington and Judge Jonathan Richards).
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Reasons for rejecting evidence on a contested issue
"[31] It is true we can see what facts the FTT relied on; namely it was simply those advanced by HMRC in its submissions. However, the above two points on the marketing material and Mr Messenger’s evidence were matters which were relevant and which were disputed. In line with the principles set out in the authorities, all the FTT needed to explain – and it is clear it could do this succinctly – was why it rejected the appellant’s arguments and evidence on issues which were relevant. Regrettably however the points were not dealt with at all. The appellant, having made the points and advanced the evidence was left in doubt, as are we, that the points were considered, and if they were, why HMRC’s arguments in the other direction were accepted, while theirs were refused.
[32] We therefore consider the reasons in the decision were inadequate and there was thus an error of law in the Decision." (Conservatory Roofing UK Limited v. HMRC [2022] UKUT 182 (TCC), Judge Raghavan and Judge Brannan)
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- Must address apparently compelling evidence which is contrary to conclusion
"[21] As explained by Males LJ in Simetra Global Assets Ltd v Ikon Finance Ltd [2019] EWCA Civ 1413, [2019] 4 WLR 112 ("Simetra Global") at [39]-[47], a failure to give adequate reasons that explain why the judge has reached a decision can form the basis of an appeal. The extent to which reasons are required to meet the test of adequacy will depend on the subject matter. The judge should "identify and record those matters which were critical to his decision". Fairness requires that he should also "deal with apparently compelling evidence, where it exists, which is contrary to the conclusion which he proposes to reach and explain why he does not accept it"." (Rahman v. Munim [2024] EWCA Civ 123, Falk, Birss, King LJJJ)
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Reasons for preferring a witness of fact
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“If the critical issue was one of fact, it may be enough to say that one witness was preferred to another because the one manifestly had a clearer recollection of the material facts or the other gave answers which demonstrated that his recollection could not be relied upon.” (English v. Emery Reimbold & Strick Ltd [2002] EWCA Civ 605, §18).
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“We have looked at the individual exchanges to which Mr Gordon drew our attention but we do not consider that that is a fruitful exercise because a judge’s view as to how far he or she can rely on the evidence of a particular witness is not only derived from the individual responses to particular questions but from an overall assessment of the witness’ candour. In our judgment, there is no basis for concluding that the Judge formed an incorrect view of the witnesses’ evidence.” (Massey and Massey t/a Hilden Park Partnership v. HMRC [2015] UKUT 405 (TC), §88, Rose J and Judge Sinfield)
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“However the FTT came to an unqualified conclusion at [37] and stated in terms at [39] that it had found that the supplies did take place. This could only have been on the basis that the FTT accepted the evidence of Mr Patel and Mr Peneron…In our judgment the reasons for the conclusion at [37] have not been adequately explained by the FTT in its decision.” (Best Buys Supplies Limited v. HMRC [2011] UKUT 497 (TCC), §§72…73).
Reasons for not accepting documents
"[88]...While for the reasons explained under Ground 1, we do not consider Award are correct to describe the FTDs as unchallenged, they were documents which, if taken at face value, pointed towards sale transactions, and therefore loss of possession and control, of the goods in France. As such, an explanation was called for, even briefly, of the reasons why, in effect, the FTT decided not to accept those documents at face value." (Award Drinks Ltd (in liquidation) v. HMRC [2020] UKUT 201 (TCC), Judge Raghavan and Judge Thomas Scott)
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Reasons for preferring an expert witness
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“But where the dispute involves something in the nature of an 35 intellectual exchange, with reasons and analysis advanced on either side, the judge must enter into the issues canvassed before him and explain why he prefers one case over the other. This is likely to apply particularly in litigation where as here there is disputed expert evidence; but it is not necessarily limited to such cases.” (Flannery v Halifax Estate Agencies Ltd [2000] 1 WLR 377 at 381-382).
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“This does not mean that the judgment should contain a passage which suggests that the Judge has applied the same, or even a superior, degree of expertise to that displayed by the witness. He should simply provide an explanation as to why he has accepted the evidence of one expert and rejected that of another. It may be that the evidence of one or the other accorded more satisfactorily with facts found by the judge. It may be that the explanation of one was more inherently credible than that of the other. It may simply be that one was better qualified, or manifestly more objective, than the other. Whatever the explanation may be, it should be apparent from the judgment.” (English v. Emery Reimbold & Strick Ltd [2002] EWCA Civ 605, §20)
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“It is legitimate, where there is a direct conflict of expert evidence, for the Judge to prefer the evidence of one expert to the other simply on the ground that he was better qualified to give it, or was a more authoritative witness, if the Judge is unable to identify any more substantial reason for choosing between them. This should not often be the case. If this is the basis for the Judge’s conclusion, he should make it plain.” (English v. Emery Reimbold & Strick Ltd [2002] EWCA Civ 605, §73).
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“a coherent reasons opinion expressed by a suitably qualified expert should be the subject of a coherent reasoned rebuttal” (Eckersley v. Binnie (1988) 18 Con LR 1 at 77 – 78, Bingham LJ);
Reasons for finding carelessness against professional
"[40] We have no doubt in this case that the FTT failed in its duty to give adequate reasons for its finding that Firm A acted carelessly in completing the return in question. Aside from the point that HMRC’s Statement of Case made no allegation of carelessness on the part of Firm A as opposed to Dr Danapal himself, it was the duty of the FTT to explain what evidence it relied on in making its finding of carelessness and why that evidence demonstrated that Firm A had been careless. In order to do so, the FTT would have had to have considered what material was before Firm A when it completed the return, what it was told by Dr Danapal or his practice manager about that evidence and how it was that Firm A came to complete the return inaccurately. None of those matters are addressed by the FTT in the Decision. That is not surprising, because Firm A gave no evidence itself and was therefore not cross examined as to how it carried out its work in relation to Dr Danapal’s tax returns." (Danpal v. HMRC [2023] UKUT 86 (TCC), Judge Herrington and Judge Bowler)
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Read on the assumption that the FTT understood which matters to take into account
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“[39] It is unrealistic for an appellate court to expect a trial judge in every case to refer to all the points which influenced his decision. As Lord Hoffmann said in Piglowska v Piglowski [1999] 1 WLR 1360, 1372, “reasons should be read on the assumption that, unless he has demonstrated the contrary, the judge knew how he should perform his functions and which matters he should take into account”. He also rightly said that an “appellate court should resist the temptation to subvert the principle that they should not substitute their own discretion for that of the judge by a narrow textual analysis which enables them to claim that he misdirected himself”…” (PMS International Group Plc v. Magmatic Limited [2016] UKSC 12, Lord Neuberger)
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Careful judgment identifying significant points but failing to mention one significant point indicates error
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“[39]...However, when a judge has given a full and careful judgment, conscientiously identifying and specifying a significant number of points which weigh with him, an appellate court can properly conclude that his failure to mention a significant point means that he has overlooked it. That conclusion is particularly valid here, given that the point in question is more significant than many of the points which the judge mentioned…” (PMS International Group Plc v. Magmatic Limited [2016] UKSC 12, Lord Neuberger)
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And still important that parties can see why Tribunal reached conclusion it did
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“[39]...And, while it is important that an appellate court should not be over-critical of any judgment, it is equally important to bear in mind that one of the main purposes of requiring a judge to give reasoned judgments is to ensure that the parties and an appellate court can see why he reached the conclusion which he did, and can assess whether he made any errors of law or fact.”(PMS International Group Plc v. Magmatic Limited [2016] UKSC 12, Lord Neuberger).
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General statement of correct approach inconsistent with rest of decision
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“Moreover, although, in paragraph 55 of its decision, the UT stated that the no other reasonable explanation standard was not met "whether the factors were looked at individually or as a whole", it did not elucidate why that was so. I give that statement little weight in the light of the general tenor of the decision, which was to look at factors in isolation.” (Davis & Dann Limited v. HMRC [2016] EWCA Civ 142, §60, Arden LJ)
Do not assume too readily that FTT misdirected itself
"[25] It is well established, as an aspect of tribunal law and practice, that judicial restraint should be exercised when the reasons that a tribunal gives for its decision are being examined. The appellate court should not assume too readily that the tribunal misdirected itself just because not every step in its reasoning is fully set out in it." (R (Jones) v First-tier Tribunal (Social Entitlement Chamber) [2013] UKSC 19, Lord Hope)
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"[38] [The taxpayer] submitted that at [12] the Tribunal was making an initial finding of dissimilarity but at [15] it concluded the opposite. There was no explanation for the volte face – hence the decision lacked reasons.
[39] I do not accept this. It would be a most astonishing thing for such an experienced Tribunal to take such a bizarre course. I would only conclude that it had done so if there were no other explanation. There is such an explanation: [12] is merely recording [the taxpayer's] argument, not stating any conclusion, provisional or otherwise. That appears both from the face of the decision itself and from an examination of the arguments before the Tribunal." (Proctor & Gamble UK v. HMRC [2009] EWCA Civ 407, Jacob LJ).
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- No narrow, textual analysis (reasons could always be expressed better)
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"[20] ... vi) Reasons for judgment will always be capable of having been better expressed. An appeal court should not subject a judgment to narrow textual analysis. Nor should it be picked over or construed as though it was a piece of legislation or a contract." ​(Rahman v. Munim [2024] EWCA Civ 123, Falk, Birss, King LJJJ)
Conclusion and reasons do not have to be contiguous
“We are compelled to agree with Mr Maugham that the F-tT might have explained their reasoning on this point more clearly. However, the failing is largely one of presentation: the conclusion is found at [239] while the reasoning which led to it is at [257] and [258], and not linked back to the conclusion. From the perspective of a reader coming to the decision without any knowledge of the case, the link between the reasons and the conclusion will be obscure; but as Smith LJ explained in Harris v CDMR Purfleet, that is not the test. We do not accept that the parties can reasonably claim to have been unable to work out why the F-tT reached the decision they did.” (Degorce v. HMRC [2015] UKUT 447 (TCC), §131, Hildyard J and Judge Bishopp).
Unspecified further findings of fact insufficient
“The FTT’s support for inferences and other findings by reference to unspecified further facts is not a proper exercise of the duty to give reasons and must be regarded as an error of law. A statement that the tribunal finds such facts as are necessary to support other findings or determinations is not itself a finding of fact at all and therefore contravenes the principles in Flannery.” (HMRC v. Pacific Computers Ltd [2016] UKUT 350 (TCC), §44 , Mann J and Judge Berner).
Short, practical questions call for short, practical answers
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“[14] Before going further, I have this general observation. This sort of question – a matter of classification - is not one calling for or justifying over-elaborate, almost mind-numbing legal analysis. It is a short practical question calling for a short practical answer. The Tribunal did just that.” (Proctor & Gamble UK v. HMRC [2009] EWCA Civ 407, Jacob LJ, re: are Pringles similar to potato crisps?).
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"[72] There was a hopeless attempt in this court to challenge the adequacy of the Tribunal's reasons. P&G's complaint was that they did not know why the Tribunal had decided the case against them. In my view, the judgment, read as a whole, as it ought to be, leaves the fair minded reader in no doubt as to why P&G lost the argument. I agree that the reasoning in the concluding paragraphs is concise. That is a commendation, not a criticism." (Proctor & Gamble UK v. HMRC [2009] EWCA Civ 407, Mummery LJ, re: are Pringles similar to potato crisps?).
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Unclear whether FTT rejected argument but failed to explain why or overlooked it
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“We agree with [HMRC] that FTT(2) is not altogether satisfactory. In particular, we accept his argument that what the judge said at [31] does not address the distinction HMRC were seeking to draw between the paras [21] and [22] students, liable in principle to pay the fee published in the College’s prospectus but who were eligible for partial or total remission on the one hand, and the para [23] students, liable to pay the published fee and who were not eligible for any remission, on the other. At the very least, he has failed to explain why he rejected the argument (if he did reject it) that a distinction was there to be drawn. It is, instead, unclear whether he rejected HMRC’s argument in his own mind but failed to explain why, or overlooked it. That failure amounts, in our view, to a material error sufficient to require intervention by this tribunal: see Pendragon plc v Revenue and Customs Commissioners [2015] STC 1825 at [44] ff and Weymont and another v Place [2015] EWCA Civ 289 at 4 ff. It does not, of course, necessarily follow that the conclusion in FTT(2) is wrong.” (HMRC v. Wakefield College [2016] UKUT 19 (TCC), §45, Barling J and Judge Bishopp).
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Complex questions require a coherent reasoned rebuttal
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"[32] ... There is no universal rule as to the extent of reasons that has to be given for a decision. That will depend on the nature of the issues in dispute. We quite accept that, where the factual dispute was about whether or not professional advice was taken, it was appropriate for the FTT to state that they accepted the evidence of the witness who confirmed that it was taken. However, the factual issues in dispute in this case were more extensive and, as we have stated, to produce a properly reasoned decision the FTT needed to show that it had engaged with the case that HMRC were presenting. It was not sufficient for it simply to say that it accepted Mr Orton was an honest witness who denied actual knowledge of any connection with fraud. We therefore conclude that the FTT’s decision on whether Beigebell had actual knowledge was inadequately reasoned.
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[35]... in order to be adequately reasoned, the FTT’s conclusion on means of knowledge would need at least to engage with HMRC’s case that the alternative explanation was not a reasonable one." (HMRC v. Beigebell Ltd [2020] UKUT 176 (TCC), Judge Richards and Judge Cannan)
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“Although we accept that in making a multi-factorial assessment it is not incumbent on a tribunal to “spell out item by item how each was weighed as if it were using a real scientist’s balance”, it remains necessary for the decision to contain “a summary of the Tribunal’s basic factual conclusion and a statement of the reasons which have led them to reach the conclusion which they do on those basic facts” (per Thomas Bingham MR in Meek v City of Birmingham District Council [1987] IRLR 250).” (HMRC v. Pacific Computers Ltd [2016] UKUT 350 (TCC), §44 , Mann J and Judge Berner).
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“…we reach the conclusion that the Judge has not given adequate reasons for rejecting HMRC’s submissions on this point. In particular, we conclude that: (1) the Judge’s treatment of HMRC’s alternative case was too brief; (2) the twenty points required much more by way of an intellectual exchange from the Judge than they received; (3) the twenty points did not receive a coherent reasoned rebuttal from the judge; (4) Mr Attenborough’s evidence, even as explained by the F-tT, did not amount to a rebuttal, much less a reasoned rebuttal, of those points; (5) the Judge ought to have formed his own assessment of the alternative case and was not able to decline to do so on the basis that he did not have expert evidence to help him.” (HMRC v. CCA Distribution (in administration) Ltd [2015] UKUT 513 (TCC), §118, Morgan J and Judge Herrington).
Critical gap in reasoning is error of law
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"[75] We are conscious of the need, as an appellate tribunal, not to be over-rigorous in our approach to decisions of the FTT. First instance judges should not be expected or required to deal with everything put before them at a hearing, by way of evidence and arguments. Nor should first instance judges be expected to set out their reasoning in laborious detail. In the present case however, and with due respect to the Judge, it seems to us that there is a critical gap in the reasoning of the Judge. The Judge has not explained how his reasoning in [FTT77-83] led him to the conclusion that the Strike Out Application should be refused.
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[78] Drawing together all of the above discussion, we reach the following conclusions, in terms of our analysis of the Decision.
(1) There is a critical gap in the reasoning of the Judge in the Decision. The Judge does not explain, either in the discussion section of the Decision or elsewhere in the Decision, how his reasoning in [FTT77-83] led him to the conclusion that the Strike Out Application should be refused.
(2) By reason of this gap, the reasoning in [FTT77-83], whether read in isolation or in the context of the remainder of the Decision, does not support the Judge’s conclusion that the Strike Out Application should be refused.
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[84] ... As we have explained, we consider that there is a critical gap in the reasoning of the Judge in the Decision. By reason of this gap, we also consider that the reasoning of the Judge in [FTT77-83] does not support the Judge’s conclusion that the Strike Out Application should be refused. If the first ground of appeal is understood as a complaint that the Judge went wrong in law in the Decision in these ways, we accept the first ground of appeal." (HMRC v. Tasca Tankers Limited [2022] UKUT 88 (TCC), Edwin Johnson J and Judge Andrew Scott)
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No discernible evidence that the FTT evaluated the relevant factors
"[51] We find the First-tier Tribunal materially erred in law for the following reasons. When construing assertions in the letter regarding zero-rating it failed to consider the letter as a whole, failed to consider relevant aspects of the proposed amended grounds of appeal and failed to take a highly relevant factor into account, namely the continuing claim to be entitled to recover input tax. We accept that the Upper Tribunal must be slow to interfere with elements of First-tier Tribunal’s evaluation but in this case there is no discernible evidence that the First-tier Tribunal evaluated the above aspects of the evidence or if it did so has not provided an explanation in the written reasons for the decision. Our view is that the assertion in the letter as construed by the First-tier Tribunal is – as the respondents put it in their correspondence – simply incomprehensible. On closer analysis of the letter and the proposed grounds of appeal, the letter clearly cannot be construed as the appellant abandoning its case that its supplies were zero-rated. Such a conclusion, in our view, is inconsistent with the evidence and therefore the Tribunal’s finding that the appellant could not succeed was irrational." (G B Fleet Hire Limited [2021] UKUT 225 (TCC), Judge Ramshaw and Judge Andrew Scott)
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Decision not sustainable on the basis of reasons actually given​
"[23] The FTT referred to the three stage approach in Martland, and purported to apply it. In doing so, it expressed the view that the Appellant would suffer “little prejudice” (presumably if permission were denied). It did not explain the basis of this view. If it meant that it considered there was little prejudice for the Appellant in having to make immediate payment of the amounts in issue (which the FTT recorded as £65,463) then it is difficult to see how it reached this conclusion (and there is no explanation of it in the Decision). If, as is perhaps more likely, it meant that the prejudice to the Appellant was small because it considered the merits of his underlying appeal to be weak, it did not actually say so, nor did it explain why it considered the underlying appeal to be weak.
[24] As was made clear in Martland, “any obvious strength or weakness” of the underlying appeal could be taken into account, as an Appellant with an unarguably strong underlying appeal would clearly suffer greater prejudice than an Appellant with a hopeless appeal if permission to pursue it belatedly were refused. Here, the FTT reached the view that “the merits of the appeal succeeding are at first blush dim”, but without properly explaining why.
[25] We therefore consider that the Decision contains errors of law, for the interlinked reasons that (a) it reached a decision which no tribunal, acting judicially and properly instructed as to the relevant law, could have reached on the basis of the reasons actually given; and (b) it failed to provide adequate reasons for the decision which it reached." (De Silva v. HMRC [2021] UKUT 275 (TCC), Judge Poole and Judge Greenbank, underlining original)
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Inferring reasoning (must be plain)
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“While it is plain that in various respects they preferred Mr Chandler's evidence and analysis to that of Mr Parish it does not follow that they accepted all his reasoning. The terminology of this part of the Decision does not really admit of the inference that they accepted it in this area. It is just not plain enough that they did. They have not set out their reasons for getting to their conclusion, and the terms of the Decision suggest they thought it was a matter of simple logic with no-one arguing otherwise.” (Greene King Plc v. HMRC [2014] UKUT 0178 (TCC), §69).
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Looking at skeleton arguments and order/direction
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“I am unable to discern from a combination of the written reasons and the skeleton argument put forward on behalf of IA the particular considerations which led Judge Demack to conclude that it was unfair to the appellants, so unfair as to require exclusion of evidence that was prima facie admissible and potentially helpful…So the next consideration is whether one can discern a rational basis in the redactions themselves for cutting out that part of Mr Fletcher's report.” (HMRC v. IA Associates Ltd [2013] EWHC 4382 (Ch), §§67…68, Nugee J).
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Duty of advocate to raise inadequacies
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“…it is the responsibility of the advocate, whether or not invited to do so by the judge, to raise with the judge and draw to his attention any material omission in the judgment, any genuine query or ambiguity which arises on the judgment, and any perceived lack of reasons or other perceived deficiency in the judge’s reasoning process.” (Re A and L (Children) [2011] EWCA Civ 1205, §16).
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Lack of clarity does not stop ground being raised
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“Nonetheless, we take the view that this ground of challenge is open to HMRC pursuant to its ground of appeal that the Judge paid “insufficient regard” to its alternative case. We consider that on a fair reading, this formulation of the challenge allows HMRC to argue that the way in which the Judge dealt with its alternative case was “insufficient” in that the Judge gave inadequate reasons for his dismissal of that alternative case.” (HMRC v. CCA Distribution (in administration) Ltd [2015] UKUT 513 (TCC), §108, Morgan J and Judge Herrington).
Judge should consider providing additional reasons in response to application to appeal
“If an application for permission to appeal on the ground of lack of reasons is made to the trial Judge, the Judge should consider whether his judgment is defective for lack of reasons…If he concludes that it is, he should set out to remedy the defect by the provision of additional reasons refusing permission to appeal on the basis that he has adopted that course. If he concludes that he has given adequate reasons, he will no doubt refuse permission to appeal.” (English v. Emery Reimbold & Strick Ltd [2002] EWCA Civ 605, §25; see also Re A and L (Children) [2011] EWCA Civ 1205, §17).
Remission for reasons/UT asking for reasons
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See Q7: Unfair conduct of trial
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“The delay between hearing and appeal will normally be too long to make a remission to the trial Judge for further reasons a desirable course. The same is not true of the position shortly after judgment has been given…If an application for permission to appeal on the ground of lack of reasons is made to the appellate court and it appears to the appellate court that the application is well founded, it should consider adjourning the application and remitting the case to the trial Judge with an invitation to provide additional reasons for his decision or, where appropriate, his reasons for a specific finding or findings. Where the appellate court is in doubt as to whether the reasons are adequate, it may be appropriate to direct that the application be adjourned to an oral hearing, on notice to the respondent.” (English v. Emery Reimbold & Strick Ltd [2002] EWCA Civ 605, §22…§25).
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“There are exceptional cases in which, on a “lack of reasons appeal”, this court may, before deciding the appeal and in order to avoid a possibly unnecessary re-trial, seek from the trial judge amplification of the reasons for the appealed order.” (Space Airconditioning plc v. Guy [2012] EWCA Civ 1664, §8).
No point if judge has already decided not to amplify judgment
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“There is no point in remitting the matter to the judge for her to amplify her judgment, as she has already declined to do that when the error was pointed out and she decided not to make an amendment. If she thought it was a typographical slip, she would have said so and dealt with it accordingly by omitting the word “not” or re-writing that paragraph of the judgment. If she wished to amplify her judgment, she could have done that by withdrawing it at that point for reflection and for consideration of a possible amendment before the order was entered, but she decided that the judgment should remain as it was.” (Space Airconditioning plc v. Guy [2012] EWCA Civ 1664, §61).
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Risk of ex post facto rationalisation
“There is some force in these objections by CCA. It would have been better if, from the outset, HMRC had made it more clear that it intended to challenge the adequacy of the Judge’s reasons in this respect. If that had been done, then the Judge might have been prepared to give further reasons in relation to [394] to [395]. In view of the passage of time since the Decision was released and in view of the risk of ex post facto rationalisation by way of further reasons, we do not think that it would be fair to the Judge or to HMRC to ask the Judge to supply further reasons at this stage.” (HMRC v. CCA Distribution (in administration) Ltd [2015] UKUT 513 (TCC), §108, Morgan J and Judge Herrington).
Burns-Barke procedure in employment tribunals
“Even if there were no power to request further reasons pursuant to rule 30, the employment appeal tribunal would in our view be acting lawfully in inviting the employment tribunal to clarify, supplement or give its written reasons. As we have said, there is no prohibition in the statute or rules against such a request.” (Barke v. SEETEC Business Technology Centre Ltd [2005] EWCA Civ 578, §29).
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"The procedure is available where the EAT considers that there is possibly an inadequacy in the ET's reasons for its decision. The EAT may, before it finally decides the appeal, refer specific questions to the ET at the preliminary hearing of the appeal, requesting it to clarify or supplement its reasons where no reasons were given or where the reasons given were inadequate. The purpose of the procedure is to give the ET the opportunity of fulfilling its duty to provide adequate reasons for its decision without the inconvenience that might be involved in the EAT allowing a reasons challenge to the ET decision under appeal and having to remit the case to the ET for a further hearing. Under the procedure developed by the EAT and this court the ET can be asked before the hearing of the appeal to supply, if it is possible to do so, the reasons for which the request is made…It is not, however, desirable for the ET to do more than answer the request. The ET should not, for example, advance arguments in defence of its decision and against the grounds of appeal. It must not engage, or appear to be engaged, in advocacy rather than adjudication.” (Woodhouse School v. Webster [2009] EWCA Civ 91 §§26…27).
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Consequences of insufficient reasons
See also R7: Outcome of appeal
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Error of law
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"As to HMRC’s submission that any error regarding inadequacy of reasons was not material, this does not detract from such inadequacy constituting an error of law. There is also the difficulty that, without knowing the FTT’s reasoning for its conclusion, we cannot say with any confidence what difference the points the appellant raised, but which were not considered, would have made to the outcome of the decision. The error being a material one, we consider we should set aside the Decision." (Conservatory Roofing UK Limited v. HMRC [2022] UKUT 182 (TCC), Judge Raghavan and Judge Brannan)
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Remit if not apparent why judge reached decision
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“Where permission is granted to appeal on the grounds that the judgment does not contain adequate reasons, the appellate court should first review the judgment, in the context of the material evidence and submissions at the trial, in order to determine whether, when all of these are considered, it is apparent why the Judge reached the decision that he did…If despite this exercise the reason for the decision is not apparent, then the appeal court will have to decide whether itself to proceed to a rehearing, or to direct a new trial.” (English v. Emery Reimbold & Strick Ltd [2002] EWCA Civ 605, §26)
"[35] The next question is whether we should remit the decision to the FTT or re-decide the matter ourselves. As we have already mentioned, the Decision in our view lacked a clear set of findings of fact, and while we were taken to excerpts of the evidence that were before the FTT, we did not hear the live evidence, which clearly went beyond the terms of the Mr Messenger’s one page witness statement. There is no comprehensive account of it that was before us because as, understandably, given the scale of the case, no transcript was taken. With some reluctance, given the inevitable extra cost and delay, we consider we must remit the appeal to be fully re-determined by the FTT. This will be to a new FTT panel (the FTT judge who heard the matter, nearly two years ago now, having since retired)." (Conservatory Roofing UK Limited v. HMRC [2022] UKUT 182 (TCC), Judge Raghavan and Judge Brannan)
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Not clear whether the judge addressed his/her mind to a point at all (remit)
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“the judge’s determination necessarily implies a finding of fact that the land was an asset of the golf partnership. In some circumstances an implication of that kind might be enough. Here, we do not think it is, because it is not apparent from the decision that the judge addressed her mind to the point at all, and in consequence we cannot be confident that she did in fact make such a finding on the evidence before her…All one can safely say is that the documents do not speak for themselves and lead to a clear answer. For that reason it is not possible for us to remake the decision ourselves, and we must remit the matter to the First-tier Tribunal.” (Wrag Barn Gold & Country Club v. HMRC [2012] UKUT 111 (TCC), §§40 - 41).
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UT refusing to remit to the same FTT for further reasons where FTT failed to understand party's case
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"[59] Beigebell argued that if, contrary to its arguments, we found errors of law in the Decision, the appropriate direction would be to remit the appeal back to the same FTT with a direction that they should give further reasons for their decision. We will not follow that course. Having allowed HMRC’s appeal on Grounds 2 and 3, we have identified flaws in the Decision that are not confined to the extent of the FTT’s reasons. Rather, as we have concluded, the FTT decided the “means of knowledge” question by applying the wrong test. It also made its overall decision following a material error as to whether the existence of the “channel model” was in dispute or not in circumstances where the “channel model” was at the heart of Beigebell’s explanation as to why it neither knew, nor should have known, that its transactions were connected with fraudulent evasion of VAT. We do not consider that these deficiencies could be remedied simply by the same FTT providing further reasons.
[60] In any event, the FTT’s failure to provide reasons was not restricted to a discrete area. Rather, as we have explained, the lack of reasons suggested that the FTT had not engaged with HMRC’s case and indeed we have a very real concern that the FTT might not have fully appreciated the nature of HMRC’s case. If the FTT simply provided further reasons for an unchanged conclusion, the concern that HMRC’s case was not properly addressed, and perhaps not properly understood, would remain." (HMRC v. Beigebell Ltd [2020] UKUT 176 (TCC), Judge Richards and Judge Cannan)
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UT examining decision itself to identify what conclusions could be drawn
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"[92] We accordingly remake the FTT Decision. The new decision adopts in its entirety the decision the FTT made but incorporates by way of addition the reasons we have set out above at [76] to [79] as to why the FTDs could not be taken at face value and did not therefore mean possession and control of the goods had been divested by Award. The remade decision accordingly concludes that Award’s appeal against the assessment is dismissed." (Award Drinks Ltd (in liquidation) v. HMRC [2020] UKUT 201 (TCC), Judge Raghavan and Judge Thomas Scott)
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“The absence from the F-tT’s decision in this case of clear reasoning has, therefore, made it necessary for us to examine the evidence ourselves in some detail in order to determine what conclusions the F-tT could reasonably have drawn from it.” (Charles v. HMRC [2014] UKUT 328 (TCC), §28).
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Reading transcript no substitute for live evidence where credibility at issue
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"[61] However, we regard that as unworkable. Reading a transcript is no substitute for hearing live evidence, particularly when questions of credibility are in issue." (HMRC v. Beigebell Ltd [2020] UKUT 176 (TCC), Judge Richards and Judge Cannan)
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Insufficient reasons re point of law cured by appeal
"[107] We agree with Mr Boch that the FTT did not give adequate reasons for its conclusion on this issue. However, that does not mean that this ground succeeds, because the deficiency in the FTT’s decision has been cured by the opportunity given to Mr Boch in this appeal to argue why, as a matter of law, the FTT’s conclusion was wrong. We have rejected that argument, for the reasons given above, in relation to Ground 1(a). In those circumstances, we consider that the position is analogous to that in the recent decision of this Tribunal (with which we agree) in Michael and Bridget Brown v HMRC [2022] UKUT 298 (TCC), where the Tribunal said, at [76]:
In terms of fairness to Mr and Mrs Brown, they have had the opportunity of arguing the merits of the proposition that there was chargeable consideration under s 45(3)(b)(ii) before us. Insofar as there may have been an error of law on the part of the FTT in deciding the case on that basis without giving Mr and Mrs Brown the opportunity of making submissions on the point, that error will in effect have been cured by the point being fully argued before this Tribunal. That is, of course, subject to there having been no prejudice to Mr and Mrs Brown, for example, as a result of them not having had the opportunity of adducing further evidence that would support their case.
[108] In conclusion, the FTT did give sufficient reasons for its decision, those reasons were specific rather than generic, and the Appellant would have been able to understand why it had lost its appeal. The only exception is that the FTT did not adequately explain its conclusion on accessibility, but that has been cured in this appeal. The appeal under Ground 3(c) is therefore dismissed." (The How Development 1 Ltd v. HMRC [2023] UKUT 84 (TCC), Judge Thomas Scott and Judge Brannan)
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