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Procedure.Tax
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M23: Adding parties
FIRST-TIER TRIBUNAL
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Power to add
(2) The Tribunal may give a direction adding a person to the proceedings as a respondent.
(3) A person who is not a party to proceedings may make an application to be added as a party under this rule.
(4) If the Tribunal refuses an application under paragraph (3) it must consider whether to permit the person who made the application to provide submissions or evidence to the Tribunal.” (FTT Rules, r.9(2) – (4)).
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"[13] The Tribunal's power to add a party as a respondent is contained in Rule 9(2) of the Tribunal Rules. Any person who is not a party may apply to be added (Rule 9(3))." (Uberdev Limited v. HMRC [2024] UKFTT 100 (TC), Judge Vos)
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Person cannot be added as an appellant
“…in Ryan Sampson [2014] UKFTT 179 Judge McKenna added a party to an appeal as an appellant. However [that] case related to an appeal against a letter of review addressed to two people whose property had been seized. It appeared that the tribunal administration had treated the appeal is being by one of them only. This was a case either of the correction of an administrative mistake under paragraph (1)(a) – the wrong person being named as a party – or where an alternative would have been to consolidate to appeal the appeals of the two persons affected…I have come to the conclusion that rule 9 does not confer on this tribunal a power to add a person as an appellant.” (Space Maker Storage 2 Ltd v. HMRC [2014] UKFTT 296 (TC), §§33…34, Judge Hellier – relied particularly on the definition of appellant in r.1(2) as the person who starts proceedings).
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Tribunal will notify/join persons with a clear interest
“In common with the Tribunal’s usual procedure in such appeals, the second respondent (having a clear interest in the outcome of the appeal, being the person whose entitlement to statutory sick pay was under consideration) was informed of the appeal and that she would be joined as second respondent unless she object.” (Brian Cleaver v. HMRC [2014] UKFTT 1075 (TC), §3).
No set conditions - case management decision
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"[14] The Tribunal Rules do not impose any conditions which must be satisfied before a party may be added as a respondent. Nor do the Rules giver any guidance as to what factors should be taken into account. Essentially, this is a case management decision (see the decision of the Upper Tribunal in Pierhead Drinks Limited v HMRC [2019] UKUT 7 (TCC) at [31]) to be taken in accordance with the overriding objective of dealing with cases fairly and justly set out Rule 2 of the Tribunal Rules. The need to focus on the interests of justice was stressed by the Tribunal in MCashback Software 6 LLP v HMRC [2013] UKFTT 679 (TC) at [85]." (Uberdev Limited v. HMRC [2024] UKFTT 100 (TC), Judge Vos)
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- Unlikely to add someone unless decision would have direct effect on them
"[15] Although the Upper Tribunal in Pierhead did not need to decide the point, it commented at [31] that it is unlikely that the First-tier Tribunal would add a person as a respondent unless the outcome of the appeal would have some direct effect on that person. Typically this would be as a result of some financial interest in the outcome of the appeal but it might also be some other effect such as reputational damage or the ability to conduct business.
[16] This is however only one (albeit an important) factor to be taken into account. It is necessary for the Tribunal to consider all other relevant circumstances in reaching its decision." (Uberdev Limited v. HMRC [2024] UKFTT 100 (TC), Judge Vos)
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- Indirect interest: will the person bring something to the party without imposing a disproportionate burden on other parties?
'[19] However, [Counsel for the applicant] observed that, in AerCap, Butcher J referred at [25] to the decision of Mann J in LB Holdings Intermediate 2 Limited v Lehman Bros Holdings Scottish LP 3 [2018] EWHC 2017 (Ch), a case where the financial interest of the entity applying to be joined as a party was only indirect. Mann J considered at [11] that, in the context of the relevant civil procedure rule (CPR 19.2(2)) the question to be asked is whether the proposed party "can, or might with sufficient certainty, be able to bring something to the party without at the same time imposing any unnecessary, unfair or disproportionate burdens on the other parties to the proceedings".
[20] Although the civil procedure rules are different in that there is a threshold requirement before a party can be added, Mann J had decided that the threshold was met and his comment was made in the context of the exercise by the Court of its discretion as to whether or not to add the applicant as a party. This is very similar to the exercise by the Tribunal of its discretion in this case and, in my view, the question proposed Mann J is a relevant factor to take into account in deciding whether a party should be added where the interest of the party seeking to be added is not direct or immediate." (Uberdev Limited v. HMRC [2024] UKFTT 100 (TC), Judge Vos)
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- Well resourced applicant with greater potential liability
"[53] Without intending any disrespect to those representing Uberdev and Rosetta, I accept that TAAG has a greater incentive (and is therefore willing to devote more resources) in ensuring that all possible arguments are put forward in support of the position that it is not an MSC provider and that it will no doubt leave no stone unturned in doing so, a point perhaps borne out by the fact that it has instructed Kings Counsel to appear on its behalf at the hearing of these applications.
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[74] In that respect, if there is someone who is able and willing to pursue an appeal which has merit as opposed to a risk that there will be no appeal even if there is merit, that is an important factor to take into account. This is particularly the case in circumstances where it may well be that these appeals are designated as lead cases and are therefore likely to have a significant impact on many other cases. It must be in the interest of justice that there is a proper determination of the appeals, including, if necessary, by the Upper Tribunal or by a higher court. " (Uberdev Limited v. HMRC [2024] UKFTT 100 (TC), Judge Vos)
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- HMRC will have to grapple with applicant's submissions at some point in any event
"[56] Looking first at HMRC there seems little doubt that they will at some point have to grapple with the submissions and evidence which TAAG wishes to put forward, whether this is in the context of the present appeals or any future appeal TAAG may make if it is issued with a transfer notice. There is therefore no significant additional burden for HMRC and in any event it is not disproportionate given the total amount of tax at stake in relation to all of TAAG's clients who have been issued with regulation 80 determinations. " (Uberdev Limited v. HMRC [2024] UKFTT 100 (TC), Judge Vos)
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- Reducing the likelihood of other litigants seeking to distinguish themselves from the decision
"[65] Looking first at the position if the Uberdev and Rosetta appeals are designated as lead cases, Mr Mullan submits that it is desirable to have all of the best evidence and submissions before the Tribunal in order to increase the likelihood of the decisions in those lead cases being binding on any related cases. In accordance with Rule 18(4) of the Tribunal Rules, the appellant in any related case may apply to the Tribunal for a direction that the decision does not apply to and is not binding on them. Mr Mullan suggests that it is much less likely that an appellant would seek to distinguish their case if they knew that the Tribunal had made its decision in the lead cases with the input available as a result of TAAG being a party.
[66] I accept this submission. If TAAG is not a party, it seems to me inevitable that an appellant in another case would be more likely to consider that there may be some basis in fact or law on which their case can be distinguished and that there are likely to be more appeals which the Tribunal has to deal with at a full hearing. Adding TAAG as a party is therefore likely to preserve the Tribunal's own resources." (Uberdev Limited v. HMRC [2024] UKFTT 100 (TC), Judge Vos)
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Relevant factors and examples
- Persons directly affected in their legal rights or financial position
“It seems to me that when two parties are in dispute in an action at law, and the determination of that dispute will directly affect a third person in his legal rights or in his pocket, in that he will be found to foot the bill, then the court in its discretion may allow him to be added as a party on such terms as it thinks fit. By so doing, the court achieves the object of the rule” (Gurtner v. Circuit [1968] 2 QB 587);
“We agree with Liquid that, CARS having so consented, it would be in accordance with the overriding objective (Rule 2: to deal with cases fairly and justly) to substitute CARS as the appellant going forward.” (Liquid Investments Ltd v. HMRC [2014] UKFTT 297 (TC), §35, Judge Kempster).
“The fact that a third party is directly affected, either legally or financially, by the outcome of legal proceedings is a legitimate consideration to be taken into account” (Barclays Bank plc v. CEC [1992] VATTR 229)
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- Persons with potential secondary liability for tax if appellant does not pay (MSC provider)
"[26] Instead, the interest relied on is the potential for TAAG to become liable for any tax which is found to be due. This arises as a result of the combined effect of Section 688A ITEPA and Regulation 97C PAYE Regulations.
[27] These provisions allow the tax in question to be recovered from the MSC provider in circumstances where HMRC believe that the tax cannot be recovered in full from the managed service company, they make a direction authorising the recovery of the tax from various categories of people mentioned in Section 688A(2) ITEPA (which includes an MSC provider) and they then issue a transfer notice to the person they wish to make liable. The transfer notice must generally be issued within 12 months of the date on which the Regulation 80 determination becomes final.
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[33] Whilst I have no evidence as to the likelihood of Uberdev and Rosetta being able to pay any tax which is ultimately found to be due nor whether there are any other clients of TAAG which may be unable to pay the tax, given the sheer number of Regulation 80 determinations issued by HMRC there must, on any view, be a high likelihood that there will be cases where the MSC is unable to pay and where HMRC will therefore seek to issue a transfer notice to TAAG.
[34] As Mr Mullan observes, were that not the case, it is of course unlikely that TAAG would seek to intervene in these proceedings. I consider that this conclusion is also supported by the reference made by HMRC in the meeting I have mentioned to the possibility of liability being transferred to TAAG.
[35] Mr Mullan notes that the potential tax liability for TAAG could be very significant. If Uberdev and Rosetta are representative of TAAG's clients, the liability of each client might be in the region of £25,000. However, the liability of TAAG could be many times that amount depending on how many of the thousand plus clients are unable to pay the liabilities which have been imposed on them.
[36] Taking all of this into account, in my view, TAAG does have a significant financial interest in the outcome of these appeals (bearing in mind the potential impact on other cases). The liability is direct in the sense it is TAAG itself which will have the liability should it crystalise. I accept that the liability could be described as hypothetical or contingent but, given HMRC's duty to collect any tax which may be due, I do not regard this as a significant issue." (Uberdev Limited v. HMRC [2024] UKFTT 100 (TC), Judge Vos)
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Applicant's own right of appeal outweighed by potential for inconsistent findings of fact
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"[37] However, whilst the existence of a significant financial interest is an important factor, as I have said, the Tribunal must take into account all other relevant factors.
[38] One particular point which I have already referred to is the fact that, if a transfer notice is issued to TAAG, it has its own right of appeal against the transfer notice and, in that context, would be able to put forward its own evidence and submissions in support of any such appeal.
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[43] [HMRC] suggested that the risk of inconsistent findings of fact is part of the nature of jurisdiction of the Tribunal although did not elaborate on this. It is not clear to me on what basis the jurisdiction of the First-tier Tax Tribunal would make it particularly prone to the possibility of inconsistent findings of fact but, even if that were the case, given the public interest in avoiding inconsistent findings, if there is a route available from a case management perspective which reduces this risk, it is something which a Tribunal should seriously consider taking into account all other relevant factors." (Uberdev Limited v. HMRC [2024] UKFTT 100 (TC), Judge Vos)
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- Persons joined to ensure that they are bound by findings of fact
“By directions dated 1 November 2013, Judge Barbara Mosedale joined Mr Thomas, Mr Stuart Thomas and SSS…Judge Mosedale made this joinder direction in order that these three additional parties should be bound by findings of fact made by this Tribunal in this appeal insofar as they were relevant to other appeals…” (Spring Capital Ltd v. HMRC [2015] UKFTT 0066 (TC), §6).
“My view is that…there is a real risk of inconsistent findings of fact being made in potential proceedings for restitution which Gnutti might decide to take either against HMRC or the appellant and which it is still in time to initiate; and that risk is such as to justify what is likely to be a quite limited increase in cost and expense for the appellant in these proceedings by adding a second respondent. While I accept that the risk of inconsistent findings can only be nullified if the Court hearing the subsequent proceedings were to find abuse of process, as res judicata will not apply, it seems a real possibility that such a court might find it abusive for Gnutti, if a party to these proceedings, to seek to re-open the question of whether the appellant repaid it the VAT when its associated company made the payment of $2 million.” (Bradonbay Ltd v. HMRC [2015] UKFTT 229 (TC), §65 – the question was whether the vendor/taxpayer had passed on the cost of paying VAT when selling a business, the purchaser)
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- Where subject matter of appeal has been validly assigned
“I consider that those words in Rule 9(1) are wide enough to include a change in circumstances consisting of a valid assignment of the subject matter of an appeal, and also that a substitution is necessary because the Appellant has assigned its claim to the Applicant.” (New Miles Limited v. HMRC [2012] UKFTT 33 (TC), §33, Judge Kempster – customs BTI obtained in wrong name; HMRC’s conclusion disputed; person actually affected substituted)
- Tax indemnities/warranties
“It would be a bizarre situation, in my judgment, should the appellants have to conduct the appeal on the basis of the material at present before them at the instance of the [indemnifying party], but that the [indemnifying party] could take their part in the appeal before the tribunal putting forward their own wholly different slant and conducting their own case differently from that of [the appellant].” … “Should they become necessarily involved in the appeal as a result of information given [to the Appellant], who have a duty to conduct the appeal in accordance with the undertaking, different considerations may arise” (Schwarz v. Aresta Ltd [1989] STC 230 at 234 - 235)
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- Supplier supporting HMRC’s position in appeal by customer
This application raises what appears to be a novel point of procedure. Should the tribunal join, as a party to a VAT appeal against a decision brought by a user of services, a taxpayer who approves of the decision and wants it upheld as being in his interest? Specifically the questions are, first whether the tribunal has power to join a third party which wants to be on the same side as the Commissioners and, secondly, if so, whether it should properly exercise its discretion and make such a direction?
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The fact that Visa International have made their staff and their documentary information available to the Commissioners for the purpose of providing evidence is not enough, as the tribunal sees this case developing, to secure the just determination of Barclays Bank's appeal. That evidence will, of course, provide the tribunal with primary facts many of which will be undisputed. The real dispute will centre on what the tribunal should properly infer from the primary facts in determining whether Visa International's services do or do not fall within the category of exempt financial services in Schedule 6 Group 5. In determining what inferences should be drawn from the primary facts there may, and very likely will, be more than two ways of looking at the matter. Visa International and the service it supplies are at the heart of the dispute. To exclude Visa International means shutting out an informed and experienced, though a necessarily partisan, viewpoint. Visa International's business affairs will be under scrutiny: it should have the opportunity to 'speak for itself' and perhaps even prevent the tribunal from drawing a wrong and ill-informed conclusion. The tribunal's opinion is that in its task of finding the facts and drawing the correct inferences from those facts, it would be much better equipped to do justice to the matter under appeal if Visa International were joined as a party. Expressed in the words of rule 19(3) it is in the view of he tribunal both necessary and expedient to have Visa International as a party to the appeal.
In reaching this conclusion, there are certain other features which the tribunal regards as reinforcing the case for Visa International's inclusion. One feature is that Visa International has a real interest in the matter in dispute. The fiscal implications to Visa International were explained by CSP Walsh in the passages from the affidavit summarised above. The fact that a third party is directly affected, either legally or financially, by the outcome of legal proceedings is a legitimate consideration to be taken into account in deciding whether that party should be joined. See Gurtner v Circuit ([1968] 2 QB 587).
Another feature is that this appeal is not a run-of-the-mill VAT appeal. It is an appeal by a user of services rather than by the supplier. The usual scenario is for the supplier to appeal against a ruling addressed to it. Joining the user as a party to the supplier's appeal would seldom be necessary or expedient." (Barclays Bank plc v. CEC [1992] VATTR 229)
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- Addition of person affected by CGT valuation/apportionment
See Chapter J1: Challenging direct decisions for SI 1967/149
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Cannot add a party without his/her consent
“I do not consider that the tribunal has power to compel an otherwise unwilling party to join an appeal as a third party…The Tribunal has no power or jurisdiction over that person unless either he has already appealed, in which case his appeal may if appropriate be joined with another party litigating the same matter, or he applied to be joined.” (Canterbury Hockey Club v. CCE VTD19086, §23)
“Rule 9(2) of the 2008 Rules gives the First-tier Tribunal a very broad power to add persons or bodies as respondents to proceedings, although a person or body should not, in my judgment, be added as a respondent without their consent unless the law requires it.” (ML v. Tonbridge Grammar School [2012] UKUT 283, §31)
Possible distinction between cases where adding a party is required to deal with case fairly and justly and where it is merely helpful:
“In many cases, such as that being deal with [in Tonbridge Grammar School], where it may be helpful to add another respondent, it may still be possible to deal with a case fairly and justly without doing so, and in those cases I would accept that the consent of the respondent should be obtained before being added.” (CM v. HMRC [2014] UKUT 272 (AAC), §11).
Adding a third party cannot be made a condition of an appeal
“I do not read rule 19(3) as empowering this or any other tribunal to make it a condition of the party’s right to appeal that a third party is joined” (Canterbury Hockey Club v. CCE VTD19086, §23).
Adding a party is possible even after the decision
“I consider that the First-tier Tribunal’s power to consider an application for joinder after judgment must be derived from a process of interpretation of rule 9 of the Tribunal Procedure Rules. I am satisfied that it is permissible to interpret rule 9 as permitting joinder following judgment. It seems to me that such an interpretation may be reached either by relying on the Court of Appeal’s decision in Prescott as persuasive authority from a higher court on a matter of procedure, or by praying in aid the overriding objective in order to achieve fairness and justice in the circumstances of the case, as did Judge Warren in Corke.” (Razzaq v. Charity Commission [2016] UKUT 546 (TCC), §12, Judge McKenna).
Procedure where person added​
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- Added party directed to provide statement of case
"The Tribunal now needs to make directions so that these appeals can be brought to a hearing as soon as possible. I indicated to the parties that it would make sense for TAAG to be directed to provide a statement of case (which it will be able to do relatively swiftly given that Mr Mullan indicated that most of the points it would wish to make are set out in its applications to be joined as a party) and that HMRC should be given an opportunity to reply to that statement of case. Uberdev and Rosetta should also be given an opportunity to respond to these further pleadings should they wish to do so." (Uberdev Limited v. HMRC [2024] UKFTT 100 (TC), Judge Vos)
- Costs (existing appellant)
“If the tribunal takes the exceptional course of admitting a third party, the discretion should, so far as practicable, be exercised in a way that causes the least possible disturbance to the Appellant and the way in which he conducts his appeal: on this basis the question of costs should be dealt with at the start…if the third party is normally to be kept harmless from having to pay the appellant’s costs it is only evenhanded that the appellant should be given similar protection.” (Barclays Bank plc v. CEC [1992] VATTR 229)
- Costs (third party)
“…having been joined as a third party on the basis that it was necessary or expedient to ensure the speedy and just determination of the appellant’s appeal, it would be hard to envisage circumstances in the context of a VAT appeal in which that third party should also be put at risk of paying the other parties’ costs. It would be otherwise if the third party offered to be at risk…” (Barclays Bank plc v. CEC [1992] VATTR 229)
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UPPER TRIBUNAL
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UT power to add interested party does not apply to tax appeals
"(1) The Upper Tribunal may give a direction adding, substituting or removing a party as an appellant, a respondent or an interested party.
(2) If the Upper Tribunal gives a direction under paragraph (1) it may give such consequential directions as it considers appropriate.
(3) A person who is not a party may apply to the Upper Tribunal to be added or substituted as a party." (UT Rules r.9(1) - (3))
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"[10] The Application made clear that the Applicants were not applying to be joined as appellants in the Hearing, and were not applying for the Barclays’ appeals to be transferred to this Tribunal under Rule 28 of the FTT Rules: see 2.3 and 6.7 of the Application.
[11] The Application is for the Applicants to be joined as “interested parties” to the Hearing..." (HSBC Electronic Data Processing (Guangdong) Limited v. HMRC [2021] UKUT 58 (TCC), Judge Thomas Scott)
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- Meaning of interested party
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“interested party” means—
(a) a person who is directly affected by the outcome sought in judicial review proceedings, and has been named as an interested party under rule 28 or 29 (judicial review), or has been substituted or added as an interested party under rule 9 (addition, substitution and removal of parties);
(b) in judicial review proceedings transferred to the Upper Tribunal under section 25A(2) or (3) of the Judicature (Northern Ireland) Act 1978 or section 31A(2) or (3) of the Supreme Court Act 1981 F27, a person who was an interested party in the proceedings immediately before they were transferred to the Upper Tribunal;
(c) in a financial services case or a wholesale energy case, any person other than the applicant who could have referred the case to the Upper Tribunal and who has been added or substituted as an interested party under rule 9 (addition, substitution and removal of parties);
(d) in a financial sanctions case, any person other than the appellant upon whom the Treasury has imposed a monetary penalty under Part 8 of the Policing and Crime Act 2017 in connection with the same matters as led to the decision that is the subject of the appeal and who has been added or substituted as an interested party under rule 9 (addition, substitution and removal of parties); and
(e) in a trade remedies case, any person other than the appellant who could have appealed to the Upper Tribunal and who has been added or substituted as an interested party under rule 9 (addition, substitution and removal of parties)" (UT Rules r.1(3))
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Limb (a) only applies to judicial review cases
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"[21] As to that construction, Rule 1(3) is clearly, and conventionally, structured so as to define in relation to a number of distinct types of proceedings in which the Tribunal has jurisdiction (at (a) to (e)) who can and cannot be an interested party. It would be extremely surprising if a freestanding category had been bolted by the draftsman onto the definition applying in non-transferred judicial review proceedings. The standard drafting approach would have been to create a separate category, either by way of an additional sub-paragraph in Rule 1(3), or by way of introductory wording, if the Applicants’ construction were correct. There would seem to be no good reason why a freestanding definition should be included in (1)(a) and not in another sub-paragraph. Secondly, the comma after “proceedings” is a clear indication that both Rule 28/29 and Rule 9 situations are those arising “in judicial review proceedings”. Thirdly, if the construction proposed by the Applicants and HSBC were correct, then either the references to Rule 9 in sub-paragraphs (c), (d) and (e) would be otiose or those subparagraphs would naturally have been expressed as limitations to a “freestanding” Rule 9 power. Finally, although I afford this less weight in reaching my conclusion, the construction proposed by the Applicants would mean that in all situations other than those referred to in (a) to (e) where the Upper Tribunal has jurisdiction the Tribunal has an unfettered discretion to add anyone at all as an interested party. I think it unlikely that that can have been the intention of the draftsman.
[22] I therefore conclude that this Tribunal does not have jurisdiction in this case to add the Applicants as interested parties." (HSBC Electronic Data Processing (Guangdong) Limited v. HMRC [2021] UKUT 58 (TCC), Judge Thomas Scott)
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But does have power to permit submissions from non-party
"[39] In Lobler v HMRC [2015] UKUT 0152 (TCC) the Chartered Institute of Taxation had made submissions in relation to the legislation relevant in that appeal. The CIOT was gathering information in relation to that legislation from interested parties and professional bodies with a view to making representations to the Treasury as to a possible change in law. The Tribunal directed under Rule 5(3)(d) that it should hear written and oral submissions from counsel for the CIOT.
[40] While the power in Rule 5(3)(d) may be relevant in circumstances similar to those in which a party applies to a court to be an intervener, I am not persuaded that it 10 should necessarily be construed by reference to the same restrictions. Barclays is not applying to be an intervener, the position of an intervener in the courts is well established, and tribunal rules are designed to be more flexible in their operation. Having said that, Lobler was an example of a situation of the sort described by Lord Hoffman." (HSBC Electronic Data Processing (Guangdong) Limited v. HMRC [2021] UKUT 58 (TCC), Judge Thomas Scott)
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- Not permitted to allow party to another appeal to seek to influence outcome
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"[41] In this case, I do not consider that the Tribunal should of its own initiative make a direction under Rule 5(3)(d) of the Rules permitting written or oral submissions from the Applicants. The reasons I have given above for refusing the Application militate against a decision to exercise discretion so as to make such a direction. It is apparent from the documents filed by the Applicants what submissions they would wish to make. Such submissions would not assist the Tribunal to understand the issues raised by the preliminary issues to be determined at the hearing. The position of the Applicants in making any submissions is far removed, for example, from the position of the CIOT in Lobler. The Applicants’ motivation is to have a say in the conduct and ambit of the Hearing and the terms of the Tribunal’s decision, for the reasons they give, and their status is that they are parties to another appeal before the FTT. I would decline to issue a direction permitting them to make submissions." (HSBC Electronic Data Processing (Guangdong) Limited v. HMRC [2021] UKUT 58 (TCC), Judge Thomas Scott)
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