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Q2: Errors of fact as errors of law

Identifying findings of fact

 

Evidence recorded without comment is assumed to have been accepted

"[52]...If Commissioners record evidence given by a witness without specific comment, the general practice of the courts on appeals from the Commissioners is to assume that the evidence was accepted." (Wood v. Holden [2005] EWHC 547 (Ch), Park J)

Identifying findings of fact

Foreign law: spectrum approach to intervening

See N6A: Foreign law

Foreign law: spectrum approach to intervening

Express findings of fact on issues it was unnecessary to decide not treated as obiter

 

Evidence recorded without comment is assumed to have been accepted

"(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)

Express findings of fact on issues it was unnecessary to decide not treated as obiter

Dispute as to what evidence was given

 

See R3: Upper Tribunal's Role

Dispute as to what evidence was given

General

​​

“An error of law may be disclosed by 

[1] a finding based on no evidence at all, 

[2] a finding which, on the evidence, is not capable of being rationally or reasonably justified, 

[3] a finding which is contradicted by all the evidence, or 

[4] an inference which is not capable of being reasonably drawn from the findings of primary fact.” (Megtian Ltd v. HMRC [2010] EWHC 18 (Ch), §11, Briggs J, paragraphing added).

 

"[17] (2) Where the FTT has made findings of fact or, in evaluating facts, has given weight to certain factors, the findings of the FTT can only be overturned where the UT concludes that the FTT’s fact finding process was flawed because either (i) irrelevant considerations were taken into account, (ii) relevant considerations were ignored or (iii) no reasonable tribunal, properly directed in law, could have reached that finding. The test in Edwards v Bairstow [1956] AC 14 HL applies."(Hargreaves v. HMRC [2022] UKUT 34 (TCC, Edwin Johnson J and Judge Jonathan Richards)

 

Complaints not amounting to errors of law 

 

“The question is not whether the finding was right or wrong, whether it was against the weight of the evidence, or whether the appeal court would itself have come to a different view.” (Megtian Ltd v. HMRC [2010] EWHC 18 (Ch), §11, Briggs J).

Must be raised as a distinct ground of appeal

 

“If it is to be challenged as a perverse finding of fact, then the perversity must be raised as a distinct ground of appeal. That is particularly important in the case of an appeal from a specialist tribunal, with whose expertise an appellate court should only interfere with caution…” (HMRC v. London Clubs Management Ltd [2012] STC 388, §73).

 

“If a factual finding by the FTT is challenged, I consider that this should be clearly stated in the Grounds of Appeal.” (Reed Employment v. HMRC [2013] UKUT 0109 (TCC), §41).

 

Not possible in relation to findings of fact supported by the appellant

 

“The Edwards v Bairstow challenge to those findings amounts in effect to a submission by Reed that no reasonable tribunal could or should properly have accepted its own description of the subject-matter of its repayment demands. That argument is, frankly, hopeless and it is somewhat surprising that it was advanced at all.” (Reed Employment v. HMRC [2013] UKUT 0109 (TCC), §44).

 

Inadequate reasons for decision leading to greater scrutiny

 

“We are also satisfied that the judge’s reasons for the adverse findings were inadequate. He did not find the witnesses to be liars by reason of their bearing or demeanour so we can form our own view on the transcript.” (Markem Corp v. Zipher Ltd [2005] EWCA Civ 267, §62)

 

Typically necessary to produce evidence available to fact finder 

 

“I accept Mr Brennan’s submission that, at least as a general rule, it is not possible to mount a perversity challenge unless the court is provided with the evidence which was before the fact finder. However, it may be possible mount such a challenge simply on the basis of the evidence recited and facts found in the judgment itself.” (Autoclenz Ltd v. Belcher [2009] EWCA Civ 1046, §41).

General

Edward v. Bairstow requires the appellate court to look at the totality of the findings of fact 

 

“To determine whether the Commissioners’ conclusion satisfied the test in Edwards v. Bairstow the court must look at the totality of the findings of fact and evidence before the Commissioners.” (HMRC v. Kearney [2010] EWCA Civ 288, §19).

“In our view [HMRC have] correctly characterised a large number of Reed’s factual appeals and in our view this also includes the considerable number, which although maintained we heard no oral submissions on, as a wide ranging and pernickety attack on the FTT’s findings amounting to the deployment of a “fine toothcomb” with the intention of discovering detailed grounds of purported criticism. We have attempted to stand back from this and look at the Decision as a whole when considering and largely dismissing Reed’s factual appeals.” (Reed Employment Plc v. HMRC [2014] UKUT 160 (TCC), §192, Proudman J and Judge Herrington).
 

Edward v. Bairstow requires the appellate court to look at the totality of the findings of fact 

Procedure to be followed by person challenging finding of fact

 

“the appellant must 
[1] first identify the finding which is challenged; 
[2] secondly, show that it is significant in relation to the conclusion; 
[3] thirdly, identify the evidence, if any, which was relevant to that finding; and 
[4] fourthly, show that that finding, on the basis of that evidence, was one which the tribunal was not entitled to make.” (Georgiou v. CEC [1996] STC 463, 476, Evans LJ, paragraphing added).

 

"[67]...Such an approach is, in itself, incapable of succeeding since it involves precisely the “island hopping” in a “sea of evidence” that is deprecated by Fage v Chobani. Moreover, it is in direct contravention of the proscription that Evans LJ expressed in Georgiou v C&E Commissioners [1996] STC 463 in the following terms..." (Hargreaves v. HMRC [2022] UKUT 34 (TCC, Edwin Johnson J and Judge Jonathan Richards)

Emphasis that attacks on findings of fact must be specific rather than general

 

“What is not permitted, in my view, is a roving selection of evidence coupled with a general assertion that the tribunal’s conclusion was against the weight of the evidence and was therefore wrong.” (Georgiou v. CEC [1996] STC 463, 476, Evans LJ)
 

Be alert to attacks on findings of fact disguised as errors of law 

 

“There is a well-recognised need for caution in permitting challenges to findings of fact on the grounds that they raise this kind 30 of question of law … It is all too easy for a so-called question of law to become no more than a disguised attack on findings of fact which must be accepted by the courts. As this case demonstrates, it is all too easy for the appeals procedure to the High Court to be misused in this way. Secondly, the nature of the factual inquiry 35 which an appellate court can and does undertake in a proper case is essentially different from the decision-making process which is undertaken by the tribunal of fact. The question is not, has the party upon whom rests the burden of proof established on the balance of probabilities the facts upon which he relies, but, was there evidence 40 before the tribunal which was sufficient to support the finding which it made? In other words, was the finding one which the tribunal was entitled to make? Clearly, if there was no evidence, or the evidence was to the contrary effect, the tribunal was not so entitled.” (Georgiou v. CEC [1996] STC 463, 476, Evans LJ).

 

“It is obviously important that the appellate tribunal scrutinises the grounds of appeal with care to be sure that they are not what Peter Smith J described in HMRC v Photron Europe Ltd [2012] UKUT 275 (TCC) as “a classic disguised factual challenge dressed up as questions of law”.” (HMRC v. Cooneen Watts and Stone Limited [2014] UKUT 31 (TCC), §69, Nugee J)

Procedure to be followed by person challenging finding of fact

No island-hopping approach to the evidence

 

"[17] (3) It is not open to us, as an appellate tribunal, to engage in an islandhopping exercise in a sea of evidence; see the well-known statement of Lewison LJ in Fage UK Ltd v Chobani UK Ltd [2014] EWCA Civ 5, at [114], and see also what was said by the UT in Carter & Kennedy v HMRC [2021] UKUT 0300 (TCC), at [24]. That is a particularly pertinent consideration in the present case, given the mass of documentary and oral evidence that was before the FTT. The documentary evidence ran to 17 lever arch files and the FTT heard oral evidence from seven witnesses (this number includes one of HMRC’s witnesses, Mr Symonds, who was called to give evidence, but was not cross-examined). In this hearing, we did not hear the witnesses, and we have been taken to only a small part of the documentary evidence which was before the FTT.

...

[67]...Yet it is clear from paragraphs [70] to [99] of the Decision that the FTT engaged in a detailed survey of a mass of contemporaneous documents and publications, by no means limited to the four documents on which Mr Hargreaves now relies. Therefore, Mr Hargreaves’ entire approach involved putting forward a small cross-section of the evidence that was before the FTT together with submissions as to why that small cross-section supported his case on the Practice Condition, without saying anything about the significant other evidence that clearly weighed heavily in the balance in leading the FTT to a different conclusion. Such an approach is, in itself, incapable of succeeding since it involves precisely the “island hopping” in a “sea of evidence” that is deprecated by Fage v Chobani..." (Hargreaves v. HMRC [2022] UKUT 34 (TCC, Edwin Johnson J and Judge Jonathan Richards)

No island-hopping approach to the evidence

Claim that witness evidence was unchallenged needs to be substantiated

 

"[132] In his skeleton argument, Mr Ridgway indicated that this evidence had been uncontested at the hearing before the FTT. In oral submissions he corrected this and acknowledged that there was no material available from which we could identify how this aspect of Mr Jackson’s evidence had been dealt with before the FTT. We know that Mr Jackson was cross-examined, however there is no transcript available, no agreed note of evidence of the advocates appearing before the FTT and no note of evidence from the FTT. Mr Ridgway did not appear before the FTT and Ms Choudhury did not appear before the FTT at the time the evidence was given. She was instructed only for the hearing in September 2019 which considered submissions on the Section 12D Issue.

[133] In those circumstances we cannot see any basis on which we can or should interfere with this part of the Decision..." (Allam v. HMRC [2021] UKUT 291 (TCC), Edwin Johnson J and Judge Cannan)

Claim that witness evidence was unchallenged needs to be substantiated

Approach to unchallenged evidence depends on the circumstances (not necessarily required to accept)

 

"[69] HMRC’s better answer to the appellant’s point, which we understand Ms Montes Manzano conceded in reply, is that even if the evidence was not regarded as challenged, the FTT was not bound to accept the evidence but could reach its own view on it in the light of the totality of the evidence. Mr Carey referred us to Peter Griffiths -v- TUI (UK) Ltd [2021] EWCA Civ 1442, which concerned whether the trial judge had to accept an expert’s “uncontroverted” report (“uncontroverted” was the term which the judge on first appeal had used, and which the Court of Appeal accordingly adopted, to mean there was no factual evidence undermining the factual basis of the report, no competing expert evidence and no cross-examination – see [34]). Asplin LJ, having surveyed the relevant authorities, rejected the suggestion that there was such a strict rule stating at [69] that “the approach 15 to such evidence all depends on the circumstances.”  Nugee LJ agreed with her conclusions and added this (at [81]):

“As a matter of basic principle it is the function of trial judges to evaluate all the evidence before them in reaching their conclusions on the factual issues.  That includes deciding what weight should be given to the evidence. I see nothing in the authorities that suggests that that obligation to assess the evidence falls away if it is “uncontroverted”; uncontroverted evidence still has to be assessed to see what assistance can be derived from it, viewed in the context of the circumstances of the case as a whole. Uncontroverted evidence may be compelling, but it may not be: it may be inherently weak or unhelpful or of little weight for other reasons.”      

[70] The totality of the evidence included Mr Harrison’s own evidence regarding the complex and demanding work tasks he carried out at the material times. That deals with his argument that there was no or insufficient evidence before the FTT to make its finding regarding Mr Harrison’s capability to manage his tax affairs."(Harrison v. HMRC [2022] UKUT 216 (TCC), Judge Raghavan and Judge Andrew Scott)

Approach to unchallenged evidence depends on the circumstances (not necessarily required to accept)

Appellate courts slow to interfere with overall assessment 

See also: Q1: Errors of law

“an appeal lies from the First Tier Tribunal to the Upper Tribunal and from the Upper Tribunal to the Court of Appeal on points of law only. In addition, such an appeal is circumscribed by the ordinary principles applicable to any exercise of appellate jurisdiction. One of these is that unless vitiated by some error of principle a decision based on the evaluation of competing factors will generally be respected.” (HMRC v. Pendragon plc [2015] UKSC 37, §35 – on the facts, however, the FTT had approached the question of what the essential aim of the transaction was “at too high a level of generality” and thus “did not answer the critical question” (§39)).

“Matters of weight are for the first instance tribunal, subject to an overall test of Wednesbury unreasonableness.” (BPP Holdings v. HMRC [2016] EWCA Civ 121, §40).

“The need for appellate caution in reversing the judge’s evaluation of the facts…is because specific findings of fact…are inherently an incomplete statement of the impression which was made upon him by the primary evidence…Where the application of a legal standard such as negligence or obviousness involves no question of principle but is simply a matter of degree, an appellate court should be very cautious in differing from the judge’s evaluation” (Biogen v. Medeva [1997] RPC 1 at 45, Lord Hoffmann, applied in HMRC v. Stoke By Nayland Golf and Leisure [2018] UKUT 308 (TCC), §106 - Judges Herrington and Poole); 

“…because the decision involves the application of a not altogether precise legal standard to a combination of features of varying importance, I think that this falls within the class of case in which an appellate court should not reverse a judge’s decision unless he has erred in principle” (Designer Guild v. Russell Williams [2001] 1 All ER 700, Lord Hoffmann); 

“Appellate courts have been repeatedly warned ... not to interfere with findings of fact by trial judges, unless compelled to do so. This applies not only to findings of primary fact, but also to the evaluations of those facts and inferences to be drawn from them. ... The reasons for this approach are many.” (Fage UK Limited v Chobani UK Limited [2014] EWCA Civ 5, §114, Lewison LJ, applied in Ingenious Games LLP v. HMRC, [2019] UKUT 226 (TCC), §58, Falk J).


 “Often a statutory test will require a multi-factorial assessment based on a number of primary facts. Where that it is so, an appeal court (whether first or second) should be slow to interfere with that overall assessment – what is commonly called a value judgment.”…”one can put the test for an appeal court considering this sort of classification exercise as simply this: has the fact finding and evaluating tribunal reached a conclusion which is so unreasonable that no reasonable tribunal, properly construing the statute, could reach?” (Procter & Gamble UK v. HMRC [2009] STC 1990, §9, §22, §60 – re: are Pringles similar to potato crisps?)

“A determination of the question whether a party has, or has not, acted unreasonably is, accordingly, not the exercise of a discretion, but a matter of value judgment. An appeal against such a judgment, on a question of law, needs to be approached with appropriate caution. As Jacob LJ observed in Proctor & Gamble UK v Revenue and Customs Commissioners [2009] STC 1990, at [7], it is the FTT which is the primary maker of a value judgment based on primary facts. Unless the FTT has made a legal error, for example by reaching a perverse finding or failing to make a relevant finding or misconstruing the statutory test) it is not for the appeal court or tribunal to interfere.” (Market & Opinion Research International Limited v. HMRC [2015] UKUT 12 (TCC), §16, Judges Berner and Powell - appeal against refusal to award costs for unreasonable behaviour).

Rockwater v. Technip [2004] EWCA Civ 381;  

Hardship application appeals

“In the context of a decision on a question whether the FTT is satisfied that the requirement to pay or deposit the VAT in dispute would cause the appellant to suffer hardship, that decision involves a value judgment or multi-factorial assessment…An appeal against such a judgment, on a question of law, needs to be approached with appropriate caution.” (HMRC v. Elbrook (Cash & Carry) Limited [2017] UKUT 181 (TCC), §§16…17, Marcus Smith J and Judge Berner)
 

Appellate courts slow to interfere with overall assessment 

Elementary error based on no evidence would be surprising

 

"[38] This reasoning respectfully appears to me to be open to criticism. First, given a finding by an expert tribunal which was ambiguously expressed, I would hesitate to attribute to the tribunal a conclusion which involved an elementary error on a matter falling squarely within its expertise and which, furthermore, had no basis in the evidence. It is clear from the FTT's decision that it understood that, as it said, "conceptually, profits and assets are different.". (Anson v. HMRC [2015] UKSC 44 , Lord Reed)

Elementary error based on no evidence would be surprising

Witness credibility

Slow to interfere

"[63] The final criticism made by the Court of Appeal was that the judge “could not rationally have reached the conclusion that Mr Perry, his wife and two sons had all given false evidence”: see per Gloster LJ at para 55. It is a very strong thing for an appellate court to say, from a review of the paper records of a trial , that the trial judge was irrational in concluding that witnesses were not telling the truth, all the more so when the trial judge gives detailed reasons for that conclusion in a lengthy reserved judgment, and those reasons do not disclose any failure by him to consider relevant materials, or any disabling failure properly to understand them. The credibility (including honesty) of oral testimony is, of all things, a matter for the trial judge.

[64] It is unnecessary to address in detail the reasons given by Gloster LJ for that finding of irrationality against the judge. It is sufficient to say that, while they constitute persuasive and forcefully expressed views about why she and her colleagues in the Court of Appeal, faced with the same materials, would have come to a different conclusion, they do not, separately or in conjunction, support a conclusion of irrationality as the only explanation for the judge’s contrary view. As the judge said, the question whether Mr Perry needed assistance in the performance of the relevant tasks following his retirement from mining was pre-eminently a matter to be proved, or not proved, by his oral evidence, with such support as he could muster from the oral evidence of his wife and two sons. It was, as the judge put it, a question of credibility. While there undoubtedly are cases where surviving documents point so clearly to the correct answer to issues of fact that the oral testimony of relevant witnesses is of subordinate importance, this is not one of them. Furthermore the surviving documents were, as was demonstrated during cross examination, generally hostile to Mr Perry’s case." (Perry v. Raleys Solicitors [2019] UKSC 5)

“It is well established that, where a finding turns on the judge’s assessment of the credibility of a witness, an appellate court will take into account that the judge had the advantage of seeing the witnesses give their oral evidence which is not available to the appellate court. It is therefore, rare for an appellate court to overturn a judge’s finding as to a person’s credibility. Likewise, where any finding involves an evaluation of facts, an appellate court must take account that the judge has reached a multi-factorial judgement, which takes into account his assessment of many factors. The correctness of the evaluation is not undermined, for instance, by challenging the weight the judge has given to elements of the evaluation unless it is shown that the judge is clearly wrong and reached a conclusion which he was not entitled to reach.” (Alexander Langsam v. Beachcroft LLP [2012] EWCA Civ 1230, §72, Arden LJ applied in Douglas v. HMRC [2021] UKUT 163 (TCC), §8(5) Judge Herrington and Judge Scott).

“An appellate court should also be slow to interfere with an assessment of the credibility of a witness.” (HMRC v. Stoke By Nayland Golf and Leisure [2018] UKUT 308 (TCC), §107 - Judges Herrington and Poole)

Greater scrutiny where dishonesty not based on demeanour 

“We are also satisfied that the judge’s reasons for the adverse findings were inadequate. He did not find the witnesses to be liars by reason of their bearing or demeanour so we can form our own view on the transcript.” (Markem Corp v. Zipher Ltd [2005] EWCA Civ 267, §62)

Assessment based on overall candour, not individual exchanges

“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 v. HMRC [2015] UKUT 405 (TCC), §83)
 

Witness credibility

Significant finding of fact

 

“Mr Glick observed that although Reed contend the finding is wrong he found it very difficult to see quite how it feeds into the decision. We agree and on that basis it fails the test in Georgiou that the error, if there is one, has any significance in relation to the conclusions in the Decision.” (Reed Employment Plc v. HMRC [2014] UKUT 160 (TCC), §176, Proudman J and Judge Herrington).

 

“…it is necessary to assess, first, whether the errors of fact alleged were plainly findings that the FTT, acting judicially and properly instructed, could not have made; and secondly, if unequivocally erroneous findings are demonstrated, whether it has then also been demonstrated that they infected the ultimate determination so as to render it perverse or unsafe. A negative answer at either stage negates any error of law.” (Edgeskill Limited v. HMRC [2014] UKUT 38 (TCC), §208, Hildyard J).
 

Significant finding of fact

Findings of fact based on no evidence/contrary to all evidence

"[45] It is clear the FTT erred in law by making a finding of fact on a relevant matter, that a payment had been made to Miss Jones when that was completely contrary to the bank statement evidence, and which then led it to positing a wrong assumption, about the nature of the subsequent £6,515.04 payment in issue." (Jones v. HMRC [2020] UKUT 229 (TCC), Judge Raghavan and Judge Greenbank)

“Finally in this category, Reed contends that the FTT’s finding in paragraph 65 of the Decision that Reed obtained legal advice about the terms of its contracts of employment once the first dispensation had been granted but the FTT did not discover its result was erroneous. Neither party was able to show us any evidence to support that finding so it appears that it was not open to the FTT to make it.” (Reed Employment Plc v. HMRC [2014] UKUT 160 (TCC), §177, Proudman J and Judge Herrington).

Settled practice as to tax questions still requires evidence 

“However, without any evidence to support that assertion, and without any evidence that the Revenue took the same view, there was no material before the Commissioners which could support a conclusion that a settled practice existed, let alone a settled practice which could properly be described as “the practice generally prevailing at the time”.” (HMRC v. Household Estate Agents Ltd [2007] EWHC 1684 (Ch), §58).

No fall back case submitted 

 

“It does not seem to me that this stance relieved HMRC of the need to put forward an intermediate case as to what the Respondent’s charge would have been, in case it were unable to make good a case that the rate would have been 15%...[The Tribunal] had no material on which to come to a conclusion on that, above all because no evidence had been adduced relevant to this issue, and no questions were addressed to Mr Cochrane on the point.” (Baines & Ernst Ltd v. HMRC [2006] EWCA Civ 1040, §68…69).

 

Examples

 

Finding the reason why the taxpayer was present in the UK

"[91] [HMRC] submitted that there was no evidence before the FTT to support its conclusion that the Taxpayer was “prevented from leaving the UK” on 18 or 19 December 2015 because she “needed to care for both her twin sister and her minor children”.

[92] We agree. The only evidence before the FTT about the reason why the Taxpayer considered she was unable to leave before 20 December 2015 was that “it took her three days to reach a point where she was satisfied that her twin sister was no longer at risk of taking her own life and that was the first opportunity that she could return to Dublin”. However, as explained above, that evidence was rejected by the FTT. 

[93] The FTT’s finding about the First Visit was thus not based on any evidence, and so constitutes an error of law.

...

[97] Given the lack of evidence, the FTT was unable to make findings of fact on a day-by-day basis that “the circumstances prevented the Taxpayer from leaving the UK” on each of 15, 16, 17 and/or 18 February 2016.  The failure to make findings of fact sufficient to support their conclusion was a further error of law." (HMRC v. A Taxpayer [2023] UKUT 182 (TCC), Green J and Judge Redston)

Finding that a purpose was a dominant purpose

 

“In my judgment, the challenge by HMRC to this finding, and to the consequential finding that use of the London house in the interim was simply a convenient byproduct of its retention, is well-founded. There is no proper basis in the evidence for a conclusion that there was a single, dominant or fundamental reason for the retention of the London house or for the implicit finding that the other reasons given by or on behalf of Mr Glyn were not of real significance. In particular, the evidence did not permit the FTT to conclude that interim use of the London house by Mr Glyn was not a real or significant reason for its retention.” (HMRC v. Glyn [2015] UKUT 551 (TCC), §63, David Richards J). 

 

Finding that a trader should have carried out particular further investigations

 

“In our judgment, the FTT erred in law in taking into account in its legal reasoning in relation to its alternative conclusion at paragraph [85] of the Second FTT Decision the further investigations mentioned at paragraph [215] of the First FTT Decision, because there were no grounds for it to do so. Those further investigations were not raised with S&I’s witnesses and were not the subject of any evidence, at least no such evidence was referred to. In our judgment, in the circumstances, there can have been no reasonable and proper basis for advancing them and relying upon them…In the absence of any evidence to the contrary, we doubt the possibility of any ordinary trader in S&I’s position being able to engage any independent third party to chase a transaction down the chain, even if such third party undertook not to divulge details of the suppliers’ identities.” (S&I Electronics Ltd v. HMRC [2015] UKUT 162 (TCC), §72, Asplin J and Judge Walters QC).

 

Findings that a trader should have required personal indemnities from its suppliers against the risk of fraud

 

“In the absence of any evidence to the contrary, we also doubt the practicality of S&I requiring from those behind its suppliers personal secured indemnities against the possibility of loss of input tax deductibility...But there was no evidence that such indemnities were generally sought or given and, in those circumstances, it cannot be assumed that any trader, honest or not, would have been prepared to give such an (open-ended) indemnity, rather than trade with another counterparty who did not demand it.” (S&I Electronics Ltd v. HMRC [2015] UKUT 162 (TCC), §73, Asplin J and Judge Walters QC).

 

Finding that trader could have established sales volume of product

 

“In the absence of evidence that an investigation of manufacturers’ accounts, trade magazines and websites available as at 11 April 2006 would in fact have revealed sales volumes of the relevant phone models, it was not open to the Tribunal to make the finding that it did.” (Annova Limited v. HMRC [2014] UKUT 28 (TCC), §29, Arnold J)
 

Findings of fact based on no evidence/contrary to all evidence

Finding of fact based on assumption rather than evidence

 

"[22] We agree with Mr Gordon that an inferential conclusion of fact has to be soundly based on primary facts found or admitted: it cannot just be an assumption. There was no evidence before the FTT on this occasion capable of justifying the inference that officers of HMRC decided the criteria on the basis of which computers were programmed to give effect to them, resulting in the service of the full return on Mr Marano. We are unclear how the FTT managed to reject the possibility, posited by Mr Vallis, that the computer had been programmed by persons other than HMRC staff; or indeed that the function had been outsourced." (Marano v. HMRC [2023] UKUT 113 (TCC), Fancourt J and Judge Tilakapala)

"[43] It was telling that when we asked Ms Choudhury what evidence there was to support a conclusion that there was a one week notice period, her response was that it was more what evidence was absent than what evidence there was. She submitted, in that regard, that Mr Jones was not necessarily saying that there was no notice period. Further, the FTT recorded at [7] of the Decision that Mr Jones “could not remember the details of Mr Mantides’ engagement”.

[44]  We acknowledge that the evidence before the FTT, in particular contemporary documentation, was distinctly lacking and incomplete. While neither party suggested that the contractual arrangements involving Mr Mantides, DRC and RBH were in the form of oral contracts, the standard terms and conditions on which Mr Mantides apparently contracted with DRC were not in evidence, nor was there any other form of documentary evidence that might shed light on the terms of that contract. Nor was there, apart from Mr Jones’ account, any evidence as to the terms of the agreement between DRC and RBH. The FTT was thus presented with a difficult task and strived to make findings of fact. However, the finding as to a notice period of one week appear to us to have been based more on assumptions and what might have been agreed rather than on evidence as to what actually was agreed between the parties." (George Mantides Limited v. HMRC [2021] UKUT 205 (TCC), Bacon J and Judge Cannan)

Finding of fact based on assumption rather than evidence

Wholly unreasonable / irrational / perverse findings of fact

 

“[An appeal court’s] duty is no more than to examine those facts with a decent respect for the tribunal appealed from and if they think that the only reasonable conclusion on the facts found is inconsistent with the determination come to, to say so without more ado…” (Edwards v. Bairstow [1956] AC 14, 39, Lord Radcliffe).

 

Contradictory findings of fact 

 

“At the very least, the reasoning surrounding the deposit required to be articulated, and as things stand the overall impression is contradictory. This was a crucial point, being the basis of the FTT’s findings about Mr Davis’ reasoning and intentions at the time of the purchase. The contradiction makes it impossible to see the basis of the decision, and accordingly the appeal must be allowed on this point.” (Davis v. Wiggett [2016] UKUT 358 (TCC), §31, Judge Elizabeth Cooke).

Perversity includes taking into account irrelevant considerations or not taking into account relevant considerations

 

“We use “perverse” in this sense: a decision is perverse if it took into account irrelevant considerations or failed to take into account relevant considerations, if it was made on the basis of a material mistake of law, or if it was a decision which no reasonable tribunal could have made on the evidence before it.” (Wright v. HMRC [2013] UKUT 481 (TCC), §25, Judges Hellier and Gort – in the context of a judicial discretion).

Wholly unreasonable / irrational / perverse findings of fact

Misunderstanding or ignorance of an established and relevant fact 

 

“…the time has now come to accept that a mistake of fact giving rise to unfairness is a separate head of challenge in an appeal on a point of law, at least in those statutory contexts where the parties share an interest in co-operating to achieve the correct result. Asylum law is undoubtedly such an area. Without seeking to lay down a precise code, the ordinary requirements for a finding of unfairness are apparent from the above analysis of CICB. 
[1] First, there must have been a mistake as to an existing fact, including a mistake as to the availability of evidence on a particular matter. 
[2] Secondly, the fact or evidence must have been "established", in the sense that it was uncontentious and objectively verifiable. 
[3] Thirdly, the appellant (or his advisers) must not been have been responsible for the mistake. 
[4] Fourthly, the mistake must have played a material (not necessarily decisive) part in the Tribunal's reasoning.” (E v. Secretary of State for the Home Department [2004] EWCA Civ 49, §66, paragraphing added).

 

“In brief, the uncorrected sentence in 39 of the judgment indicates that the judge may have proceeded on a mistaken view of the contents of Space's confidential customer documents. That mistake was material, because it is not possible to say, with sufficient confidence to uphold her judgment, that her findings and conclusions on other issues in the case would probably have been the same, even if she had not made that mistake. There is at least a real possibility that her mistaken view that the documents did not contain the discount information had an impact on other issues about Mr Guy's explanations for the print outs and his alleged use of the confidential information…I would allow the appeal on the ground that the decision appealed was either wrong or it was unjust as a result of an irregularity…I would direct that the matter be remitted to the High Court to be re-tried by a different judge.” (Space Airconditioning plc v. Guy [2012] EWCA Civ 1664, §§65…66).
 

Misunderstanding or ignorance of an established and relevant fact 

Improper use of hindsight


“In our view the FTT’s conclusion must have been made with the benefit of hindsight. Such a declaration, made in circumstances where all concerned were aware of the fact that traders in mobile phones applying to open an account with the bank were operating in a sector in which VAT fraud was prevalent but were unaware at that point of any issues with FCIB, could not properly lead to the inevitable inference that opening an account with FCIB was an indication that all those who dealt with it were engaged in MTIC fraud. The declaration would, at the time, properly be seen as an appropriate act of due diligence on the part of the bank.” (BTS Specialised Equipment Limited v. HMRC [2017] UKUT 159 (TCC), §149, Warren J and Judge Herrington)

Improper use of hindsight

Overplaying the evidence

 

“There is force in the submission that the FTT overplayed the effect of the evidence. The statement that the consistent evidence of Mr Glyn and several of their friends was that his attendance at regular social Sunday dinners and other similar occasions “virtually ceased” does not stand well with his oral evidence that he saw “all of my friends whenever I could”. Nor does it stand well with the significant number of other formal social occasions, often more than one each month, attended by Mr Glyn during 2005/2006. The evidence overall might justify the conclusion that there was, as the FTT found, a very significant loosening of his social ties, but the assessment of the evidence for the purpose of reaching this conclusion is not balanced.” (HMRC v. Glyn [2015] UKUT 551 (TCC), §90, David Richards J). 

Overplaying the evidence

Failing to draw an inference

 

“There is no logical difference, so far as the function of the court is concerned, between an omission to draw an inference and the making of an inference. In either case the inference or the failure to draw an inference is susceptible to review on appeal if it meets the test laid down in Edwards (Inspector of Taxes) v Bairstow [1956] AC 14, 36 TC 207. Accordingly if the Revenue can in this case show that the absence of a finding as to whether the 1984 deed was sham is inconsistent with the other facts found by the commissioners in my view the court would be entitled to reach the conclusion that the commissioners had committed an error of law in not making that finding… In my judgment if the court concludes that a particular finding is one which, if the commissioners had been asked to make a finding on that point, it would have been unreasonable for the commissioners not to have made, given their other findings, then the court can, in performance of its review function as laid down in Edwards (Inspector of Taxes) v Bairstow, supply that finding.” (Hitch v. Stone [2001] EWCA Civ 63, §§82…89, Arden LJ).

Failing to draw an inference

Failure to give proper weight may be an error

 

"[31] Taking account the narrow compass of the issue and available documentation before the FTT, that the e-mail chain was not considered in the context of live evidence but against the backdrop of the findings the FTT had already expressed in is earlier decision, we consider the justification for deference is perhaps not as strong as it might otherwise be. We are in no significantly worse position than the FTT to evaluate the sufficiency of the e-mail chain.

...

[40] By dismissing evidence which so clearly went to the essence of the issue the parties had raised before it – namely whether the deduction was made for tax and not something else - we consider the FTT erred in law." (Jones v. HMRC [2020] UKUT 229 (TCC), Judge Raghavan and Judge Greenbank)

“The FTT did not subject the evidence of PCL’s witnesses to scrutiny by reference to the factual evidence produced by HMRC and the inferences which HMRC submitted ought to be made from that evidence as a counterweight to the evidence of those witnesses. The failure to give proper weight to the evidence of the officers was, in our view, part and parcel of this overall failure in relation to the evidence.” (HMRC v. Pacific Computers Ltd [2016] UKUT 350 (TCC), §75, Mann J and Judge Berner).

 

However:

 

“[99] The court cannot substitute its own findings of fact for those of the decision-making authority if there was evidence to support them; and questions as to the weight to be given to a particular piece of evidence … are for the decision-making authority and not the court.” (Begum v. Tower Hamlets [2003] UKHL 5, cited in Douglas v. HMRC [2021] UKUT 163 (TCC), Judge Herrington and Judge Scott, §9(4))

“It is clear from [751] that the FTT did not ignore the evidence on the rejected traders but rather decided to attach little weight to it and more weight to the other evidence before it on the issue. Its finding that the due diligence on the rejected traders was  “pointless” was, in our view, a finding open to the FTT bearing in mind that it found that all of the due diligence undertaken by the Appellants was “window dressing”. In those circumstances, we characterise Mr Pickup’s challenge as an instance of what Evans LJ described in Georgiou as a “roving selection of evidence coupled with a general assertion that the tribunal’s conclusion was against the weight of the evidence and was therefore wrong.” It cannot be characterised as a finding which is made without any evidence to support it or where the only reasonable conclusion contradicted the finding. Mr Pickup’s challenge therefore fails to surmount the very high hurdle which the test in Edwards v Bairstow necessarily requires to be surmounted.” (BTS Specialised Equipment Limited v. HMRC [2017] UKUT 159 (TCC), §115, Warren J and Judge Herrington – compare this with Pacific Computers Ltd, above. Both are MTIC cases. In Pacific Computers Ltd, HMRC were the appellant, here the taxpayer was the appellant).

Failure to give proper weight may be an error

Unbalanced assessment of the evidence

 

"[28] ... if the FTT did wish to find that the delay was in part excused by Mr Gluchowski’s non-receipt of the review decision, it should at the very least have explained why it was accepting as true a vague statement in the Notice of Appeal that was not obviously corroborated by any first-hand evidence from witnesses. It should also have tested the relatively weak evidence of nonreceipt against evidence pointing in the other direction (for example the apparently successful prior correspondence with Mr Gluchowski, summarised at [6(4)] and [6(5)] above, that was referred to in the Border Force’s review decision). The FTT could also usefully have taken into account the obvious self-interest that Mr Turek had in stating that Mr Gluchowski did not receive the review decision of 19 February 2018." (Director of Border Reveneu v. Turek [2020] UKUT 167 (TCC), Judge Richards and Judge Greenbank)

“The evidence overall might justify the conclusion that there was, as the FTT found, a very significant loosening of his social ties, but the assessment of the evidence for the purpose of reaching this conclusion is not balanced.” (HMRC v. Glyn [2015] UKUT 551 (TCC), §90). 

However

"[9] These principles were recently confirmed by the Court of Appeal in Ras Al Khaimah Investment Authority v Azima [2021] EWCA Civ 349. The Court also emphasised (at [69]) the following points: “This court said in ACLBDD Holdings Ltd v Staechelin [2019] EWCA Civ 817, [2019] 3 All ER 429:

"[31] The mere fact that a trial judge has not expressly mentioned some piece of evidence does not lead to the conclusion that he overlooked it. That point, too, was made in Henderson at [48]: "An appellate court is bound, unless there is compelling reason to the contrary, to assume that the trial judge has taken the whole of the evidence into his consideration …"

[32] At [57] Lord Reed added: "I would add that, in any event, the validity of the findings of fact made by a trial judge is not aptly tested by considering whether the judgment presents a balanced account of the evidence. The trial judge must of course consider all the material evidence (although, as I have explained, it need not all be discussed in his judgment). The weight which he gives to it is however pre-eminently a matter for him, subject only to the requirement, as I shall shortly explain, that his findings be such as might reasonably be made. An appellate court could therefore set aside a judgment on the basis that the judge failed to give the evidence a balanced consideration only if the judge's conclusion was rationally insupportable." (Emphasis added.)" (Douglas v. HMRC [2021] UKUT 163 (TCC), §8(5) Judge Herrington and Judge Scott)

Unbalanced assessment of the evidence

Misunderstanding a party’s case on the evidence

 

“we have reached the view that the FTT failed properly to examine the evidence before it. That failure, in our judgment, can be attributed to a number of factors. First, the FTT had effectively closed its mind to a material part of the evidence put forward by HMRC which was unchallenged; secondly, the FTT misunderstood the case as put by HMRC, and accordingly asked itself the wrong question in relation to the evidence of orchestration and contrivance; and thirdly, in considering the evidence put forward by PCL, the FTT failed to test that evidence by reference to the surrounding circumstances, including in particular the orchestrated and contrived nature of the fraud with which 5 PCL’s transactions were connected…the FTT erred in law in failing properly to address HMRC’s case on the evidence, and in failing to give proper reasons for certain of its conclusions.” (HMRC v. Pacific Computers Ltd [2016] UKUT 350 (TCC), §§75…85, Mann J and Judge Berner).

Misunderstanding a party’s case on the evidence

Threshold for interfering: inevitably the same or entitled to reach same finding in any event

FTT entitled to reach same conclusion despite impugned finding of fact

“For the reasons given above, I have concluded that Annova’s first complaint is well-founded, but not its second. It follows that I must consider whether the Tribunal would have been entitled to conclude that Annova should have known that Deal 1 was connected with fraudulent evasion of VAT absent the impugned finding with regard to knowledge of sales volumes…In my judgment the answer to this question is that the Tribunal would have been entitled to reach the same conclusion as it did. If one considers the Tribunal’s reasoning in relation to Deals 2, 3 and 4 at [194]-[195], it seems to me that it justifies the same conclusion in relation to Deal 1.” (Annova Limited v. HMRC [2014] UKUT 28 (TCC), §§33…34, Arnold J)

Threshold for interfering: inevitably the same or entitled to reach same finding in any event

Failure to consider evidence not before the Tribunal is not an error of law

 

“The decision of the House of Lords in Edwards v. Bairstow…can only apply to the facts found by the tribunal on the evidence before it. There can be no error of law on the basis of the principles applied in Edwards v. Bairstow by reference to evidence that was not in front of the judge.” (Bramley Ferry Supplies Limited v. HMRC [2017] UKUT 214 (TCC), §14, Judge Bishopp and Judge Greenbank).

 

However, see R4: New evidence on appeal

Failure to consider evidence not before the Tribunal is not an error of law

Admissibility of FTT’s note of the evidence

“[Counsel for the Revenue], objected to the admissibility of the Special Commissioners' notes of evidence. In the circumstances we allowed [Counsel for the taxpayer] to refer to the notes de bene esse, without prejudice to the question of their admissibility. For my part, I regard it as unnecessary to decide that question since I am content to proceed on the assumption, favourable to the taxpayer, that the Special Commissioners made findings in the terms sought by [Counsel for the taxpayer].” (Schuldenfrei v. Hilton 72 TC 167 at 199).
 

Admissibility of FTT’s note of the evidence

Consequence of error of fact amounting to error of law​: must be material to decision

 

"[17](4) If we find that the FTT did make an error of law in relation to a particular issue, it does not necessarily follow that the FTT reached the wrong decision on the relevant issue. It is still open to us to decide that the FTT reached the right result, if the error of law was not material to the relevant decision of the FTT; see Henderson LJ in Degorce v HMRC [2017] STC 2226 at [103]." (Hargreaves v. HMRC [2022] UKUT 34 (TCC, Edwin Johnson J and Judge Jonathan Richards)

"[8](6) Even if criticisms of certain of the FTT’s findings of fact are made out, the Upper Tribunal may still consider whether the remaining findings, taken together with those matters relied upon by the FTT which were not challenged, nonetheless constituted a sufficient basis for the decision under appeal. The Upper Tribunal should not regard any finding of fact as disclosing an error of law where it is not significant in relation to the findings in the decision." (Douglas v. HMRC [2021] UKUT 163 (TCC), §8(5) Judge Herrington and Judge Scott)
 

"[20] We have also adopted the guidance set out in Stoke by Nayland Golf and Leisure Ltd v HMRC [2018] UKUT 0308 (TCC) at [109], as follows: 109. Furthermore, the fact that we may find that one or more of the FTT’s findings disclose errors of law on its part does not necessarily mean that we should allow the appeal and set aside the Decision. Section 12 TCEA provides that if the Upper Tribunal finds that the making of the relevant decision involved the making of an error on a point of law it “may (but need not) set aside” the decision. That language clearly indicates that we have a discretion in that respect. In our view, we should not exercise our discretion to set aside the Decision if we were satisfied, notwithstanding errors of law in the Decision, that there was a sufficient basis in the findings of the FTT which were fully reasoned and not subject to challenge to justify its conclusions that Leisure was a non-profit-making body. If we conclude that one or more of HMRC’s criticisms of the FTT’s findings of fact are made out, we may still consider whether the remainder, taken together with those matters relied upon by the FTT which were not challenged, nonetheless constituted a sufficient basis for the Decision. That is consistent with the passage from Georgiou quoted at [102] above: we should not regard any finding of fact as disclosing an error of law where it is not significant in relation to the finding in the Decision with which these appeals are concerned…" (Fiander v. HMRC [2021] UKUT 156 (TCC), Judge Scott and Judge Greenbank)

Consequence of error of fact amounting to error of law​: must be material to decision
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