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H4: Undertakings

Taxpayer can rely on undertakings given to the Court

Taxpayer can rely on undertakings given to the Court

“For HMRC it was submitted that the undertaking was given to the Court, not the Company, and could not be relied on by the Company. This argument was rejected, and rightly so, by the FTT and I say no more about it.” (Spring Salmon Ltd v. HMRC [2016] UKUT 313 (TCC), §27 Lord Glennie)
 

Undertaking restricting the scope of HMRC’s enquiries/assessments

“On that basis HMRC are precluded by their undertaking from seeking to claim the sums which are the subject of this appeal…HMRC contended, in effect, that the 2010 undertaking point only affected the £900,000 PAYE. I do not agree. I accept the argument for the Company that it also affects the sum claimed in respect of NIC. I hold, therefore, that the appeal succeeds in its entirety. The PAYE determination and the NIC decision under appeal are both reduced to nil.” (Spring Salmon Ltd v. HMRC [2016] UKUT 313 (TCC), §§38…40 Lord Glennie see also Spring Capital Ltd v. HMRC [2015] UKFTT 0066 (TC), §§272 - 282)
 

Undertaking restricting the scope of HMRC’s enquiries/assessments

Interpret as a legal document

“The undertaking was an undertaking given to the Court. It should be construed in the same way as any legal document, adhering as far as possible to the plain meaning of the words used in the way in which they would have been understood by the interested parties. In circumstances such as prevailed at the time the undertaking was given, it cannot have been intended or understood in an unduly technical sense, containing traps for the unwary…The FTT’s argument that “assessments” in this final sentence does not cover a Notice of Determination (for PAYE) or a Notice of Decision (for NIC) smacks of over-literalism. I cannot accept that the undertaking was intended to draw such fine semantic distinctions.” (Spring Salmon Ltd v. HMRC [2016] UKUT 313 (TCC), §37 Lord Glennie)
 

Interpret as a legal document

Rights of third parties 

“It is clear to me that the Undertaking confers no rights on the appellant. The Undertaking was given in relation to proceedings to restore SSS to the register. The appellant was not a party to those proceedings. The whole tenor of the wording of the Undertaking reflects the context in which it was given i.e. outstanding enquiries into the tax affairs of SSS.” (Spring Capital Ltd v. HMRC [2015] UKFTT 0066 (TC), §279).
 

Rights of third parties 

Consequences of taxpayer not complying with undertaking: unclear what the Tribunal can do

“Mr Tager’s breaches cannot, however, be simply ignored. I invite the parties to provide written submissions about the action, if any, which I should take: HMRC within 14 days of the release of this decision, and Mr Tager to respond within 7 days thereafter.” (HMRC v. Tager [2015] UKUT 40 (TCC), §68, Judge Bishopp)
 

Consequences of taxpayer not complying with undertaking: unclear what the Tribunal can do

Undertakings cannot be varied, only released​ (possibly subject to conditions)

 

"[5] All three lower courts adopted without demur the wife’s description of her application as being to “vary” her undertaking. But her description betrays a conceptual confusion which it is as well to dispel as this early stage. An undertaking is a solemn promise which a litigant volunteers to the court. A court has no power to impose any variation of the terms of a voluntary promise. A litigant who wishes to cease to be bound by her (or his) undertaking should apply for “release” from it (or “discharge” of it); and often she will accompany her application for release with an offer of a further undertaking in different terms. The court may decide to accept the further undertaking and, in the light of it, to grant the application for release. Equally the court may indicate that it will grant the application for release only on condition that she is willing to give a further undertaking or one in terms different from those of a further undertaking currently on offer. In either event the court’s power is only to grant or refuse the application for release; and, although exercise of its power may result in something which looks like a variation of an undertaking, it is the product of a different process of reasoning." (Birch v. Birch [2017] UKSC 53)

Undertakings cannot be varied, only released​ (possibly subject to conditions)
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