TC09568 - [2025] UKFTT 00917 (TC)

The jurisdiction of the FTT, in particular the question whether it has any general judicial review or supervisory jurisdiction, was summarised, in language I cannot improve on, by the FTT in Gallagher's Windows, Doors & Conservatories Ltd v HMRC,  [2023] UKFTT 706 (TC) at [38], as follows:

However, it does not follow, from the FTT having no general judicial review function as such, that public law issues always fall to be ignored in determining tax appeals.  As the FTT observed, the FTT is a creature of statute and it is always open to Parliament to draft a right of appeal which allows a taxpayer to raise, and the FTT to consider, a public law issue. 

One question which arose in KSM Henryk Zeman SP Zoo v HMRC, [2021] UKUT 182 (TCC), was whether, when deciding whether a taxpayer can invoke public law grounds in a tax appeal, the tribunal should start on the basis that they can unless that entitlement is excluded by the statutory regime.  At [34] the Upper Tribunal emphatically stated that it considered the answer to that question to be "Yes". 

In Caerdav Limited v HMRC, [2023] UKUT 179 (TCC), the Upper Tribunal reached the conclusion (at [152]) that appeal grounds which concern public law arguments should generally be pursued in judicial review proceedings rather than before the FTT, but the FTT may have jurisdiction to consider appeal grounds based on public law arguments (such as legitimate expectation) depending on the statutory provisions under consideration.  The Upper Tribunal approached the question of statutory interpretation in that case on a more open basis, without the presumption in favour of allowing public law arguments to be found in Zeman.

We have already discussed a number of authorities which make it clear that, when addressing an appeal brought under section 83(1)(c) VATA (as to the amount of any input tax which may be credited to a person) and at least where certain parts of regulation 29 are concerned, the Tribunal has a supervisory jurisdiction; it can decide whether HMRC has exercised a discretion that the statute undoubtedly gives it in accordance with public law principles. An example of a part of regulation 29 where this approach operates is HMRC’s ability to allow a taxpayer seeking to recover input tax to adduce other evidence (i.e. evidence not of a type in the list of primary evidence to be held by a person claiming input tax – here the C79, in a purely domestic context a VAT invoice). In line with those authorities, HMRC accept here that Ground (4), which engages these provisions, is an issue the Tribunal has jurisdiction to consider. Even here, the Tribunal’s jurisdiction is not unlimited. It can only take public law issues into account when deciding the amount of input tax that may be credited to a person; public (or other non-VAT) law considerations cannot result in an amount which is not input tax being treated as input tax.

Mr Hayhurst says that Ground (1) is quite different from Grounds (2) and (4) in that there is no decision by an individual HMRC officer here to do (or not do) anything in relation to ICL. All that HMRC did was tell ICL that it could not recover input tax as it did not hold the document (the C79) HMRC required a taxpayer relying on regulation 29(2)(c) to hold and that it was now too late for ICL to take the step (amending the import declaration) necessary for it to obtain a C79.

HMRC had previously taken, and clearly articulated (see [31] above), a policy decision of general application as to what an importer needed to do to recover as input tax VAT paid on importation. The link between the import declaration and the C79 and the importance of quoting a correct UK EORI number (so that import VAT was matched with the correct importer) on the import declaration were made very clear. All that has happened here is that this policy decision was applied to ICL.

Part of Ground (1) complains that “HMRC have wrongly exercised their discretion and/or have failed to exercise their discretion in relation to whether to issue or authenticate the document required by regulation 29(2) of the 1995 Regulations. By refusing to issue a C79 or equivalent document for reasons which are irrational and in breach of obligations of proportionality, neutrality and effectiveness, HMRC have unlawfully denied or prevented the Appellant from exercising its right to deduct.”

I cannot find, in the dealings between ICL and HMRC in the run-up to the Decision Letter, any request for HMRC to issue a C79, let alone any refusal by HMRC to do so. I agree with Mr Hayhurst that all HMRC seemed to be doing in the Decision Letter was telling ICL that it did not have a C79 and that it was now too late to get one.

However, during correspondence following the Decision Letter, KPMG (then acting for ICL) suggested to HMRC (in a letter dated 30 March 2023) that:

“[T]he original import declaration was completed correctly with ICL’s NL EORI number (NL823256753). We therefore believe that CHIEF should have automatically triggered the generation of the C79 certificate, as the entry was correctly accepted and cleared against entry number: 191-004626P, dated 06th April 2017.

…

As set out above, we do not believe the original import declaration requires amendment. Based on our previous experience, we understand that HMRC’s PCA team should be capable of generating a C79 certificate through CHIEF post clearance, without amending the original entry, which was finalised in CHIEF.”

In a letter dated 6 September 2023, KMPG went on to say that:

“In relation to the April 2017 and September 2020 import transactions, HMRC did not issue respective C79 certificates to ICL at the time of import. We understand that this is because ICL’s freight agents quoted ICL’s Dutch EORI number on the UK import declarations, and at that time (for the reason below) it was not linked to ICL’s UK VAT number.

In normal circumstances before Brexit, a Dutch established entity, such as ICL would only have a Dutch EORI number and the NETP’s UK VAT registration number would be linked to that EORI number. This would then result in C79 certificates being automatically issued by HMRC when the NETP (or its agent) completed the import declarations with its Dutch EORI number.

As per our letter of 30 March 2023, ICL had correctly linked its UK VAT registration number to its Dutch EORI number. However in October 2015, HMRC incorrectly issued a UK EORI number and linked ICL’s UK VAT registration number to this EORI number, meaning that the UK VAT registration was no longer linked to the Dutch EORI number. This resulted in HMRC not automatically issuing C79 certificates where ICL (or its agent) completed UK import declarations with the Dutch EORI number. ICL had also been issued with a second EORI number by HMRC, but the EU Customs regulations are very clear that a taxpayer can only have one EORI number.”

Given what they described as “unusual circumstances” leading to ICL not being issued a C79, KPMG asked HMRC to issue a C79 (or equivalent) or allow ICL to use alternative evidence to support its input tax claim.

In their Review Conclusion HMRC said that, as ICL did not have a C79, it could have asked HMRC to amend the import declaration, which would have allowed a C79 to be issued. However, the 3-year time limit in TCBTA would have prevented this. The author noted KPMG’s view that the import declaration did not need to be changed. In such a case, the author wrote, “the company could have used alternative evidence to support a claim of import VAT and if required the company could have asked HMRC to confirm this was acceptable.” That would have been subject to the four-year time limit in regulation 29(1A) of the Regulations. HMRC do not seem to have engaged with KPMG’s suggestion that HMRC should issue a C79 or equivalent given that the system’s failure to generate a C79 could be laid at HMRC’s door.

Ground (1), read in the light of this correspondence, can fairly be understood as challenging HMRC’s failure to give ICL credit for the input tax paid on the April 2017 Import on account of ICL’s failure to hold a C79 (or equivalent) as being a course of action which, notwithstanding HMRC’s published policy on the prerequisites for the issue of a C79, was not reasonably open to it given that (a) there was no challenge to the fact of ICL having imported the goods and incurred the VAT, (b) the system failure which led to the initial non-issue of the C79 was (at least to some extent) HMRC’s, and (c) issuing/authenticating a C79 (or equivalent) was a course of action within HMRC’s gift.

It seems to me that such a challenge would be just as relevant to the amount of input tax ICL can be credited with (which HMRC currently say is none at all due, inter alia, to ICL not having a C79) as a challenge to a decision by HMRC not to entertain alternative evidence and the resulting conclusion that no input tax credit is available. For myself, I cannot discern any meaningful difference between a decision by HMRC not to admit alternative evidence leading to a conclusion that no input tax credit is available and a decision not to authenticate or issue a document showing the amount of VAT charged on an import leading to an identical conclusion.

I do not consider that regulation 29(2)(c) not expressly referring to a discretion on HMRC’s part on this issue makes any difference to the Tribunal’s jurisdiction. If HMRC have a choice, which they clearly do here (even though it is not as explicitly articulated in discretionary terms as their “alternative evidence” choices), to do (or not to do) something which is relevant to the amount of VAT a trader can recover, a review of any decision they make is in principle within the Tribunal’s jurisdiction.

There is clearly a decision in HMRC’s (lack of) response to KPMG’s suggestion that HMRC should now issue a C79 (or equivalent). Whether that decision is a result of a considered review by an officer or simply an automatic operation by the officer of a settled HMRC policy, does not make any difference. HMRC as a body has made a decision which is relevant to the amount of VAT a trader can recover.

In terms of remedy, neither here nor in a case where the Tribunal accepts a challenge to a decision on alternative evidence leading to a particular conclusion on the amount of input tax credit available can the Tribunal tell HMRC what to do. That is not an obstacle to the Tribunal having jurisdiction in an “alternative evidence” case, nor should it be here.

I express no view as to whether such a challenge would succeed at a substantive hearing, but I consider that the Tribunal has jurisdiction to consider Ground (1) to the extent that it is an assertion that, in the particular circumstances of this case, HMRC were wrong (in the sense that their decision was not one which a public authority properly understanding the law could reasonably come to) to refuse to issue or authenticate the document required by regulation 29(1)(c) and in consequence refuse ICL credit for VAT incurred on the April 2017 Import because ICL did not hold such a document.

ICL has also referred to EU law arguments in relation to Ground (1); the Further Grounds of Appeal refer to an alleged “breach [by HMRC] of obligations of proportionality, neutrality and effectiveness, [which] have unlawfully denied or prevented the Appellant from exercising its right to deduct” and Ms Sloane referred to EU law arguments in the hearing.

We have seen that Article 178 of the PVD requires a trader in ICL’s position here to hold “an import document specifying him as consignee or importer and stating the amount of VAT due or enabling that amount to be calculated.” As with regulation 29, the PVD does not stipulate any form of document.

I can see how ICL might want to argue, generally (that HMRC’s policy requirement for a C79 and the process for issuing a C79 were too prescriptive and inflexible) or specifically (that the customs declaration that was completed here made it perfectly possible to identify ICL as the importer and HMRC were wrong to insist that a process of their own devising was followed), that HMRC’s application of regulation 29(1)(c) represented an unjustifiable restriction on its enforcement of its EU law right to recover as input tax the VAT it incurred on the April 2017 Import. Clearly if this argument were successful, ICL’s EU law rights would prevail.

Again, I express no view on the merits of such an argument, but the Tribunal clearly has jurisdiction to consider Ground (1) to the extent that it is an assertion that HMRC’s decision to refuse ICL credit for VAT incurred on the April 2017 Import, because ICL did not hold a C79 (or equivalent), amounted to a breach of ICL’s EU law right to recover as input tax the VAT incurred on the April 2017 Import.

For the reasons set out above, I have concluded that the Tribunal has jurisdiction to consider Ground (1), and I refuse HMRC’s application to strike it out.

I have reached my conclusion without needing to consider the alternative arguments raised on section 84(10) VATA.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.