TC09623 - [2025] UKFTT 01064 (TC)

I start by considering the Rules.

The barring application requests that the proceedings should be struck out pursuant to Rules 8(2)(a) and 8(3)(c).

Under Rule 8(2)(a), I must bar HMRC from taking any further part in these proceedings if the tribunal has no jurisdiction in relation to them. The parties agree that I do have such jurisdiction. And even if they did not so agree, it is clear that I have such jurisdiction. This is a straightforward case in which HMRC have issued discovery assessments which are being challenged by the appellant. There is no jurisdictional point in issue.

The barring application is therefore made pursuant to Rule 8(3)(c).

I therefore have to consider whether HMRC have a reasonable prospect of success.

The barring application stated that the appellant has no prospect of receiving a fair trial. In the appellant’s view the tribunal cannot deal with proceedings fairly and justly. This is the language of Rule 8(3)(b). But whilst this gives me discretion to bar HMRC, it only applies if HMRC have failed to cooperate with the tribunal. There is no evidence that they have failed to cooperate, and indeed the appellant’s submissions include no such assertion. He asserts that the “non-cooperation” is by HMRC.

Nor, in my view, does the overriding objective to deal with cases fairly and justly, set out in Rule 2 provide a route for the appellant to persuade me that because in his view he will not receive a fair trial, I can strike out HMRC’s case at this stage. Strike out (or barring HMRC) is a draconian remedy and to my mind therefore can only be exercised in accordance with the specific provisions of Rule 8. Rule 2 does not provide a roving power outside Rule 8 to strike out an appellant or bar HMRC. What it does do is provide that if I am considering either, I must also consider the overriding objective in Rule 2, when exercising that power under Rule 8.

So, I need to consider whether there is no reasonable prospect of HMRC’s case succeeding. I must consider whether HMRC have a realistic, as opposed to a fanciful, prospect of success. This is likely to be the case where I consider that there is relevant evidence which will be available to the trial judge. I can consider evidence that was before me at the hearing and also evidence which can reasonably be expected to be available at the trial. I should allow the appeal to proceed to trial if I believe that a full investigation into the facts would add to the evidence available to the trial judge and thus affect the outcome of the case. But if HMRC’s case is bad in law, I should grasp the nettle and deal with it now.

The barring application essentially asserts two grounds. The first is that the discovery assessments are defective. The second is that due to the delay by HMRC, the appellant cannot get a fair trial.

I shall refer to these as the “discovery assessment issue” and the “fair trial issue”.

Dealing first with the discovery assessment issue. This was clearly pleaded by the appellant in his original appeals to HMRC in 2013 and 2014, in his notice of appeal to the tribunal on 10 June 2024, and in the further and better particulars which were provided on 29 November 2024. He asserts that no valid discovery was made, no one had authority on his behalf to submit a tax return, HMRC have not provided details of the amounts assessed, and there is no technical justification for recategorising the loan as redirected employment income.

He further asserts, via the barring application, that he cannot get a fair trial as he will not be able to cross examine the assessing officers.

However, as set out in Mr Hopkins’ skeleton argument and as I explained to Mr Dyer at the hearing, the law is very clear regarding who has to prove what in relation to a discovery assessment. It is for HMRC to show that an officer has made a subjectively and objectively reasonable discovery and on the basis of that discovery went on to make a valid in time discovery assessment which was properly served on the appellant.

This requires HMRC to do all the running. If they cannot establish the validity of the assessment, then the appellant must succeed. The second stage of the process (namely if HMRC have established that there is a valid discovery assessment, the burden is on the appellant to demonstrate that it overcharges him) does not apply unless the discovery assessment is valid in the first place.

To do this HMRC will need to provide sufficient evidence to persuade a judge. They may have a difficulty given that the assessing officer or officers may not be available to give first-hand evidence of the process pursuant to which the discovery was made and the assessments generated. But that is their problem. If those officers are available and give oral evidence, then the appellant’s objection that he cannot cross-examine them falls away. He can cross-examine them at the hearing at which they give evidence. The same is true if oral evidence is given by officers other than the original assessing officers. They will be available for cross-examination by the appellant.

But at this stage however, I cannot possibly say that the prospect of HMRC establishing a valid discovery are fanciful. The validity of the discovery assessments, which lies at the heart of this appeal, can only be ascertained on the basis of full evidence given by HMRC at a hearing at which any oral evidence can be challenged by the appellant. I cannot say at this stage (when no witness statements have been prepared or exchanged, and indeed there has been no statement of case as yet) whether HMRC have a realistic prospect of establishing the validity of the discovery assessments.

What I am able to say is that it is highly likely that HMRC will produce evidence to justify the validity of the discovery assessments at a full hearing. Whether that evidence comes up to proof is another matter. But to deny them the opportunity, at this stage, to present that evidence, would not to my mind satisfy the overriding objective of dealing with this case fairly and justly.

I consider that there is a reasonable prospect of HMRC being able to establish that the discovery assessments are valid and consequently I am not prepared to bar them from taking any further part in these proceedings on that basis.

I now turn to the fair trial issue. This presents a difficulty for the appellant. He has never pleaded this as a ground of appeal. Whilst that would have been impossible of course when he originally appeal against the discovery assessments in 2013 and 2014, it would have been perfectly possible for him to have done so in his appeal to the tribunal and, more importantly, as part of his further and better particulars which were submitted as recently as 29 November 2024.

It seems strange to me that at that time he was focusing on the discovery assessment issue, but only a month later, on 31 December 2024, via the barring application, his focus changed completely. It is now on whether he can obtain a fair trial due to HMRC’s delay.

HMRC have never addressed this argument before. They have never needed to. The view of the matter letter and review conclusion letter simply dwell on the justification for their technical view that the loan comprises employment income, and that there were valid in time discovery assessments. This is unsurprising given that, as a basis for his appeal, the suggestion that he might not get a fair trial was only raised in December 2024.

Mr Hopkins, however, very fairly dealt with the appellant’s assertions. He could have said that given that the fair trial issue has not been pleaded by the appellant, there is nothing in HMRC’s case which could form the basis of an application that their case does not have a reasonable prospect of success because the appellant would not get a fair trial.

In light of this, I have considered the fair trial issue in the context of the barring application. I have considered the appellant’s assertions and HMRC’s response. Given that I am allowing this appeal to proceed to a trial, anything I say regarding the fair trial issue should not be construed as giving a definitive opinion, nor a finding of fact, which might have an impact on the trial.

But there is authority that the tribunal can consider whether inexcusable and inordinate delay on behalf of HMRC might prejudice an appeal by an appellant to such an extent that they cannot get a fair trial and thus there has been an abuse of process which might allow a tribunal to allow an appeal.

However, these are deep waters and (subject to what I say below regarding the appellant’s pleadings) can only be considered in light of an extensive review of the facts tested against the relevant case law. That is not the purpose of the barring application which is to consider whether HMRC have a reasonable prospect of success. Whilst the appellant has put forward a number of arguments to justify his assertion that he will not get a fair trial, HMRC have equally put forward a number of arguments to explain why, to the extent that it is relevant to the proceedings, he will receive a fair trial. These competing positions need to be considered at length, and that is not the purpose of the proceedings before me.

And I certainly do not consider HMRC’s position on the fair trial issue to be fanciful. They have put forward cogent arguments as to why, for example, Article 6 does not apply to tax cases. They have explained that the taxpayer’s charter has no statutory basis. They have explained why, in their view, the appellant will not be prejudiced by not being able to cross examine HMRC’s witnesses, since they will of course be able to cross-examine them should such witnesses give oral evidence. They have challenged the appellant’s assertion regarding evidence that he could have obtained had he known about the delay, and the relevance of that evidence to the issues in this case (in light of the fact that it is HMRC’s obligation to establish the validity of the discovery assessments).

So, I am not prepared to bar HMRC from these proceedings on the basis that they have no realistic prospect of establishing a “defence” to the fair trial issue.