TC09641 - [2025] UKFTT 01115 (TC)

Ashley Charles Trees v HMRC [2023] UKFTT 339 (TC) (“Trees”) concerned a VAT civil evasion penalty rather than an inaccuracy penalty, but is relevant here because the Tribunal considered the question of abuse of process where a company director sought to re-litigate facts and issues that had already been decided in a previous appeal by the company.

Mr Trees was the sole director of a company called CCA Distribution Ltd (“CCA”). HMRC issued decisions which denied CCA the right to deduct input tax on the basis that the related transactions were connected with the fraudulent evasion of VAT, and that Mr Trees knew, or should have known, of that connection.

CCA appealed to the Tribunal. The Tribunal refused the appeal, stating that they were "in no doubt that Mr Trees knew that all of CCA's transactions in the period in question were connected to fraud" (see CCA Distribution Ltd v HMRC [2020] UKFTT 222 (TC)).

HMRC subsequently issued CCA with a civil evasion penalty under the Value Added Tax Act 1994 and at the same time issued Mr Trees with a Director’s Liability Notice (“DLN”) for the full amount of the penalty, on the basis that the conduct giving rise to the penalty was wholly attributable to his dishonesty. Mr Trees appealed the DLN, in part on the grounds that he did not know the transactions were connected to fraud. HMRC applied to strike out those parts of his grounds of appeal, on the basis that this had already been decided in the appeal by CCA, and it would be an abuse of process for Mr Trees to re-litigate the same issue.

The Tribunal decided (see Trees at [67]) that it would be an abuse of process to allow Mr Trees to appeal the DLN on the basis that he did not know of the connection to fraud. The Tribunal went on to say that, in the previous appeal by the company (CCA):

“[69]…the FTT clearly and unequivocally decided that "Mr Trees knew that all of CCA's transactions in the period in question were connected to fraud", and that conclusion was founded on detailed findings of fact derived from careful examination of the evidence.

[70] Mr Trees sought to rely on Lord Bingham's statement that in considering whether there is abuse of process, a court must make "a broad merits-based judgment". While correct, that approach requires me to take into account, not only "the facts of the case" and Mr Trees' interests, but also (a) the interests of HMRC, who should not be "twice vexed in the same matter" and (b) the public interest, which requires "finality in litigation", a principle "reinforced by the current emphasis on efficiency and economy in the conduct of litigation".”

The Tribunal in Trees also took the opportunity to comment on the significance or otherwise of the previous appeal having been made by the company (CCA) rather than by Mr Trees:

“[77] I add for completeness that Mr Trees did not seek to argue that there was no abuse of process because the parties were different: CCA was the appellant in the MTIC appeal and he is the appellant in the DLN appeal. He was right not to take that point. It is clear from Gleeson (approved in Gore Wood) that where the parties are different there can still be abuse of process if there is "a sufficient degree of identity" between the original party and the new appellant. Both parties accepted that CCA was Mr Trees' alter ego, or, as Lord Bingham put it, his "corporate embodiment". CCA 2020 is therefore binding in this new litigation between Mr Trees and HMRC.”