TC09655 - [2025] UKFTT 01206 (TC)

We start by considering prejudice, and in particular prejudice to HMRC if we were to grant the application. We accept given the best judgement concession that the absence of the assessing officer is largely irrelevant to this consideration.

However, it is our view that HMRC will be profoundly prejudiced if LP’s expert report and evidence given on the Monday is retained, and LP is permitted to consider the attendance note made by Ms Wong of that evidence and permitted to submit a supplemental witness statement to deal with issues raised in that attendance note.

This gives LP the opportunity to revisit any weaknesses in his report or oral evidence which were not satisfactorily dealt with in re-examination, and deal with them in the cross-examination of his supplemental witness statement.

This cannot be right. He is a rehearsed witness. He should not be permitted a second bite at the cherry. He should not be given the opportunity to put right any flaws or weaknesses in the evidence that he gave first time round. To allow to do so would not fair or just to HMRC.

The nature of the material which was purportedly disposed of by the appellant, and which attracts the assessment to tax, lies at the heart of the appeal. It is the appellant’s case that it was not “waste” and thus could either not be disposed of or that there was no environmental permit required for the material to be placed on the land.

LP is an expert on waste. His report is an expert report on inter alia the definition of waste and the end of waste criteria. His evidence therefore is of fundamental and crucial importance to the appellant.

He is not a witness of peripheral relevance only. His evidence goes to the heart of the appellant’s case.

And because of this it is all the more important that the process by which his evidence is adduced is treated with respect and in a proper and fair way. That due process must be fair and just to both parties. By allowing LP to review his evidence and to present it at a new hearing would not be fair and just to HMRC. This cannot be compensated by costs.

We accept that the appellant will suffer prejudice if the appeal is not reinstated. It will lose the opportunity to contest the assessment and the penalty. It will also suffer financial detriment in connection with the sale of the business and reputational damage. But these were all matters which were known to the appellant when it withdrew its appeal. We do not accept that the financial consequences of dismissing the application will be “catastrophic” as submitted by Mr Borthwick. He has taken no professional advice on this notwithstanding that he has retained professional advisers dealing with the sale. We take judicial notice of the fact that catering for liabilities like this in transactions involving the sale of businesses can readily be catered for in a number of ways and usually affect price rather than the underlying viability of the deal.

Any such financial and reputational loss is a result of a conscious decision made by the appellant.

It was Mr Borthwick’s evidence that he only realised on the Monday evening that there was a possibility, should HMRC be successful, that they would carry on litigating into the future, and it was this possibility which panicked him into making a decision on the Tuesday morning to withdraw the appeal. And that panicked decision was an irrational one from which he should be protected by being permitted to reinstate the appeal.

We have a number of observations on this.

Firstly, we do not accept the only reason for the withdrawal was the sudden realisation of this possible ongoing litigation by HMRC. We think it inherently implausible that during discussions which took place on the Monday evening and the Tuesday morning, the only discussions about the impact of LP’s evidence and the appellant’s prospects of success appear to be, as reported by Mr Borthwick, that the evidence “went well” and counsel gave them a 60:40 chance of success. We think it far more likely that there was a much broader discussion about the merits of the appeal as well as the implications regarding further litigation if that appeal was successful or unsuccessful. And that the decision to withdraw was taken in light of all that advice and not solely on the basis of Mr Borthwick’s panicked decision arising from his concern about future litigation by HMRC.

We have explained our misgivings regarding the reliability of Mr Borthwick’s evidence. He has tendered no corroborating evidence concerning his discussions with counsel or the paralegal (we suspect he could readily have obtained an attendance note from either in which we have no doubt that they recorded the discussions concerning the withdrawal with him), and we consider that the purported basis for the withdrawal is not as he has described.

Furthermore, we do not accept that this was an irrational decision. It seems to us entirely rational to be concerned about the prospect of future litigation by HMRC and the time, cost and uncertainty implications (not only about litigation itself but about the future sale of the business) which goes with that litigation. And to decide, on the basis of that, to withdraw the appeal. If that was the basis of the decision that Mr Borthwick made, we can see nothing irrational about it. Finally, even if it was an irrational decision, we cannot see how this supports the application. We accept the Rule 17 gives an appellant the right to apply for reinstatement. This applies as much to a rational as an irrational decision to withdraw in the first place. We do not see why an irrational decision is a “better” reason for withdrawing than a rational one.

We accept Ms Brown’s submission that it is more likely than not that following LP’s evidence at the end of the Monday, he discussed the overall position with his legal team. On the basis of that advice he decided to withdraw. This was for a number of reasons including a realisation that his case was weak (as well perhaps that there may be ongoing litigation with HMRC should the appellant succeed). And what has happened now is that the appellant has been given a more bullish opinion regarding the appeal, and in particular the nature of waste, by Dr Willets.

As far as the merits of the appeal are concerned, we reject Mr Paulin’s submission that the case is a strong one by dint of the evidence given by LP. LP gave evidence which was challenged in a number of areas and it was up to the tribunal to decide whether or not his evidence (that the material was waste or not) was right. To do this it would need to consider the evidence of HMRC’s expert as well as the evidence of fact. The tribunal never heard this evidence and so was in no position to come to any conclusion. All we have is an expert witness who has given evidence. We are, frankly, more inclined to agree with Ms Brown’s submission that “it should have been clear to all who attended the hearing that [LP’s evidence] did not support [the company’s appeal] and it is the effect of that evidence and the fact that the appeal was withdrawn after that unhelpful evidence that HMRC relies upon to assert that the merits are not in [the companies] favour”.

Indeed this appears to be reflected in Mr Borthwick’s oral evidence that counsel had told him that LP’s evidence hadn’t come across as it should have.

For the reasons given above, we are not inclined to accept Mr Borthwick’s evidence that he was given a 60:40 chance of success by counsel following LP’s evidence given on the Monday.

The best we can say about the respective merits is that both parties have respectable technical arguments and reasonable prospects of success.