Upper Tribunal Tax and Chancery Chamber

UT (Tax & Chancery) UT/2023/00099 - [2025] UKUT 00013 (TCC)

Fecha: 22-Oct-2024

Discussion and conclusion

Discussion and conclusion

72.

The issue before us is whether the FTT Grounds included the ground that Appellant held valid VAT invoices. In short, we agree with Mr Watkinson. Had the Appellant been appealing on the basis that it held the VAT invoices to support its returns, this would have been explicitly stated, and this was not the position. It is beyond dispute that the FTT Grounds made no explicit reference to the Appellant holding valid, or otherwise, VAT invoices.

73.

Mr Brown argued that the FTT Grounds included this ground by necessary implication. In summary, his case was that:

(1)

Read broadly, the FTT Grounds attempted to answer HMRC’s assessment dated 6 February 2019 for the reasons set out in the letter of 7 January 2019 by asserting that the Appellant did hold the necessary and sufficient evidence of its right to deduct input tax (see [4]).

(2)

The assertion was that the evidence the Appellant held included all business records made available to HMRC (see [6] and [7(f)]);

(3)

The reference to “business records” implied that the Appellant held both valid invoices and other or alternative evidence of both the charge to VAT [7(d)] and the payment of VAT [7(e)].

(4)

This reading would not have required the FTT to draw upon the details or language of the correspondence passing between HMRC and the Appellant between October 2018 and June 2019, but was instead based upon a plain reading of HMRC’s assessment dated 6 February 2019 (issued for the reasons set out in the letter dated 7 January 2019) together with the FTT Grounds.

(5)

The FTT was therefore wrong to find at [40] of the Decision that the FTT Grounds “were entirely predicated on the absence of such [valid VAT] invoices”.

74.

We agree only to the extent that it might have been a step too far for the FTT to state that the FTT Grounds “were entirely predicated on the absence of such [valid VAT] invoices”. It may be that HMRC’s decision to assess for insufficient evidence was predicated on the absence of such invoices being produced to HMRC. However, it is important to distinguish between parsing or interpreting the nature of HMRC’s decision of 6 February 2019 and the nature of the FTT Grounds.

75.

We are satisfied that the FTT did not err in finding that the FTT Grounds did not state that the Appellant held valid VAT invoices nor that they made it clear by implication that this was a ground of challenge. In other words, the FTT Grounds did not make it sufficiently clear or reasonably apparent that the Appellant relied on holding valid VAT invoices such that the Tribunal and HMRC would understand this to be in issue in the appeal.

76.

We disagree with the specific points made on behalf of the Appellant by Mr Brown, in the order set out earlier in this Decision:

(1)

We reject his submission that this “invoice” ground was implied from the statement that the Appellant’s “claim for input tax is valid and correctly due”. Almost any input tax VAT appeal could use the same wording: it fails to explain why the claim is considered to be valid. Moreover, a claim can also be valid if HMRC unreasonably refused to accept alternative evidence.

(2)

Mr Brown referred to the fact that (a) the FTT Grounds refer to Officer Mills’ decision, and (b) that decision was made because no invoices had been provided, and went on to submit that the FTT Grounds are therefore to be read as including a ground that the Appellant has the necessary invoices. However, it is not enough for grounds of appeal to make a generic reference to the decision under appeal, they must say why the appellant disagree with that decision. Moreover, the invoice ground cannot be implied simply by referring to Officer Mills’ letter of 7 January 2019, because that letter said that “insufficient evidence had been provided” and it referred more generally to “an absence of records”, including the lack of “a full account listing for Verity showing payments made” as well as “the full business records and bank statements since commencement”.

(3)

Paragraph 7 of the FTT Grounds set out a list of specific points, including that the Appellant held evidence (a) to demonstrate that it received payments; (b) that its supply chain was valid and (c) that it had offered to show HMRC the business records on site. The Appellant then said at (g) that “having regard to these facts there are no valid grounds for the Respondent to deny the reclaim of VAT input tax”. The “facts” set out in paragraph 7 do not include that the Appellant was holding evidence in the form of Verity invoices.

(4)

Although Mr Brown is right that the FTT Grounds do not refer to Regulation 29(2) or to reliance on alternative evidence, that does not change the position: the FTT Grounds do not state that the Appellant’s appeal is made on the basis that it holds valid VAT invoices.

(5)

We reject Mr Brown’s submission that the invoice ground can be inferred from the fact that the “Desired outcome” box on the Notice of Appeal was completed with the words “we would like the Tribunal to vacate the assessment”. The grounds must say why the Appellant wants the assessment set aside.

(6)

Mr Brown also relied on the history and context of the FTT Grounds, saying these make clear that the Appellant was appealing on the basis that it held the invoices, and he criticised the FTT’s Decision at [42] and [43] for misconstruing the context and background. We disagree, and instead endorse and accept the summary set out by the FTT in those two paragraphs, for the reasons there given.

(7)

Mr Brown also criticised the FTT for saying at [44] that the invoice ground was raised for the first time by Duncan Lewis in December 2020. Mr Brown made two points:

(a)

He referred to the letter sent by the Appellant on 8 October 2018, which says that invoices were provided. However, as the FTT found at [6], those did not include any invoices from or relating to Verity, and this was confirmed by the Appellant on 11 October 2018.

(b)

He relied on the fact that in the same letter of 11 October 2018, HMRC had been told that “between 800 and 1000 invoices from different suppliers” underpinned each of the Verity amounts, and HMRC thus knew that the invoices existed. But that does not assist the Appellant, because the FTT Grounds made no reference to the existence of those invoices; in short, the point was not pleaded. The FTT was thus correct to find at [44] that the first time the Appellant sought to argue that the invoice ground formed part of the FTT Grounds was in the letter from Duncan Lewis of December 2020. The half-sentence on which reliance is now placed was instead one of numerous points made in earlier correspondence between the parties, and it is the purpose of grounds of appeal to identify the points on which an appellant wishes to rely.

(8)

Mr Brown did not expand the point made in his skeleton about the FTT having carried out “an impermissible ‘mini-trial’ of issues of fact, but we have taken this to be a criticism of the detailed findings made about the communications between the parties. However, Mr Brown had also submitted that in order to understand the FTT Grounds “the previous correspondence between the parties must be taken in account and the [FTT Grounds] interpreted in context”, see [32]. The Appellant’s case thus rested in part on what should be implied from the inter-partes correspondence, and the FTT had to make findings of fact. There was no “mini-trial”.

77.

It follows from the above that we find that the FTT made no error of law when it decided that the FTT Grounds did not include a ground that the Appellant held the invoices to support its claims. We thus reject the First Ground of Appeal.

78.

Even if we were wrong in relation to the First Ground of Appeal, we agree with Mr Watkinson that there would still be no material error in the FTT’s decision on the preliminary issues.For the reasons we set out below, even if the FTT Grounds had included a ground that the Appellant held valid VAT invoices, and even if that continues to form one of its grounds of appeal against the preferred assessment, that would not be determinative of the FTT’s jurisdiction in the appeal.

79.

It is instead the nature and scope of the decision under challenge which defines the FTT’s jurisdiction. HMRC’s decision to issue the assessment on 6 February 2019 denied the Appellant input tax deductions because insufficient evidence had been produced. It is that decision which may be challenged by the Appellant on the appeal, but, for the reasons explained in the next part of this Decision, that appeal may only be pursued on the basis that HMRC had unreasonably exercised its discretion not to accept the evidence: in short the FTT’s jurisdiction is supervisory only.