UT-2023-000051 - [2024] UKUT 00114 (TCC)

We reject HMRC’s submissions.

First, we accept Mr Gordon’s submission that the guidance in Beneficial House was not intended to be a mechanical checklist. Instead, it contained broad principles the relevance of which would vary from case to case.

The “value judgment” and “balancing exercise” which Beneficial House prescribes involves the FTT in an evaluative decision to be reached by the FTT in the light of all the relevant evidence. It is well-established that this Tribunal should be reluctant to interfere with an evaluative decision of the FTT, which heard the witness evidence and considered the documentary evidence, in a decision where the underlying legal principles – as in this case – are not in dispute, unless there is a clear error of law. Secondly, it is also clear that the FTT need not deal with every submission or piece of evidence, otherwise this would place an intolerable burden on the fact-finding tribunal. It was necessary only to deal with relevant evidence and submissions. Thirdly, the mere fact that the FTT does not refer to a piece of evidence does not mean that the evidence was overlooked or ignored. Furthermore, it is also well-established that if the FTT correctly states the applicable legal principles, there is a presumption that it applied those principles unless the contrary is apparent. Moreover, it is equally well-established that this Tribunal should not adopt a nit-picking or pernickety approach to decisions of the FTT. As Mummery LJ said at [30] of the judgment of the Court of Appeal in Brent v Fuller [2011] ICR 806:

“The reading of an employment tribunal decision must not, however, be so fussy that it produces pernickety critiques. Over-analysis of the reasoning process; being hypercritical of the way in which a decision is written; focussing too much on particular passages or turns of phrase to the neglect of the decision read in the round: those are all appellate weaknesses to avoid.”

Those words resonate here. The application of the principles set out in Beneficial House does not require the use of the same language or the application of the principles in the same order. It is a question of substance involving the FTT reaching a broad evaluative judgment. We accept the submission of Mr Gordon, summarised above, that the FTT had in substance applied the relevant and necessary Beneficial House principles. To conclude otherwise would involve us engaging in the nit-picking approach against which the Court of Appeal warned in Brent v Fuller.

We also reject Ms Choudhury’s submission that the logical conclusion of the Decision was that HMRC could not check a tax return or investigate an individual’s tax position where HMRC had no evidence of undisclosed income or gains. Ms Choudhury objected to the FTT’s characterisation of HMRC’s continued enquiries as a “fishing expedition.” We accept, and we did not understand this to be controversial, Mr Gordon’s submission that all enquiries must be reasonably and proportionately conducted. Nonetheless, HMRC are plainly entitled to check the tax return of any taxpayer and have ample powers to do so. The question in this case is not whether HMRC can check a tax return but whether HMRC were entitled to continue to check (or, so to speak, to continue to “fish” in respect of) a tax return after an enquiry lasting many years, bearing in mind that in the case of Jeremy and Jonathan, their enquiries were effectively parasitical on the lengthy enquiry into the affairs of their late brother. Moreover, the FTT at [52] was entitled to take account of the errors and mistakes made by HMRC in the course of their enquiry. The FTT, considering the evidence, concluded that HMRC were not so entitled and we see no reason to substitute our judgment for that of the FTT.

HMRC also complained that in making its findings at [56], the FTT failed to acknowledge that the reason there was no evidence of the funds being transferred to or for the benefit of any of the Respondents, or of the receipt of any undisclosed benefit from them was that the Respondents had refused to provide that information.

We also reject that submission. It is clear from the Decision that the FTT was fully aware of the course of the enquiry and did not overlook the matters which HMRC allege. The FTT took into account at [60] the fact that ‘HMRC have not received answers to all of their questions’ but considered ‘that the outstanding questions relating to the £40m distribution do not have a reasonable basis and amount to a fishing expedition’. It gave reasons for this conclusion at [58]: ‘that in seeking full details of the beneficiary to whom the funds were appointed by the Settlement many years prior the year of enquiry, and details as to whether the beneficiary “passed it onwards, invested it on behalf of, or in any other way acted to direct that value to one or more of [the Applicants]” amounts to a fishing expedition in the absence of any evidence for believing that there may be associated operations.’ The FTT’s conclusion that HMRC’s outstanding questions did not have a reasonable basis was within a reasonable range of conclusions and one it was entitled to reach on the evidence. It gave sufficient reasons for its conclusion. Moreover, as Mr Gordon submitted, the Respondents had, throughout the history of the enquiries, handed over a considerable volume of information to HMRC on a voluntary basis.

We should add that HMRC’s complaints about the Respondents’ alleged failure to supply information pursuant to Schedule 36 information notices is not a matter which is appropriate for this Tribunal to investigate on appeal. We do not have a fact-finding role. We do not know whether the failure or refusal to supply information was justified or not.

We reject HMRC’s appeal on Ground 1.