Upper Tribunal Tax and Chancery Chamber

UT (Tax & Chancery) UT/2022/000103 - [2024] UKUT 00183 (TCC)

Fecha: 13-Mar-2024

The FTT’s findings of fact

The FTT’s findings of fact

We are not concerned for the purposes of this appeal with the change in the representative member from telent Limited to TTSL. For the sake of simplicity, we shall refer to both as TTSL. The FTT made detailed findings about the circumstances in which TTSL came to withdraw the Assessment Appeal, to make the Claim and to appeal HMRC’s refusal of the Claim, which included but was not limited to the Overlap Period.

The HMRC officer who made the Assessment was Mr Boobyer. Whilst it was not recorded by the FTT, it is not disputed that the notification of the Assessment states that the reasons for making it are set out in a letter dated 17 November 2014. It is clear from that letter that the Assessment was made to recover input tax claimed by TTSL in relation to the Escrow Account which HMRC considered had been claimed incorrectly.

The Assessment was confirmed by HMRC in a statutory review letter dated 12 August 2015. The FTT did not refer to the contents of the review letter but the letter identified that the point at issue between the parties was input tax recovery on fund management fees for the Escrow Account. TTSL appealed the Assessment to the FTT by notice of appeal dated 10 September 2015. The grounds of appeal were not identified in the Decision but for reasons which follow we consider they are relevant and included the following:

Her Majesty's Revenue and Customs ("the Respondents") have issued an assessment, notified to the Appellant by letter dated 17 November 2014, on the basis that the Appellant is not entitled to recover the VAT so charged ("the Contested Decision"). The reasoning provided in the Contested Decision is that the services provided to the Appellant by fund managers are directly and immediately linked to exempt supplies. The Respondents upheld the Contested Decision on review, notified to the Appellant in a letter dated 12 August 2015.

…

10.

The Appellant contends that the services provided to it by the fund managers are services which were used exclusively in making taxable supplies within the meaning of Regulation 101(1).

11.

In the alternative, the supplies were used both in the making of taxable supplies and in making other supplies of a description falling within Group 5 of Schedule 9 of the Act, those being supplies that are incidental to the Appellant's business activities. If the alternative position were to be found then the Appellant would be entitled to recover the VAT so charged in full in accordance with the terms of Regulation 101 (2)(d).

On 9 March 2016 KPMG, who were then acting for TTSL, lodged a notice of withdrawal of the Assessment Appeal with the FTT. It simply stated:

TAKE NOTICE THAT the Appellant HEREBY WITHDRAWS this appeal.

10.

At some stage thereafter, TTSL changed adviser to PwC and on 30 September 2016 PwC made the Claim on behalf of TTSL. PwC stated that the “direction of travel” of recent case law, including a reference to University of Cambridge v HM Revenue & Customs [2015] UKUT 305 (TCC), meant that a person who has a fund should be able to recover input tax on investment management costs where those costs are a general overhead of the business. Mr Boobyer wrote to PwC on 3 November 2016. He made some comments on the technical arguments relevant to input tax recovery and then added:

I would draw your attention to the fact that your client accepted in a previous appeal relating to this same subject (TC/2015/05402) that telent’s escrow activity was a business or ‘economic’ activity (this view was confirmed in a letter that was dated 28 May 2015). The appeal progressed on that basis until it was withdrawn prior to being heard…

There is one further point I should make about the claim: it includes periods 08/12 to 05/14 inclusive, the various amounts claimed for those periods totalling £855,754. These amounts are identical to the amounts previously assessed by HMRC, forming part of the tax in dispute in the previous appeal, from which, as I have mentioned, your client withdrew. In these circumstances, I can confirm now that, if any repayment were made in advance of the Court of Appeal’s decision in the University of Cambridge case, it would exclude the amount of £855,754. Moreover, in the event that the final decision were in telent’s favour, repayment of the £855,754 would be a matter for HMRC’s discretion, given that the tax in question had been subject to an appeal process from which your client had formally withdrawn.

11.

PwC responded in a letter dated 5 December 2016 arguing that there was no restriction on the Overlap Period being contained in the Claim, relying on Matalan Retail Limited v HM Revenue & Customs [2009] EWHC 2046 (Ch) ("Matalan”). It was said that the unilateral withdrawal of an appeal cannot be said to restrict further consideration of the relevant periods at a later date. Mr Boobyer replied on 12 April 2017 stating that HMRC had decided not to repay the Claim. In relation to the Overlap Period, he stated that he had changed his view as to the effect of TTSL’s withdrawal of the Assessment Appeal:

In my letter of 3 November I suggested that any repayment HMRC may eventually be required to make in connection with this matter should be restricted to £456,556, the amount that had not been part of the tax at stake in the previous appeal. I have since considered the relevance of the High Court’s judgment in Matalan (as per PwC’s letter of 5 December) and now accept that, if it is ultimately determined that a repayment should be made, that repayment should be of the full claim in the sum of £1,312,309.

12.

PwC requested a statutory review and HMRC’s review letter dated 18 January 2018 from a Mr Bennett upheld the decision not to repay the Claim. It also addressed the “previous assessment action” as follows:

On 17 November 2014, an assessment was raised in respect of the input tax related to the escrow funds in question for VAT periods 11/10 to 05/14. You queried this assessment, but the decision was upheld on review. I understand that telent submitted but subsequently withdrew an appeal to the Tribunal. The issue for this period is therefore considered by HMRC to be closed.

A review was offered at the time under VAT Act 1994 Section 83A, and this review was performed as requested. There is no allowance in law for a second review of a matter, and indeed VATA Section 83A (3) specifically states that the offer of a review does not apply to the notifications of the conclusions of a review. Furthermore, Section 83C(4) states that HMRC shall not review a decision if the matter has been appealed to the Tribunal.

I therefore regret that I am unable to review the part of the claim relating to VAT periods 08/12 to 05/14, on the grounds that these periods have already been subject to review. I agree that there is no impediment to you discussing the issue further with HMRC. However, if you wish to reinstate the claim for these earlier periods then, in the absence of the withdrawal of the assessment, your only option is to apply to the Tribunal for a reinstatement of the appeal submitted in 2015. Reinstating an appeal is at the discretion of the Tribunal, and HMRC will be asked whether there is any objection to such action. This issue is outside of the scope of my review.

Although your claim dated 30 September 2016 covers all VAT periods from 08/12 to 08/16, I am, for the reasons given above, only able to review the claim as it relates to VAT periods 08/14 to 08/16.

13.

TTSL notified its appeal against refusal of the Claim to the FTT on 15 February 2018. The grounds of appeal made reference by way of background to the correspondence with Mr Boobyer about the Overlap Period and what was said in the statutory review about the Assessment Appeal. HMRC filed its statement of case on 25 May 2018, setting out why it considered that TTSL was not entitled to any repayment in respect of the Claim. HMRC did not take any point in the statement of case that withdrawal of the Assessment Appeal prevented TTSL from claiming a repayment in relation to the Overlap Period. The statement of case was entirely silent on that issue.

14.

The Claim Appeal proceeded towards a hearing in the normal way, and on 8 June 2021 the FTT gave notice that the hearing would take place on 7 – 9 December 2021.

15.

On 15 July 2021, HMRC wrote to PwC saying that following a further review they wished to “revisit” a “jurisdictional issue”. The issue was whether TTSL could make a claim for the Overlap Period. HMRC stated that although Mr Boobyer had previously agreed on the basis of Matalan that a claim could be made for the Overlap period, they were no longer of that view. Their view was that TTSL was procedurally barred from making a claim for the Overlap Period. HMRC indicated that they were minded not to proceed with the substantive argument and offered to settle the dispute on the basis that the Appellant conceded that part of the Claim which related to the Overlap Period.

16.

PwC on behalf of TTSL refused to concede the Overlap Period, but in any event HMRC withdrew their case on the substantive issue by notice dated 14 October 2021. At the same time, HMRC issued a strike out application based on what the parties have referred to as the procedural issue, namely: HMRC’s case that the Claim Appeal was barred by cause of action estoppel, issue estoppel and/or was an abuse of process. That application included an application to amend their statement of case to reflect their new position on the substantive issue and to raise the procedural issue “to the extent necessary”. HMRC also applied to vacate the hearing in December 2021.

17.

The FTT gave directions for the parties to provide submissions on HMRC’s applications and it heard the strike out application on the dates previously set aside for the substantive hearing in December 2021. HMRC accepted that they ought to have raised the procedural issue in their statement of case. TTSL opposed the strike out application but did not object to HMRC amending their statement of case. The FTT struck out the Claim Appeal.