UT/2024/000060 - [2024] UKUT 00315 (TCC)

As regards Ground 1, it appears to me that the scope of dispute is very much centred on the correct test of awareness. It is this which HMRC’s defence concentrates by disputing the claimant’s interpretation of the test suggested by the SP (that it is to do with the taxpayer’s “conviction” as to chargeability of tax) and instead advancing a “factual” basis test. HMRC do not appear to me to defend the case on the basis such test was actually applied by HMRC when making its decision (merely that it is clear the unawareness test is as a matter of fact not satisfied). Even if that were a basis of defence, then given the stance HMRC have taken they would have to rely on the terms of the 5 January 2024 letter to make that good (as mentioned they do not advance Ms Murphy’s evidence for that purpose). If the Upper Tribunal panel hearing the substantive matter were to agree with HMRC’s factual awareness test, the claimants in my view already have a good prospect, on the wording of the 5 January 2024 letter, of showing that that was not the test actually applied. I would not expect this to raise difficult questions of interpretation in relation to which the pre-decision communications and discussions to Ms Murphy would be needed to shed light. I am not accordingly persuaded that disclosure of the discussions and considerations in the run up to 5 January 2024 letter are necessary to resolve the matter of what test was in fact actually applied fairly and justly.

A very similar analysis applies for Ground 2 and the factual issue raised there of whether the alternative condition was considered. HMRC’s case is that the condition is not met on the facts. They do not appear to me to argue that the alternative condition was in fact considered. Again the absence of any mention in the letter of such consideration, and HMRC’s position that they are only relying on the terms of the letter to evidence the reasoning process, mean that the claimant already has a good prospect of persuading the tribunal hearing the substantive matter that the alternative condition was not in fact considered. It is difficult therefore to see therefore how it can be said the disclosure sought is necessary to resolve the matter fairly and justly.

Mr Firth suggested it was wrong to interpret the reference in Tweed to “necessary” in this way. There was nothing different in judicial review proceedings when it came to establishing the relevant facts. The tribunal should be equipped with the best evidence, which on well-established authority, involved looking at the kind of contemporaneous documents informing the decision making process which the claimant now sought.In my view it is not possible to downplay the need to show the disclosure is necessary. It is notable that when, in Friends of the Earth the court was discussing the general principles set out by the Tweed test the court specifically emphasised the term “necessary” in the test (at [16]) (clarifying in subsequent passages the test was not one of determinacy ([19]) nor was it of relevance in the sense the claimant there suggested of being “related to the issue” (see [21])). The reference to disclosure being “necessary…” in my view can readily accommodate considerations of the likely significance the disclosure sought will make to resolution of the issues before the tribunal.

As regards any imperative to ensure the best evidence to resolve the issue of fact was obtained, that is not how the disclosure test has been expressed. So far as the particular issues for resolution here are concerned, the Upper Tribunal panel hearing the substantive matter will not be “speculating in a vacuum” but will have recourse to the letter of 5 January 2024 setting out HMRC’s decision. That self-evidently is contemporaneous evidence of the decision. Mr Firth also highlighted statements by the Administrative Court in R (oao Unison and others) v Secretary of State for Business and Trade) [2023] EWHC 1781 (Admin) (at [66]) where it was noted by way of criticism of the defendant public authority’s evidence there that, given the duty of candour, it should not have been necessary for the court to carry out “detective work” or “reading between the lines” or make inference from silence. However as Mr Birdling indicated, those criticisms need to be seen in the particular context of the facts in that issue in that case (an alleged failure in consultation where a key issue was whether there had been consideration of the product of consultation by the Secretary of State personally). As explained later in [66], the duty of candour in that context “required a departmental witness statement to set out in clear terms what material was seen by the Minister and what was not”. The witness statement the court was critical of did not provide that clarity however talking instead in general terms about matters seen or considered “the Government”. Here, neither of the issues of fact under Grounds 1 and 2, in my view, taking account of the positions adopted by the parties on those issues, will involve the same kind of difficulties encountered in Unison.

Under Ground 3 the claimant submits that HMRC’s decision that the facts here did not fall within the SP was irrational and that any reasonable inspector diligently considering the would have to conclude the claim out to have been admitted in the light of various points the ground then goes on to elaborate. In their pleaded defence, HMRC disagree, responding to each of the claimant’s points. The irrationality alleged is founded of number of facts in relation to which a reasonable inspector considering the SP would conclude the claimant’s circumstances were ones in which HMRC ought to admit the claim. The ground does not rely on what was in fact considered by Ms Murphy and HMRC’s response does not address the ground in those terms. HMRC’s defence puts forward various points in respect of which it is said the threshold for irrationality is not made out. Their response to the facts raised by the claimant is to dispute their relevance to HMRC’s refusal. It is difficult to see therefore how discussions or input into the decision making process which led to Ms Murphy producing the 5 January 2024 letter would inform the separate questions of whether the facts relied upon by the claimant meant the conclusion to refuse the claim was irrational in the light of such facts.

Ground 4 submits HMRC made errors of law in concluding that the claim could/should have been made earlier than it was. The claim could not be quantified until the foreign notional rate was agreed and there was nothing to set the NTLRD against until HMRC had brought the overseas dividends into account which they had not done. The ground also submits that HMRC’s conclusion also failed to take into account various relevant considerations which are then further specified. HMRC’s response is that all are irrelevant (albeit that in relation to one point regarding a Brief HMRC issued in January 2020, that point is made under Ground 3). Apart from mentioning that the date of the January 2020 Brief was referred to in the decision and therefore in contemplation there is no suggestion the various matters were considered.

The points for the Upper Tribunal to resolve will principally concern the relevance of the points advanced. To the extent it becomes necessary for the Upper Tribunal to reach a view on whether the January 2020 Brief was in fact considered, I do not see any great difficulty with it being able to reach a view on that on the basis of looking at the 5 January 2024 letter. It would certainly be open to the tribunal to conclude a reference without further mention did not mean it was considered. It is difficult to see that notes of internal communications preceding the 5 January 2024 will throw any further significant light on the fact.

Ground 5 is that taking account the above factors HMRC reached an irrational conclusion and there was no breach of the requirement the claim should be made “as soon as possible”. HMRC suggest does not come close to high threshold and irrationality challenge requires. Mr Firth submitted this arose out of whether HMRC took all relevant considerations into account and applied the right test. He argued the claimant needed to fully understand the decision making process and the reasons underlying the decision to properly put that into context. That does not reflect how the ground is put however. The irrationality is predicated on establishing various matters and then submitting that, given those, the conclusion is irrational. The irrationality is not dependent on showing whether or not in fact Ms Murphy considered such factors and what she made of them.

I am not therefore persuaded, as regards each of Grounds 3 to 5,the disclosure sought is necessary for the fair and just resolution of the relevant issue.

Finally, Mr Firth suggested refusal of the disclosure request would set a precedent that it would in future cases be sufficient to simply disclose the decision letter without any further evidence or explanation. I do not agree. I have already rejected the view that simply by virtue of reasoning being contained in a decision letter it will be enough to say that that is all that is relevant (particularly where there is no statutory duty to set full reasons out in such letter). Whether it is correct to say the reasoning is contained in a decision letter and the question of what facts are relevant will plainly need to be considered on a case by case basis by those charged with carrying out the “high duty” of candour.