Tribunal and beyond

[webberg]

After what seems a long time, we have now seen a couple of cases appear before a Tribunal and no doubt we will begin to see decisions being released in due course.

I'll try to summarise below what this means for those individuals involved in the cases at Tribunal, those not and what may happen in the future.

The Tribunals (First and Upper Tier) have a duty to make maximum use of their time in achieving their purpose of demonstrating that justice must be seen to be done.

Thus a case which involves more than one taxpayer will usually proceed on the basis that a lead case will be heard but that others will be willing to be bound to the decision made. There are a couple of Tribunal rules on this (5 & 18) but they are designed to bind as many people as possible to a decision.

This process usually takes place BEFORE a hearing goes ahead, but sometimes a Judge can make a request during the course of a hearing to either HMRC or the taxpayer's representatives.

Being bound to a winning case is of course good. Being bound to a losing case, perhaps not, although there is always hope that a higher Tribunal/Court may reverse the decision.

On a more practical level however whether you are bound or not, a decision in Tribunal that is not appealed will have implications for you if you have used the same or a similar scheme.

HMRC's Follower Notice rules will apply if there is a FTT decision that is not appealed. usually a FTT decision is not legally binding but will be regarded as "final" for the purposes of a FN.

If you get an FN and want to continue the fight, picking up the pieces from a FTT decision that has not been appealed can be tricky. You would need to be quick off the mark and have a different argument to the one that lost originally.

Keeping litigation groups together is tricky as well. Many people join with righteous ire and anger in their belly only to find that years of procedure and process wear them down. A defeat in the early stages will often be the final straw for many and cases will founder through lack of funds.

We are however in an era where litigation groups will be needed and will need to either hold together or be prepared to reform in the event of initial loss at FTT.

The price of indifference here could be a Follower Notice and liability that you have no power to influence without pitching in.

[GoneSurfing]

On a more practical level however whether you are bound or not, a decision in Tribunal that is not appealed will have implications for you if you have used the same or a similar scheme.

HMRC's Follower Notice rules will apply if there is a FTT decision that is not appealed. usually a FTT decision is not legally binding but will be regarded as "final" for the purposes of a FN.

If you get an FN and want to continue the fight, picking up the pieces from a FTT decision that has not been appealed can be tricky. You would need to be quick off the mark and have a different argument to the one that lost originally.

So all members of a scheme will get a FN if any taxpayer is defeated at FTT and the decision is not appealed, irrespective of whether the other members were also planning/scheduled to go to FTT with a different legal team?

Does this mean that any given scheme effectively only gets one shot at FTT or are the subsequent FTT appeals being run for other taxpayers still able to proceed... and if so, what happens to the money paid under the FN if they win?

[stonehenge]

If you get an FN, you risk a 50% penalty if you continue with your appeal. I settled because that would have wiped me out. I know someone who received an FN, and didn't settle, who has now been hit with 50%. He says the penalty + interest are now more than the original tax.

[webberg]

So all members of a scheme will get a FN if any taxpayer is defeated at FTT and the decision is not appealed, irrespective of whether the other members were also planning/scheduled to go to FTT with a different legal team?

Does this mean that any given scheme effectively only gets one shot at FTT or are the subsequent FTT appeals being run for other taxpayers still able to proceed... and if so, what happens to the money paid under the FN if they win?

No. It means that if a case is lost at FTT (and not appealed so that it becomes final), then finding grounds for another - new - case to go to Tribunal may well be difficult as a Tribunal may say that they have already heard all the arguments and there is nothing new to hear.

If there are new or better grounds for an appeal, it will be heard.

What you cannot do is re-run the argument.

As the poster above also says if you do find new grounds then going with those and losing again may well result in a higher penalty.

Who said the system was fair?

[Iter]

Tribunal and beyond

If tax payer wins at FTT would it be likely HMRC will always appeal? If they do is it then on them to bring forward a new argument to change decision? If appeal was lost, is the FTT decision then final still in favour of tax payer.

I guess if tax payer / group loose FTT they wouldnt appeal, realistically it would not be worth the risk to continue if the FN could add penalties? Also if the original argument fails at FTT realistically any new argument wouldn’t stand up in court, guess it’s down to
the judge..... Would orig liability stand with no penalties at this point. In other words is it’s always worth initially going through FTT if you think the argument will stand a good chance?

[webberg]

If tax payer wins at FTT would it be likely HMRC will always appeal? If they do is it then on them to bring forward a new argument to change decision? If appeal was lost, is the FTT decision then final still in favour of tax payer.

I guess if tax payer / group loose FTT they wouldnt appeal, realistically it would not be worth the risk to continue if the FN could add penalties? Also if the original argument fails at FTT realistically any new argument wouldn’t stand up in court, guess it’s down to
the judge..... Would orig liability stand with no penalties at this point. In other words is it’s always worth initially going through FTT if you think the argument will stand a good chance?

It seems to be HMRC default policy to appeal a loss at FTT.

This is not always the case but seems to have become more common even where there is no realistic chance of winning. Part of the reason for this is that the cost of going to Upper Tier etc is not part of the equation for HMRC who hide behind a strategy (LSS) that permits them to hold no view on the correct analysis other than their own. This is not conducive to a sensible or balanced result.

A taxpayer loss at FTT can be appealed (there are time limits) and is usually recommended, but cost is a factor.

Usually the facts and the core arguments are determined at FTT and Tribunals and Courts are reluctant to admit new arguments later in the process. There are a variety of reasons for this, but perhaps one is that a Tribunal is reluctant to spend time analysing an argument only to find it abandoned and replaced with a new one, requiring more time, later.

New arguments are permitted sometimes. See the HMRC case on Rangers in which new argument was permitted at the Court of sessions level.

If you have an argument good enough at FTT level, there is no reason other than financial to abandon that if you lose.

[stonehenge]

In the old days, there was nothing much to lose by lodging an appeal but an FN changes all that.

You'd have to be pretty damn confident of your argument to risk a 50% penalty.

I wonder what HMRC will dream up next to put people off going to tribunal?

[BolshieBastard]

Before either side can appeal an FTT decision, they must first get permission, called Leave, to appeal.

Normally the FTT decision will include a statement in its judgement that Leave to appeal is granted or not. Normally, Leave will not be granted if the FTT thinks any appeal is very unlikely to succeed or, the arguments advance during the hearing were particularly weak or spurious.

Where the FTT refuses Leave, either party to the original FTT hearing can apply to the Upper Tier Tribunal for Leave to appeal.

Any actual appeal to the UTT must be on a point of law. That means the FTT erred in applying the law or interpreting the law. The test is high to act as a filter so as not to encourage people to continually appeal because they do not like the decision.

If the UTT refuses Leave, an application can be made to the Civil Courts. Im not sure if this is to the High Court or Court of Appeal but again, the test is high to succeed.

There are also time limits in which these appeals and applications should be made. Again, if the timelimit is missed, an application for an 'Out of time' appeal to be heard can be made. However, you cannot just claim you missed the deadline or expected someone else to do this on your behalf as Mr Gittins tried. There has to be real, solid reasons before an out of time appeal application can succeed.

If the criteria is met for the Out of time appeal to be heard, the appellant then has to satisfy the UTT with their arguement that the FTT erred on a point of law.

The FN legislation has been designed to discourage people from appealling and pay up instead. This is snidey in the extreme and severely hinders people's access to the court system.

[regron]

In the old days, there was nothing much to lose by lodging an appeal but an FN changes all that.

You'd have to be pretty damn confident of your argument to risk a 50% penalty.

I wonder what HMRC will dream up next to put people off going to tribunal?

Well, APN's kind of helped them there. Although that was more to put them off going to tribunal !!

[stonehenge]

The FN legislation has been designed to discourage people from appealling and pay up instead. This is snidey in the extreme and severely hinders people's access to the court system.

And open to abuse by HMRC. They get to decide when a case is similar enough to issue an FN. You can challenge an FN by making representations but that's just window dressing to make it look like the process is fair.

The reality is, if you want to contest an FN, you'll almost certainly need to undertake a JR which requires ££££££.