Case: HMRC unable to collect tax in related appeals until lead appeal heard by UT

[2017] UKFTT 0220 (TC)

Judge Jonathan Richards

Decision released 13 March 2017

Procedure – Direction under Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 18 – Approach when lead appellants appeal to Upper Tribunal – Whether to stay related appeals pending decision of Upper Tribunal - Yes

In R & C Commrs v ABL (Holdings) Ltd; Tanias Properties Ltd [2017] TC 05710, the First-tier Tribunal (FTT) rejected HMRC’s application to lift stay directions issued following the dismissal of the lead appellants’ appeals by the FTT, therefore the 133 related cases were to be stayed until after the lead appellants’ appeals were disposed of by the Upper Tribunal (UT).


In Cyclops Electronics Ltd; Graceland Fixing Ltd [2016] TC 05237, the FTT dismissed the appeals of the two lead appellants who had used a tax avoidance scheme involving restricted securities. The FTT granted the lead appellants permission to appeal to the UT and afterwards made directions (the ‘stay directions’) to:

(1)stay the appeals of the cases which had been designated as ‘related’ under the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 18 (which had been stayed pending resolution of the lead case) until 60 days after the disposal of the lead appellants’ appeals to the UT; and

(2)give the related appellants until the date the stay expired to apply not to be bound by the decision pursuant to r. 18(4).

HMRC applied to vary the stay directions. HMRC argued that by designating the cases as related meant that the decision of the FTT was binding on the related appellants. HMRC submitted that the FTT’s decision was sufficient to enable it to make a determination under r. 18(5) dismissing all the related appeals. If any related appellant wished to argue that its appeal should not be dismissed, that appellant should make an application either to be unbound or for additional directions. Crucially, in HMRC’s submission, these steps should have been required before the UT determined the lead appellants’ appeals. The stay directions should not, in HMRC’s view, have permitted the related appellants to take no action until the UT had determined the appeal. HMRC felt that it was unsatisfactory that the effect of the stay directions was that they could not collect any tax due from the related appellants, even though the FTT had determined that the ‘marketed avoidance scheme’ they had participated in had failed, as all of those appellants had had their obligation to pay the disputed tax postponed under the Taxes Management Act 1970 (TMA 1970), s. 55. HMRC proposed alternative directions, under which HMRC would have been able to take enforcement action against any related appellant whose appeal had been dismissed following a determination under r. 18(5), as TMA 1970, s. 56 provided that, even where an appeal was made to the UT, the tax at issue would have been due and payable.

The FTT found that neither the stay directions nor HMRC’s proposal was perfect. But having weighed up the various considerations it concluded that the stay directions were to remain in place because:

(1)they ensured that the related appeals would be disposed of with the full benefit of the UT’s decision on appeal, and would meet the FTT’s overriding objective is to deal with cases fairly and justly;

(2)while the stay directions deferred the point at which the binding nature of the FTT’s decision had tangible effects, they still acknowledged the binding effect of that decision;

(3)HMRC would be entitled to interest on any underpaid tax and could apply under TMA 1970, s. 55(4)(a) for a direction that the postponement of tax should cease owing to a change in circumstances and therefore, there was scope for any prejudice that HMRC suffered in being kept out of their money to be mitigated;

(4)In 288 Group Ltd [2013] TC 03041, Judge Mosedale endorsed a similar approach to this (and in General Healthcare Group Ltd [2014] TC 03488, Judge Berner did not say anything different); and

(5)the approach taken in R & C Commrs v RBS Deutschland Holdings GmbH [2008] BVC 16 reinforced the conclusion.

The FTT’s conclusion was therefore that the stay directions should remain in place.


This decision meant that even though the FTT had decided the lead appeal in favour of HMRC and therefore that tax was due from the related parties, because the lead appellants had decided to appeal to the UT HMRC could not collect the tax from the related parties until after the UT decision was released (assuming the UT also found in favour of HMRC).

For commentary on lead cases, see the CCH Tax Reporter at ¶189–565.

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