A taxpayer has partially won his case at the Court of Appeal (CoA) where HRMC had appealed a decision of the Upper Tribunal (UT) to not permit the striking out of an appeal by the First-tier Tribunal (FTT).

Mr Kishore (the taxpayer) was registered for VAT making quarterly VAT returns.  On his 12/05, 03/06 and 06/06 returns he made large claims for repayment of input tax.  HMRC refused to pay the requested refunds of just over £22m in relation to later two returns holding that Mr Kishore was aware or should have should have been aware that transactions within the returns were part of a fraudulent scheme where another trader within the supply chain suddenly disappears owing a tax authority a considerable sum.  The taxpayer appealed the assessments but the appeal was eventually struck out by the FTT as the taxpayer didn’t comply with an unless order to provide information.  The appeal to refund of the £22m wasn’t decided at tribunal but the matter was resolved with finality as the taxpayer didn’t respond to the unless order in time.

HMRC then issued penalties for over £2m against the taxpayer in relation the mis-declared VAT returns.  The taxpayer appealed these penalties and the FTT struck the appeal out using a strict test that there must a very good reason as why the initial proceedings could be revisited.  The taxpayer appealed this strike out decision and the UT agreed with the taxpayer that boarder test should be applied by the FTT to determine whether to hear a case.  HMRC appealed this decision and the case ended up at the CoA.

The CoA concurred with the UT that the appropriate test for the FTT to use was a broad merit-based test as HMRC hadn’t shown that the taxpayers non-response to the unless order showed he ‘was guilty of intentional and contumelious conduct, wholesale disregard of the rules or otherwise inexcusable conduct’.

The CoA dismissed HMRC’s appeal.  The CoA also dismissed the taxpayer’s cross appeal, holding that his human rights hadn’t been breached and that HMRC had not abused processes by issuing the penalties.

The FTT will now to apply a broad, merit-based test to determine if the case can be heard.

The decision can be found at: Revenue And Customs v Kishore [2021] EWCA Civ 1565 (28 October 2021) (bailii.org)

Please contact us if you have been issued with a VAT assessment or penalty.  We are experienced with negotiated with HMRC and can help resolve disputes.