Cold Turkey? The Dangers of Withdrawal in the Tax Tribunal
Both indirect (whether VAT or Excise Duty) and direct tax practitioners alike need to be aware of the consequences of withdrawing an appeal in the Tax Tribunal following the decision of Judge Falk (as she then was) in OWD Ltd (t/a Birmingham Cash & Carry) v Revenue & Customs [2018] UKFTT 497 (TC) (“OWD”). Those who advise liquidators, administrators or trustees in bankruptcy should pay special heed, as it is often they who come under the most pressure from HMRC shortly after their appointment to consider withdrawing appeals that taxpayers have previously made.
OWD is, despite the fact that the Tax Tribunal’s “new” procedure rules have now been with us for nearly a decade, the first decision to comprehensively analyse the interface between the statutory provisions on withdrawal and reinstatement in section 85 Value Added Tax Act 1994 (“VATA”), its direct tax equivalent in section 54 Taxes Management Act 1970 (“TMA”) and the matching provisions in Rule 17 of The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (“the Rules”).
OWD was a case concerning Excise Duty assessments, VAT assessments, related penalty assessments and an appeal against HMRC’s decision to refuse OWD’s application for approval to carry on the wholesale of alcohol under the Alcohol Wholesaler Registration Scheme (“AWRS”). OWD entered liquidation and its newly appointed Liquidator informed the Tribunal and HMRC that it wished to withdraw its appeals. Later, the Liquidator had a change of heart and sought reinstatement of the appeals. Crucially, the applications were made more than 30 days after the withdrawals.
HMRC’s argument was that since the application was made more than 30 days after the withdrawal the Tribunal was statute barred from reinstating the appeal. The issue arises because under both section 85 VATA and section 54 TMA, once 30 days have elapsed since the notification of the withdrawal of an appeal and HMRC have not objected (and the taxpayer has not notified a change of mind), a deeming provision operates such that as at the date of the notification of withdrawal, the taxpayer and HMRC are deemed to have come to an agreement that the decision under appeal should be upheld without variation.
However, Rule 17(3)-(4) of the Rules provides that a party who has withdrawn its case may apply to the Tribunal for the case to be reinstated. The Rules require that the application be made in writing and received by the Tribunal within 28 days of the case having been withdrawn.
Rule 5(3)(a) of the Rules also allows the Tribunal to “extend or shorten the time for complying with any rule… unless such extension or shortening would conflict with a provision of another enactment setting down a time limit.”
Since the change in the Tribunal’s procedure rules in 2009 both practitioners, and indeed the Upper Tribunal, had always assumed that because the Tribunal had the power to extend time to reinstate appeals that had been withdrawn, that there always remained the possibility of reinstating withdrawn appeals. In essence, Rule 17 was viewed as some form of statutory override.
Judge Falk has confirmed (at [32]) that the Rules provide no such override; in other words, once those 30 days have elapsed after notification of withdrawal of an appeal, and HMRC have not objected (and the taxpayer has not notified a change of mind), the Tribunal has no power to reinstate the appeal. The Tribunal’s power to extend time for a reinstatement application made after the 28 day time limit in Rule 17 of the Rules is thus, to a large extent, illusory.
Judge Broks has already followed OWD in Libby’s Market Place Ltd v Revenue & Customs [2018] UKFTT 563 (TC).
Those thinking of withdrawing appeals in the Tax Tribunal must therefore be aware that there is a very real guillotine on the right to change their mind.
Howard represented HMRC in the FTT in OWD. Both Howard and Vivienne continue to deal with tax cases at the highest levels in both the Civil Courts and Tribunals.
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