News Tax 5th Dec 2018

Tax Team Winter Newsletter

Welcome to the Winter Edition of the 2 Hare Court Tax Team newsletter.

In this edition, Jonathan Kinnear QC and Laura Stephenson cover the important decision of R (oao PML Accounting Limited) handed down by the Court of Appeal which touches on penalties following a resolution of the underlying decision.

Vivienne Tanchel and Howard Watkinson consider the compatibility between the First-tier Tribunal Rules and the Value Added Tax Act where a taxpayer wants to withdraw consent to an agreement pursuant to s85 following the decision of OWD t/a Birmingham Cash and Carry.

Disclosure and the fallout from the Upper Tribunal’s confirmation that the Revenue has a duty of candour in tax tribunal proceedings in Karoulla (t/a Brockley’s Rock) is considered by Christopher Foulkes and Lewis MacDonald.

Finally, Leon Kazakos and Joshua Carey delve into the Houdini-esque attempt at escape from the DOTAS provisions which resulted in the Appellants’ case being struck out in the Upper Tribunal decision of The First De Sales Ltd Partnership.


The Court of Appeal recently considered the importance of decisions underlying a penalty issued to a taxpayer by the Revenue in R (oao PML Accounting Limited) -v- The Commissioners for HM Revenue and Customs [2018] EWCA Civ 2231.

PML Accounting Ltd (“PML”), is a managed service company provider offering financial services to small companies, including preparation of accounts and financial records, PAYE and VAT registration, tax computation, and tax returns for contractors and consultants.

PML were issued by HMRC with an information notice under Schedule 36, para. 1 to the Finance Act 2008. The notice required PML to provide to HMRC documentation for a sample of its clients, purportedly so that HMRC could check if PML’s clients were managed service companies (“MSC”) and whether PML was an MSC provider…

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Cold Turkey? The Dangers of Withdrawal in the Tax Tribunal

Vivienne Tanchel & Howard Watkinson

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”)…

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Karoulla t/a Brockley’s Rock: Revenue Battered on Disclosure

Christopher Foulkes & Lewis MacDonald

In Karoulla v HMRC [2018] UKUT 255 (TCC), the Upper Tribunal (‘UT’) has ruled that HMRC have a duty of candour in proceedings in the tax tribunal. Although not the first time that this has been suggested, it will no doubt be a cause for concern at HMRC, and presents opportunities for those representing taxpayers.

Karoulla’s appeal concerned a best judgment assessment for under-declared VAT by a fish and chip shop. Just before the application for permission to appeal, HMRC produced the original till rolls from the shop, an analysis of which suggested that the under-declaration had been less extensive than that assessed.

In rejecting HMRC’s submissions that Karoulla should have applied to the FTT for an order seeking disclosure of the evidence, and that therefore the evidence could have been obtained with reasonable due diligence for use at the hearing before the FTT and was not admissible on appeal, the UT stated:

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DOTAS: Houdini’s Escape?

Leon Kazakos & Joshua Carey

Houdini was a masterful illusionist famed for his escapology. The recent judgment given by the Upper Tribunal in The First De Sales Limited and Ors -v- The Commissioners for HM Revenue and Customs [2018] UKUT 396 (TCC) confirmed that the Disclosure of Tax Avoidance Scheme (“DOTAS”) that was struck out by the FTT on application by HMRC provided the taxpayer – unlike Houdini – with no reasonable prospect of escaping from the manacles of tax.

Brief Facts

The Appellants were a combination of limited liability partnerships and limited companies carrying on a creative writing profession for which they derived modest income. Founder members of the Appellants sought further partners or members and those partners or members made capital contributions to the Appellants. The Appellants then employed people who were Non-UK Resident to undertake administrative tasks and manage the estates which were based in the United Kingdom. Shortly after the employees commenced working at the Appellants they were invited to enter into Deeds of Restrictive Undertakings under which the Appellant agreed to pay huge sums (£970M in aggregate) “solely in consideration of [the employee] giving the restrictive undertakings”…

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