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Tribunal prevents HMRC from 'relitigating' the case in Rosenbaum v HMRC

13 November 2013. Published by Dan Wyatt, Partner

In Rosenbaum v HMRC[1] the First-tier Tribunal ('FTT') recently considered the circumstances in which it can set aside a decision under Rule 38 of The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 ('the Tribunal Rules').

Facts and background

The executor of the estate of Teresa Rosenbaum ('the Appellant') appealed against the imposition of a penalty in respect of the late submission of a trust tax return for the tax year 2011/12.

On 14 January 2013, HMRC received the Appellant's paper tax return for the tax year ended 5 April 2012. The return was enclosed with a letter from the Appellant's agent stating: "Please find enclosed the tax return of the above-named estate for the year ended 5 April 2012 … Please confirm no other returns are required".

Under section 8A Taxes Management Act 1970, non-electronic returns must be submitted by 31 October each year. As this deadline had passed, on 15 January 2013, HMRC issued a £100 penalty pursuant to paragraph 3, Schedule 55, Finance Act 2009.

On 24 January 2013 (i.e. before the 31 January deadline for electronic filing of returns), the Appellant's tax return for the year ended 5 April 2012 was filed online. On the same day, the Appellant's agent wrote to HMRC stating that the paper return received by HMRC on 14 January 2013 was provided: "merely to confirm that that was the last return and no further income or tax return would be due". The agent's letter also requested confirmation that: "the penalty of £100 issued has been cancelled".

HMRC refused to cancel the penalty, and the Appellant submitted a Notice of Appeal on 25 March 2013.

FTT's decision

The FTT determined the appeal without a hearing on 8 July 2013. The FTT's decision noted that the case turned on whether the paper return received by HMRC on 14 January 2013 was a valid tax return. If it was, the penalty would have automatically arisen under paragraphs 1 and 3, Schedule 55, Finance Act 2009, notwithstanding the subsequent electronic filing of a tax return. If the paper return was not a valid return, there was no valid non-electronic tax return filed after the 31 October deadline in relation to which HMRC could issue the penalty.

The FTT noted that the onus was on HMRC to establish, on the balance of probabilities, that the facts fell within the penalty provisions. HMRC had not sought to produce any evidence to do so: in particular, they failed to produce the paper return which they had received on 14 January 2013, and there was no evidence before the FTT that the paper return had been signed. Accordingly, the FTT concluded that HMRC had failed to discharge the burden of proof that the paper return was valid for the purposes of section 8A Taxes Management Act 1970. The FTT concluded that the online return should be treated as the valid return and therefore no penalty was due.

Application by HMRC

HMRC subsequently applied to have the decision set aside pursuant to Rule 38 of the Tribunal Rules. HMRC's application enclosed a scanned copy of the paper return which they had received on 14 January 2013 and stated:

"A scanned copy of the return is attached for your consideration which was logged following routine checks to ensure the return is valid, completed and signed by a trustee. As you can see the Return which is completed and signed by the trustee, gives no indication that this was other than a response to file a return under section 8A MA 1970".

The application failed to explain why this evidence had not been advanced previously.

Under Rule 38(1), the FTT may set aside an original decision if:

(a) it considers it to be in the interests of justice to do so; and

(b) one or more of the conditions in Rule 38(2) is satisfied.

In the present case, the relevant condition relied upon is that contained in Rule 38(2)(b), which provides that the Tribunal may set aside a decision if: "a document relating to the proceedings was not sent to the Tribunal at an appropriate time".

The FTT cited Judge Poole's comments in Daksha Fraser v Revenue & Customs[2] where he said that: "the failure to send the new evidence would need to be in the nature of a 'procedural irregularity' before it can satisfy the condition in (2)(a) or (b)". The FTT said that it could see no such "procedural irregularity in the simple fact that HMRC failed to produce the evidence that they required in order to prove their case".

Furthermore, although not strictly necessary for the purposes of disposing of the application, the FTT went on to consider whether, if Rule 38(2)(b) had been satisfied, it might have been in the interests of justice for it to exercise its discretion and set aside its original decision. Again referring to Daksha, the FTT considered that Rule 38 was not intended to allow parties "a second bite of the cherry". The FTT noted that it should have been obvious to HMRC that they needed to produce evidence as to the validity of the alleged paper return in order to prove their case, but they had nonetheless failed to do so. In the FTT's view, allowing HMRC to produce such evidence now, especially when they had failed to explain why it was not previously produced, would mean that "there would be no finality regarding the Tribunal's decision. The default paper appeals would then involve a decision-making process which was iterative. Plainly this cannot be what was intended by Rule 38".


This decision is a timely reminder that parties to tax litigation (whether taxpayers or HMRC) need to prepare their cases thoroughly and, in particular, must ensure that they adduce all relevant evidence at the appeal hearing. The FTT has made clear that it will not allow losing parties to re-litigate appeals on the basis that they had simply failed to place sufficient evidence before the FTT when it first heard the appeal.

[1] Executor of the Estate of Teresa Rosenbaum (deceased) v The Commissioners for Her Majesty's Revenue & Customs [2013] UKFTT 495 (TC)

[2] [2012] UKFTT 189 (TC).