ABL – Tribunal dismisses HMRC's application to vary direction staying related cases

16 May 2017. Published by Alexis Armitage, Senior Associate

In ABL (Holding) Ltd and Tanias Properties Ltd v HMRC [2017] UKFTT 220 (TC), the First-tier Tribunal (FTT) dismissed HMRC's application to vary the FTT's direction staying over 100 related cases until the determination of the lead appellants' appeals by the Upper Tribunal (UT).


A large number of taxpayers had participated in certain arrangements involving the transfer of loan notes to employees and directors in a manner that was said not to give rise to any PAYE or national insurance liability. The arrangements were challenged by HMRC and the taxpayers appealed to the FTT. 

The FTT issued a direction, under Rule 18 of the Tribunal Rules, specifying four appeals as lead cases and designating the other cases as related cases. The related appeals were stayed pending resolution of the lead cases. 

The Rule 18 direction specified a number of related questions of fact and law which, to the extent determined in the lead appeals, would be binding on the related appellants. 
In July 2016, the FTT released its decision in Cyclops Electronics Limited and Graceland Fixing Limited v HMRC [2016] STFD 842, dismissing the appeals of the lead appellants. The FTT sent copies of its decision to the related appellants, as required by Rule 18(3) of the Tribunal Rules.

The lead appellants subsequently requested permission to appeal against the decision and the FTT gave permission for the lead appellants to appeal to the UT in September 2016. After granting permission to appeal, the FTT issued directions which stayed the related cases until 60 days after disposal of the lead appellants' appeals to the UT and extended the deadline by which the appellants in the related cases could apply for their appeals to be “unbound” from those of the lead appellants, pursuant to Rule 18(4) of the Tribunal Rules, until 60 days after disposal of the lead appellants' appeals by the UT. 

In October 2016, HMRC made an application to the FTT to vary the directions made by the FTT in relation to the related cases, arguing that the FTT's decision in relation to one of the common or related issues was binding on the related appellants (subject to any successful application by the appellants for their appeals to be unbound pursuant to Rule 18(4) of the Tribunal Rules on the grounds that the facts of their appeals could be distinguished from those of the lead appellants) and was sufficient to enable the FTT to make a determination under Rule 18(5) of the Tribunal Rules dismissing all of the related appeals.

FTT's decision

The FTT  concluded that the existing FTT directions should remain in place and dismissed HMRC's application for its directions to be varied for the following reasons:

1.  The FTT's overriding objective is to deal with cases fairly and justly. The stay directions ensured that the related appeals would be disposed of with the full benefit of the UT’s decision on appeal. 

2.  Although the stay directions deferred the point at which the binding nature of the FTT's decision on one of the issues would have a tangible effect, they still acknowledged the binding effect of that decision. Even with the stay directions in place, once the UT’s decision in the Cyclops appeal is known, there would be nothing to prevent the FTT following HMRC's suggested approach for disposing of the related appeals.

3.  There is scope for any prejudice that HMRC may suffer in being kept out of the additional tax allegedly due until the conclusion of the lead appeals by the UT to be fully mitigated. For example, HMRC is entitled to interest on any tax that is determined to have been underpaid and/or are entitled to apply under section 55(4)(a), TMA 1970, for a direction that the postponement of tax should cease, owing to a change in circumstances (although, of course, HMRC would need to satisfy the FTT on this issue). By contrast, if the FTT adopted HMRC's proposal and the appeal of a related appellant was wrongly disposed of based on a flawed appreciation of the law, that related appellant would need to appeal to the UT for the mistake to be corrected and would incur costs in doing so and would incur further costs if the matter were then remitted back to the FTT. 

4.  Finally, although neither party referred to this authority, the FTT was reinforced in its conclusion by the approach taken in HMRC v RBS Deutschland Holdings GmbH [2007] STC 814, which suggested that the FTT should consider whether the UT’s decision will be of “material assistance” in resolving the related appeals and whether it is expedient to stay the proceedings. The FTT considered both limbs of this test to be satisfied in the instant case.


It is surprising that HMRC made the application it did and the FTT's decision in dismissing the application was entirely predictable. The FTT arrived at its decision on the basis that it was necessary to uphold fairness and justice in relation to the Rule 18 direction and avoid additional costs being incurred. HMRC may have deep pockets but many taxpayers do not. Given the increasing use of the Rule 18 lead case procedure, this decision provides welcome clarification of the approach to be adopted when lead appellants appeal to the UT.

A copy of the decision can be found here.


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