BPP – Tribunal correct to strike out HMRC's case for failure to comply with Rules and Directions

23 August 2017

In BPP Holdings Ltd v HMRC [2017] UKSC 55, the Supreme Court has confirmed that the First-tier Tribunal (FTT) was justified in directing that HMRC be barred from taking further part in the proceedings for failure to adhere to the Tribunal’s Rules and Directions.


The underlying case concerned the VAT treatment of supplies of books to the students of the taxpayer's law school. However, the Supreme Court's decision concerned non-compliance by HMRC of directions issued by the FTT. 

In particular, the FTT directed HMRC to provide further and better particulars by 31 January 2014, in respect of its case in response to a request by the taxpayer. HMRC failed to comply with that direction. The FTT issued a direction under Rule 8 of the Tribunal Rules barring HMRC from further participation in the proceedings. 

The central question in the case was whether the Tribunal Rules ought to be complied with in a manner similar to the Civil Procedure Rules 1998 (CPR), or whether the Tribunal Rules anticipated a lesser standard of compliance.

The FTT considered the approach to compliance as discussed in Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537 and Denton v TH White Ltd [2014] EWCA Civ 906 and in issuing the Rule 8 direction noted that HMRC had failed to explain its non-compliance, and that the delay had caused prejudice to the taxpayer. 

HMRC appealed to the Upper Tribunal who allowed its appeal.

The taxpayer successfully appealed to the Court of Appeal. HMRC argued that a CPR-style approach should not be applied in tax appeals before the tax tribunals. The Court of Appeal rejected this argument, noting that HMRC regularly rely on the CPR by analogy in cases where it suits its arguments, remarking 'the irony in that circumstance is not lost on this court'.

HMRC appealed to the Supreme Court where its appeal was dismissed.  

Supreme Court's judgment 

It was argued by HMRC that the FTT’s reliance on the Court of Appeal’s reasoning in Mitchell was not appropriate as the position had  been modified by the Court of Appeal's later decision in Denton

The Supreme Court noted that the FTT judge had not directly applied the CPR or the authorities providing guidance thereon, he had applied their principles by analogy. There was no indication that the FTT had misunderstood the Mitchell guidance and the fact that the FTT did not consider Denton was not a valid reason for upsetting its decision. The Court of Appeal in Denton described the Mitchell approach as 'remaining substantially sound' and the refinements contained in Denton were largely clarifications. 

HMRC also argued that the FTT should have accepted the relevance of, and taken into account, the fact that the debarring direction prevented HMRC from discharging its public duty to collect tax and could lead to the public interest being harmed in that VAT which should be paid may not be recovered. The Supreme Court gave short shrift to this argument. It was of the view that it would set a dangerous precedent if the judge had been required to adopt such an approach as such an approach would discourage public bodies from living up to the litigation standards expected of individuals and private bodies. The Supreme Court also commented that it is arguable that the courts should expect higher standards from public bodies, such as HMRC, when they are conducting litigation.

The Court was of the view that although, strictly, the approach to compliance with rules and directions made under the CPR, as discussed in Mitchell and Denton , does not apply to proceedings being conducted before the tax tribunals, it is unrealistic and undesirable for tribunals not to pay close regard to the principles enunciated in those cases.

This judgment is helpful and confirms that:

(1) the FTT can rely on the guidance provided in Mitchell and Denton;

(2) HMRC does not have a special status and must comply with the Tribunal Rules and any directions issued by the FTT; and 

(3) the FTT is within its rights to debar HMRC from further participation in the proceedings when it has not complied with the Tribunal Rules and directions.  

Taxpayers and their professional advisers need to ensure that the Tribunal Rules, and any directions issued by the FTT, are adhered to. In the event that there is non-compliance on the part of HMRC, they should adopt a pro-active approach and take steps to ensure that non-compliance is dealt with effectively by the FTT.

The Supreme Court also commented that 'it may be worth considering whether tribunals should be accorded additional sanction powers to those which they currently have' and that 'there may be force in the notion that the tribunal rules should provide for the possibility of more nuanced sanctions, such as a fine or even the imposition of some procedural advantage'. Given such comments, the FTT may need to be given greater powers in order to broaden the options available to it when dealing with parties who have not complied with the Tribunal Rules and or directions issued by it. 

A copy of the judgment can be found here.

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