Court of Appeal confirms that HMRC must comply with rules and directions issued by the tax tribunals

23 March 2016.

The following is based on an article first published in Tax Journal on 8 March 2016.

In BPP Holdings v HMRC [2016] EWCA Civ 121, the Court of Appeal allowed the taxpayer's appeal and confirmed the decision of the First-tier Tribunal (FTT) debarring HMRC from further involvement in the appeal proceedings for failure to comply with a direction requiring it to properly particularise its case. 


The taxpayer had applied to the FTT to have HMRC debarred from further participation in its appeal under Rule 8 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the Tribunal Rules), on the grounds that HMRC had failed to comply with a direction issued by the FTT that it file further and better particulars of its case by a specified date. HMRC failed to comply with that direction.

Before the FTT, the taxpayer was successful and HMRC was debarred from further participation in the proceedings that were before it. HMRC successfully appealed to the Upper Tribunal (UT) and the taxpayer appealed the UT's decision to the Court of Appeal.

The critical difference between the decisions in the FTT and UT was the release of the conflicting decisions in McCarthy & Stone (Developments) Ltd v HMRC [2014] UKUT 197 (TCC) (which the FTT had the benefit of) and Leeds City Council v HMRC [2014] UKUT 350 (TCC), which had been released when the UT was sitting in BPP.

Both cases considered whether the stricter approach to compliance with rules and directions made under the Civil Procedure Rules (CPR) as set out in Mitchell v News Group Newspapers Ltd [2014] 1 WLR 795 and Denton v TH White Ltd [2014] 1 WLR 3296, applies to cases before the tax tribunals. In McCarthy, the UT concluded that the stricter approach applies to cases before the tax tribunals whereas in Leeds City Council, the UT concluded that as the Tribunal Rules were less strict than the CPR, Mitchell and Denton did not apply to litigation before the tax tribunals. 

Court of Appeal decision

Before the Court of Appeal, HMRC argued that the approach adopted by the UT in Leeds City Council should be preferred. HMRC suggested that as it was a state agency during a time of austerity, the Court should subject it to a lower standard of compliance – perhaps that of a litigant in person.

This suggestion was roundly rejected by the Court of Appeal, commenting that it found HMRC's approach to compliance to be "disturbing" and that even a litigant in person is expected to comply with the rules of court and court orders. The Court said that "a State party should neither expect to nor work on the basis that it has some preferred status" and that the 'constraints of austerity' on an agency like HMRC should in no way excuse "unacceptable behaviour".

The Court of Appeal had little difficulty in allowing the taxpayer's appeal. 


The BPP case, in effect, endorses the stricter approach adopted by the UT in McCarthy to compliance with rules and directions and overturns Leeds City Council.

The decision in Peter Nichols and Ano v HMRC [2016] (TC/2015/04557 and TC/2015/04618), handed down on 4 March 2016, is the first indication since BPP of the FTT's approach to failure on the part of HMRC to comply with instructions issued by the FTT. The taxpayers’ applications to the FTT for closure notices were resisted by HMRC, who first attempted to postpone the hearing and then filed witness statements the night before the hearing and a substantial bundle of documents shortly before 10.30 on the morning of the hearing itself (they had been ordered to do so no later than 14 days before the hearing).

In its defence, HMRC argued that it considered the applications for closure notices to be a "satellite" affair to its enquiry. The FTT was not impressed and described this "cavalier approach" as "simply not good enough". Commenting on the BPP decision, the FTT refused to admit HMRC’s evidence and directed HMRC to issue closure notices by the end of May 2016.

The decisions of the Court of Appeal in BPP and the FTT in Nichols, are to be welcomed. Although the tax tribunals are less formal than the higher courts, the Tribunal Rules and directions issued by the tax tribunals must be complied with and these two cases make it clear that HMRC is not to be subjected to a lower standard of compliance.

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