Tribunal grants 'disclosure' application against HMRC

12 February 2016. Published by Adam Craggs, Partner

The recent case of Tower Bridge GP Ltd v HMRC [2016] UKFTT 054 (TC) concerned applications by Tower Bridge GP Limited (Tower Bridge) and HMRC to the First-tier Tribunal (FTT) for disclosure of information and documents from each other, pursuant to Rule 5 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the Tribunal Rules).

Tower Bridge sought disclosure of material principally concerned with policy advice provided to HMRC officers and HMRC sought disclosure of material it considered relevant to the underlying dispute. The FTT ordered that both Tower Bridge and HMRC should provide some disclosure to each other.


Tower Bridge is the representative member of a VAT group that includes CantorCO2e Ltd (CO2e). The underlying substantive appeal relates to decisions made by HMRC to refuse Tower Bridge the right to recover input tax incurred on certain purchases of emissions allowances under the European Emissions Trading Scheme and to issue VAT assessments accordingly. One of the grounds relied upon by HMRC was that CO2e knew, or ought to have known, that the transactions in question were connected with fraudulent evasion of VAT (applying the decision of the ECJ in Axel Kittel v Belgium Case C-430/04) (the Kittel issue).

So far as relevant to the applications, there were three underlying issues, namely:

(1) the validity of certain invoices;

(2) a time limit issue relating to whether HMRC was in time to make an assessment; and

(3) the Kittel issue.

Tower Bridge applied for disclosure of eight categories of documents and information from HMRC. The basis of the application was that the documents requested would enable it to determine whether HMRC had exercised reasonable discretion, in time, and within the statutory framework.

HMRC requested disclosure of internal documents from Tower Bridge.

Rule 5 of the Tribunal Rules sets out the FTT's case management powers. Specifically, Rule 5(3)(d) provides that the FTT may direct:

"… a party or another person to provide documents, information or submissions to the Tribunal or another party."

When exercising any power under the Tribunal Rules (including the power under Rule 5(3)(d)) the FTT must take into account the 'overriding objective' set out in Rule 5(1) of the Tribunal Rules to deal with cases 'fairly and justly'.

The FTT's decision

Whilst acknowledging that the FTT operates a more flexible approach than the courts, Tower Bridge referred the FTT to Rule 31 of the Civil Procedure Rules (CPR) which governs disclosure in the courts. It was submitted that Tower Bridge's application should be treated as analogous to an application for 'specific disclosure', under which the court makes an order for the disclosure of specific documents, or classes of documents, which are relevant to an issue in the appeal. Although the FTT considered the analysis of CPR 31 as useful, the FTT said that it preferred to follow the default position set out in Rule 27(2) of the Tribunal Rules, namely, that each party will disclose to the other only those documents on which it proposes to rely.

However, given the complexity of the issues in the underlying appeal and the serious allegation that a major financial institution either knew, or should have known, that transactions with which it was involved were connected with fraud, the FTT was of the view that there should in this case be a presumption that both parties will disclose relevant material to each other. The FTT said that the test of relevance should not set an unduly high bar. Documents and information that might advance or hinder a party's case, or which might lead to a 'train of inquiry' that might advance or hinder a party's case are, in principle, relevant.

The FTT considered the specific documents requested by each party and whether they should be disclosed. It concluded that HMRC should disclose to Tower Bridge policy advice that the relevant HMRC officer admitted considering when making his decision. The FTT held that the test for "self-certification" for the relevance of documents was appropriate in the circumstances. Should any issues arise in relation to relevance, Tower Bridge would be able to make a further application to the FTT.

In relation to HMRC's application for disclosure, Tower Bridge argued that HMRC had ample opportunity to utilise its information powers, contained in Schedule 36, Finance Act 2008, during its enquiries to gather all relevant documentation and information and that it was now seeking to carry out an exercise which should have been performed during the enquiry stage of the process.

The FTT concluded that the documents requested satisfied the relevance test and the fact that HMRC had not utilised its Schedule 36 powers during the course of its enquiries to obtain the documents was not a bar to it requesting disclosure under Rule 5 of the Tribunal Rules (HMRC v Ingenious Games LLP and others [2014] UKUT 0062 (TCC) applied).


This decision provides helpful guidance on the approach to be taken when applying to the FTT for a disclosure direction under Rule 5 of the Tribunal Rules. Given HMRC's traditional reticence about disclosing documentation and information to taxpayers during the course of litigation, taxpayers should not hesitate in applying to the FTT for an appropriate disclosure direction should they form the view that HMRC is in possession of relevant material which it is refusing to disclose.

The decision also confirms that once HMRC's enquiries are concluded and an appeal has been made to the FTT, HMRC cannot utilise its Schedule 36 information powers.  If it requires further documents or information from the taxpayer, it must make an appropriate application to the FTT for a disclosure direction.

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