Sahib Restaurant Ltd v HM Revenue & Customs

For second appeals, permission requires an important point of principle or practice, or another compelling reason to hear the appeal. Parallel tax investigations are not barred by res judicata, issue estoppel or abuse of process merely because they concern the same business, period or alleged suppressed turnover. The relevant parties, statutory liabilities, assessment mechanisms and enforcement regimes must be examined. Separate income tax and VAT proceedings may involve overlapping factual questions but remain legally distinct where they concern different taxpayers, tribunals and statutory schemes. Consistency between tax assessments is desirable, but it is not itself a legal bar to a different approach in proceedings concerning another tax liability.

The appellant company challenged a VAT assessment following an adverse decision of the VAT and Duties Tribunal on 20 July 2007. Its appeal to the High Court, heard by HHJ Pelling, was dismissed on 9 April 2008. The company sought renewed permission for a second appeal.

The company and its sole owner had been subject to parallel investigations. The General Commissioners dealt with the owner’s income tax liability, while the VAT and Duties Tribunal dealt with the company’s VAT liability. The periods and alleged suppressed turnover substantially overlapped. The central issue was whether the earlier income tax decision prevented the VAT authorities from advancing a different quantification of turnover by reason of res judicata, issue estoppel or abuse of process.

1. Permission refused. The application concerned a second appeal and therefore had to satisfy the additional statutory threshold under the Access to Justice Act: the proposed appeal had to raise an important point of principle or practice, or disclose some other compelling reason for the Court of Appeal to hear it. The remaining grounds, including those concerning penalties, the standard of proof, dishonesty, irrationality and the evidence, did not meet that threshold.
2. The proposed argument based on res judicata could not succeed. The income tax and VAT proceedings involved different taxpayers and separate statutory tribunals. The relationship between the company and its owner did not establish that the two tax authorities were the same parties or privies. The distinction was materially different from the issue discussed in Johnson v Gore-Wood & Co (A Firm) [2002] 2 AC 1.
3. Even if the parties obstacle could be overcome, the two liabilities arose under different statutory provisions. Those provisions differed not only as to liability but also as to quantification, assessment and enforcement. The earlier income tax findings therefore did not create an estoppel governing the VAT assessment. The approach was supported by Caffoor v Commissioner of Income Tax of Columbo [1961] AC 584.
4. The VAT proceedings were not a collateral attack on the income tax decision. Although consistency between assessments based on substantially the same turnover was desirable, a different approach by separate tax authorities or tribunals was not inconsistent with res judicata, issue estoppel or abuse of process. There was no substantial prospect of success on the proposed appeal.

Order: Application refused.

1. Court of Appeal (Civil Division): renewed application for permission to bring a second appeal refused.
2. High Court, Manchester District Registry: HHJ Pelling dismissed the company’s appeal from the VAT and Duties Tribunal on 9 April 2008.
3. VAT and Duties Tribunal: decision adverse to the taxpayer on 20 July 2007 following a hearing concerning the VAT assessment.