Totel Ltd, R (on the application of) v The First Tier Tribunal (Tax Chamber) & Ors

The statutory exclusion of an appeal on a point of law from a tribunal hardship decision was lawful. The enabling power expressly authorised provisions about when an appeal could be made and permitted amendment, repeal or revocation of any statutory provision. The exclusion did not deny access to justice because the taxpayer retained an initial appeal, a hardship hearing before an independent tribunal, and public-law remedies for jurisdictional error. Hardship is a factual inquiry into whether payment of the assessed VAT would cause financial hardship, assessed by reference to immediately or readily available resources and proportionately.

The claimant challenged two First-tier Tribunal (Tax Chamber) decisions refusing hardship applications made under Value Added Tax Act 1994, section 84. The applications concerned VAT assessments of £205,625 and £1,268,726.38. The claimant argued that section 84(3C), which made the tribunal’s hardship decision final, was ultra vires and unlawfully removed the statutory right of appeal under Tribunals, Courts and Enforcement Act 2007, section 11.

It also argued that the tribunal had erred in law, acted irrationally, and reached conclusions incompatible with European Union law and Convention rights. The central issues were the legality of the statutory amendment and the lawfulness of the tribunal’s refusal of relief.

1. The claim was dismissed. The introduction of section 84(3C) of Value Added Tax Act 1994 by paragraph 221 of Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (SI 2009 No.56) was intra vires and lawful.
2. The principle of legality did not prevent the amendment. Even if a right of appeal on a point of law were regarded as fundamental, section 84(3C) used clear and emphatic language. Section 124 of Finance Act 2008 expressly authorised provision about the circumstances in which an appeal might be made and authorised amendment, repeal or revocation of any Act or subordinate legislation.
3. The removal of the further appeal did not thwart access to justice. Hardship was an intermediate, essentially factual stage of the VAT appeal process. The taxpayer retained access to the First-tier Tribunal and could pursue judicial review for jurisdictional error or other public-law error.
4. The tribunal applied the correct hardship inquiry: whether the appellant could pay the disputed VAT from resources immediately or readily available without suffering financial hardship. Hardship applications should ordinarily be resolved promptly on contemporaneous or near-contemporaneous information. The tribunal could take account of the position when payment should have been made where the appellant had caused substantial delay, and could impose an evidential cut-off.
5. The tribunal did not err by considering the applications separately, considering the dividend as part of the company’s resources, or rejecting the second application for want of sufficiently current and comprehensive financial evidence. Its conclusions were not irrational.
6. The statutory scheme was compatible with European Union law and Convention rights.