Shiner & Anor v The Commissioners for HMRC

A First-tier Tribunal may strike out part of a statutory tax appeal under rule 8(3)(c) where it has no reasonable prospect of success, including because re-litigation is an abuse of process. Abuse requires a broad, merits-based assessment of all the circumstances, guided by finality, avoidance of vexation and efficient litigation. A taxpayer who chose judicial review to challenge legislation, and chose the evidence deployed there, cannot ordinarily reserve a central issue or evidence for a later tax appeal. Later EU decisions may affect future assessment years, but do not ordinarily justify reopening concluded domestic proceedings. A decision confirming settled free-movement principles does not provide special circumstances where the earlier decision addressed the relevant movement of capital and alleged discrimination.

The appellants, shareholders and directors of a residential property developer, used Isle of Man trusts and a partnership structure and claimed exemption from UK income tax under the 1955 UK–Isle of Man Double Taxation Treaty and section 858 of the Income Tax (Trading and Other Income) Act 2005. Following retrospective amendments made by section 58 of the Finance Act 2008, HMRC issued closure notices.

The appellants had previously brought judicial review proceedings challenging the application of the retrospective legislation under Article 56 of the EC Treaty. The Court of Appeal dismissed that claim in [2011] EWCA Civ 892, and the Supreme Court refused permission to appeal. The appellants then raised the Article 56 issue in statutory tax appeals. The First-tier Tribunal struck out that ground as an abuse of process. The Upper Tribunal upheld the abuse-of-process decision in [2015] UKUT 596 (TCC). The central issues were whether the First-tier Tribunal had power to strike out the ground and whether later CJEU authority justified re-litigation.

Lord Justice Patten gave the judgment, with Lord Justice Sales agreeing. The appeal was dismissed.

1. The First-tier Tribunal is a statutory tribunal without inherent jurisdiction, but rule 8(3)(c) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 expressly permits it to strike out the whole or part of proceedings where there is no reasonable prospect of success. That criterion is wide enough to cover an abuse-of-process application. No implied power was required. Rule 5(1) provided an additional possible procedural source, but was unnecessary to the decision.

2. The statutory duty to determine a tax appeal under sections 31 and 50 of the TMA 1970 did not require every ground to be determined regardless of circumstances. If a ground is struck out, the assessment governs the tax payable unless reduced under section 50(6). This was consistent with the objectives of justice, accessibility, fairness, speed and efficiency in section 22(4) of the TCEA 2007.

3. The principles in Henderson v Henderson (1843) 3 Hare 100 and Johnson v Gore Wood & Co [2002] 2 AC 1 require a broad, merits-based assessment of all the public and private interests and all the facts. There is no hard-and-fast rule. Relevant considerations include finality, avoiding vexation, efficiency, whether the issue should have been raised earlier, and whether the later proceedings amount to a collateral attack.

4. The earlier judicial review was a broad challenge to the enforceability of the retrospective legislation across the relevant years. The appellants chose that forum and the evidence they presented. Nothing in judicial review proceedings prevented them from adducing their fuller evidential case. They could not reserve facts for a later tax appeal and obtain a second opportunity. The difference between judicial review and a tax appeal, and the fact that the earlier claim was brought in the name of the Crown, did not prevent a finding of abuse of process.

5. Arnold v National Westminster Bank plc [1991] 2 AC 93 and Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46 showed the strength of finality. A change in EU law might justify reconsideration for future assessment years, but did not justify reopening the concluded issue for the past years. The decision in The Trustees of the BT Pension Scheme v HMRC, Case C-628/15, applied settled Article 63 principles and supplied no special circumstance. The earlier decision had correctly addressed the alleged movement of capital and discrimination. The First-tier Tribunal was therefore right to strike out the Article 56 ground.

• Court of Appeal (Civil Division) dismissed the appeal against the Upper Tribunal’s decision in this judgment, [2018] EWCA Civ 31.
• Upper Tribunal (Tax and Chancery Chamber) in [2015] UKUT 596 (TCC) upheld the First-tier Tribunal’s decision that re-litigation of the Article 56 issue was an abuse of process, although it rejected stare decisis as an independent basis for striking out.
• First-tier Tribunal rejected issue estoppel as the basis for striking out but struck out the Article 56 ground as an abuse of process and because the tribunal was bound by the earlier Court of Appeal decision.
• Court of Appeal (Civil Division) dismissed the earlier judicial review claim in [2011] EWCA Civ 892. The Supreme Court subsequently refused permission to appeal.