R T Rate Limited v The Commissioners for HMRC

Under the EU law principle of legitimate expectation, protection requires precise assurances which would cause a reasonable and prudent economic operator to form an expectation, followed by an assessment of whether that expectation is justified. Whether the first limb is satisfied may involve an objective factual assessment rather than a pure question of law. Guidance which permits taxpayers to use modelled figures does not necessarily assure their accuracy or preserve closed claims indefinitely. The EU principle of equal treatment does not generally permit one taxpayer within a wider class to rely on a favourable settlement given to another individual taxpayer. The comparison must be made between relevant classes of taxpayers in a workable way. An appellate tribunal should not interfere with specialist factual and evaluative findings absent an error of law.

RT Rate Limited and other motor dealers had claimed repayment of output VAT on demonstrator vehicles using HMRC’s Italian Tables. After their claims had been settled, RT Rate sought in 2016 to claim further sums based on alleged errors in the tables, particularly their failure to reflect changes following the abolition of car tax.

The First-tier Tribunal dismissed the appeal. It held that RT Rate had no protected legitimate expectation and had failed to establish sufficiently similar treatment to another taxpayer, Kent Auto Panels Ltd, whose claim had been settled. The Upper Tribunal considered four grounds concerning legitimate expectation, remedy, and equal treatment.

1. Legitimate expectation. The appeal on Ground 2 was dismissed. The EU law test requires first an objective assessment of whether the administrative authority gave precise assurances which caused a reasonable expectation in a reasonably prudent economic operator, and second an assessment of whether that expectation was justified. The first question was factual and evaluative in the circumstances, not a pure question of law.
2. The FTT was entitled to conclude that the Italian Tables did not give an assurance that their figures were materially accurate, or that settled claims could be reopened indefinitely. The tables offered a relaxation from the need to prove precise historic margins. Traders remained free to produce better evidence. The figures were modelled theoretical margins without readily ascertainable true figures against which material accuracy could be measured. The alleged expectation was therefore insufficiently precise and could not be protected.
3. The Upper Tribunal would not address Ground 1, concerning the FTT’s jurisdiction to apply the EU doctrine of legitimate expectation, because the issue did not arise on the facts. Ground 3, concerning remedy, was academic.
4. Equal treatment. Ground 4 was dismissed. Where HMRC’s practice concerns a class of taxpayers, equal treatment is not assessed by comparing one taxpayer with a single other taxpayer who received a favourable settlement. The comparison must be made between classes of taxpayers in a workable manner. A single settlement cannot ordinarily become a precedent for every other taxpayer able to assert factual similarity.
5. In any event, the FTT was entitled to find that RT Rate had not proved sufficient similarity with Kent Auto Panels. The KAP Agreement recorded a settlement but did not establish the circumstances producing it. The ordinary burden of proving the factual case applied in proceedings before the FTT; the duties of candour and co-operation applicable in judicial review did not displace it.
6. RT Rate’s appeal was dismissed on all grounds.

• Upper Tribunal (Tax and Chancery Chamber): appeal from the First-tier Tribunal was dismissed on all grounds.
• First-tier Tribunal (Tax Chamber): decision released on 7 October 2020; RT Rate’s appeal was dismissed.