GB Fleet Hire Limited v The Commissioners for HMRC

An appeal against refusal to register for VAT should not be struck out as an abuse of process merely because an earlier VAT registration was cancelled and not appealed. The later application must be assessed by reference to the reasons actually given for the later refusal, the taxpayer’s current circumstances and the evidence reasonably available at a substantive hearing. Measures preventing abuse of VAT registration are prospective, but remain subject to proportionality and ongoing scrutiny of all relevant facts. The legal burden of showing both a continuing risk of abuse and abuse of process rests on HMRC. New taxable supplies may constitute new facts capable of giving the later appeal a realistic prospect of success.

HMRC cancelled GB Fleet Hire Limited’s VAT registration in 2017 on the stated ground that it was being used principally or solely for abusive purposes. The company did not appeal that cancellation, although it challenged related VAT assessments.

In 2020, after making two taxable supplies, the company applied for VAT registration. HMRC refused the application, referring both to the earlier cancellation and, incorrectly, to an allegedly extant appeal against it. The First-tier Tribunal struck out the company’s appeal as an abuse of process, holding that it had no reasonable prospect of success unless it showed that the earlier risk of abuse had been removed. The central issue was whether that strike-out was legally justified.

1. Appeal allowed. The Upper Tribunal set aside the First-tier Tribunal’s decision for material errors of law, refused HMRC’s strike-out application and reinstated the underlying appeal, remitting it to the First-tier Tribunal.
2. The relevant decision was HMRC’s 2020 registration refusal. That refusal gave two reasons: the earlier cancellation for alleged abusive use and the supposed existence of an appeal against that cancellation. The second reason was wrong. The First-tier Tribunal erred in treating that error as irrelevant and in relying on HMRC’s ability to clarify its case in a Statement of Case, which would never be served if the appeal were struck out.
3. The First-tier Tribunal also erred in inferring from the failure to appeal the 2017 cancellation that the company accepted HMRC’s factual allegations and assessment of risk. The cancellation remained binding for the relevant periods, but that did not establish acceptance of the reasons advanced for it. The evidence instead indicated that the company had misunderstood the legal relationship between the cancellation and related VAT assessments.
4. The power to prevent misuse of VAT registration is prospective, but it must be exercised proportionately and with continuing scrutiny of the relevant facts. The principle of continuity could not automatically displace consideration of the two supplies made in 2020. Those supplies were new facts which could not have been raised in 2017.
5. The legal burden of proving the continuing risk of abuse and establishing abuse of process remained on HMRC, although the evidential burden might have shifted in light of the 2017 circumstances. Whether the 2020 supplies were outweighed by continuing risk was a matter for a substantive appeal, not a strike-out application.
6. Applying the principles in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch), the appeal was neither fanciful nor unfit for trial. A fuller investigation of the evidence was required.

• First-tier Tribunal (Tax Chamber): On 30 April 2021, struck out the appeal against HMRC’s 2020 refusal as an abuse of process.
• Upper Tribunal (Tax and Chancery Chamber): Allowed the appeal, set aside the First-tier Tribunal’s decision and remitted the underlying appeal for hearing.