Frances Delaney v The Commissioners for HMRC

In an appeal against a tax assessment, the taxpayer bears the burden of showing that the assessment is wrong. HMRC need prove an assumed fact only where the circumstances provide sufficient prima facie evidence that the fact is wrong, so that the evidential burden shifts.

A tribunal has not improperly resorted to the burden of proof where it evaluates the evidence and makes findings on the determinative issue. For Taxation of Chargeable Gains Act 1992 purposes, a contract said to fix the date of disposal must have been formed under ordinary principles of contract law. Lack of agreement on a critical term, including price or a price-determination mechanism, prevents formation of the contract.

Frances Delaney v The Commissioners for HMRC was an oral renewal of an application for permission to appeal from the First-tier Tribunal decision, Delaney v HMRC [2024] UKFTT 214 (TC).

The First-tier Tribunal had dismissed Ms Delaney’s appeal against an HMRC closure notice. It held that she had not established that a contract for the disposal of her nursery business to her wholly owned company was made before 3 December 2014. That date was material to her claim for entrepreneurs’ relief under the Taxation of Chargeable Gains Act 1992.

The applicant alleged errors concerning the burden of proof, contract formation, the relevance of enforceability, the treatment of preparatory acts, and perversity. The central issue was whether any ground disclosed an arguable error of law in the First-tier Tribunal’s conclusion about the date on which a binding contract was made.

1. Permission to appeal was refused. Under section 11 of the Tribunals, Courts and Enforcement Act 2007, an appeal from the First-tier Tribunal lies only on a point of law. None of the seven grounds disclosed an arguable error of law.

2. The applicant bore the burden of showing that the closure notice had overcharged her. Kellog Brown & Root Holdings (UK) Ltd v HMRC [2010] EWCA Civ 118 did not establish a general rule that HMRC must prove every fact relied on in a closure notice. It illustrated that the evidential burden may shift where the circumstances provide sufficient prima facie evidence that a factual premise of the assessment is wrong. On the applicant’s case, she therefore had to show that the relevant contract was made before 3 December 2014.

3. The First-tier Tribunal did not decide the case merely by resorting to the burden of proof. It examined the evidence, made findings about the chronology and the parties’ intentions, and then decided the disputed issue. The exceptional situation discussed in Stephens v Cannon [2005] EWCA Civ 222 arises where the tribunal cannot decide the issue on the evidence and resolves it solely by reference to the burden.

4. Section 28 of the Taxation of Chargeable Gains Act 1992 required the tribunal to determine when a binding contract was made. The reference to an unconditional contract simply reflected that the separate rule in section 28(2) for conditional contracts was not in issue. The First-tier Tribunal did not impose a separate requirement of court enforceability. It correctly applied ordinary principles of contract formation and was entitled to find that no contract had been formed before the critical date because price, or a mechanism for determining it, had not been agreed.

5. The First-tier Tribunal was entitled to treat incorporation, the lease and the appointment of a head teacher as preparatory acts. Its finding was consistent with a contract later arising by conduct. The applicant had not shown that the factual findings lacked evidential support, were inconsistent, or compelled a finding that a contract existed before the critical date. The dismissal of the underlying tax appeal was therefore open to the First-tier Tribunal.

• Upper Tribunal (Tax and Chancery Chamber): Oral renewal of the application for permission to appeal refused in [2025] UKUT 5 (TCC).
• Upper Tribunal (Tax and Chancery Chamber): Permission to appeal had previously been refused on the papers on 27 September 2024.
• First-tier Tribunal (Tax Chamber): The taxpayer’s appeal against the closure notice was dismissed in Delaney v HMRC [2024] UKFTT 214 (TC); permission to appeal was subsequently refused.