FTT wrong to throw out case without explanation

In HMRC v Tasca Tankers Limited [2022] UKUT 00088, the Upper Tribunal (UT) held that the First Tier Tribunal had been wrong to strike out an appeal on the basis of no reasonable prospect of success. The judge failed to consider HMRC's case and refused the application without a valid reason.

• Tasca Tankers Limited (Tasca) had appealed an HMRC notice to deny Input VAT on the basis of Missing Trader Fraud and that Tasca knew or should have known that the transactions were connected with the fraudulent evasion of VAT (Kittel principle).
• HMRC applied to have the Appeal against the second notice (second appeal) struck out as it had no reasonable prospect of success. HMRC argued that Tasca had provided no evidence or answers in response to the allegation that it knew or should have known about the fraud.
• The FTT held that the appeal would not be struck out.
• On appeal to the UT, the tribunal agreed with HMRC that the judge refused to consider HMRC's case, instead insisting that such an appeal needed a full hearing without explaining why.
• The UT held that the judge erred in law in his decision. There was a critical gap in the reasoning provided and furthermore, elements of the reasoning did not support the conclusion.
• The UT also held that whilst the judge had correctly identified the relevant tests of law to be applied, he failed to apply them to the evidence before him.

The UT held that the application to strike out the appeal should be remitted to the FTT, but heard by a different judge due to the potential for a hearing by the same judge to be seen as unfair to HMRC.

Upon rehearing the case at the FTT (Tasca Tankers Limited v HMRC [2023] TC08793), the judge listened to the same evidence and witness statements and applied the principles as agreed by the UT. It was held that HMRC did not meet the threshold to have the appeal struck out. There was a realistic prospect of the appellant rebutting HMRC's arguments. HMRC's application was dismissed.

Useful guides on this topic

Input VAT: What constitutes a valid VAT invoice
What needs to be included on a VAT invoice? Can you claim back VAT without an invoice? What evidence do you need to claim input VAT? A valid VAT invoice is required to reclaim input VAT. HMRC have discretion to allow defective invoices. 

Reverse charge: Domestic
Domestic reverse charge VAT is a mechanism designed to prevent VAT fraud. When does it apply? How does it operate?

How to appeal an HMRC decision
Disagree with an HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

External link

HMRC v Tasca Tankers Limited [2022] UKUT 00088 

Tasca Tankers Limited v HMRC [2023] TC08793