Introduction

In the case of R & J Birkett t/a Various Residential Homes v. Revenue and Customs ([2017] UKUT 89 (TCC)), the Upper Tribunal (Tax and Chancery Chamber) addressed critical questions regarding the jurisdiction of the First-tier Tribunal (FTT) in handling appeals against penalties imposed by Her Majesty's Revenue and Customs (HMRC). The appellants, Mr. and Mrs. Birkett, owners of multiple residential care home partnerships, challenged daily penalties levied for allegedly failing to comply with HMRC’s information notices under Schedule 36 of the Finance Act 2008. Central to this appeal were issues surrounding the FTT's authority to consider taxpayers' legitimate expectations and the compliance of HMRC's penalty regime with the Human Rights Act 1998.

Summary of the Judgment

The Upper Tribunal upheld the decision of the First-tier Tribunal (FTT) to dismiss the Berketts' appeals against daily penalties imposed by HMRC. The appellants argued that the FTT lacked jurisdiction to consider their legitimate expectations regarding the suspension of daily penalties while an appeal against the initial penalties was underway. Additionally, they contended that the imposition of daily penalties contravened their rights under the Human Rights Act 1998. The Upper Tribunal found that the FTT's jurisdiction is strictly limited to matters explicitly conferred by statute, thereby excluding considerations of legitimate expectations or broader human rights implications in this context. Consequently, the appeal was dismissed, reaffirming the FTT’s limited scope in tax-related penalty disputes.

Analysis

Precedents Cited

The judgment heavily relied on several key precedents to delineate the boundaries of the FTT's jurisdiction:

• Oxfam v HMRC [2009] EWHC 3078 (Ch) ("Oxfam")
• Hok Ltd v HMRC [2012] UKUT 363 (TCC) ("Hok")
• HMRC v Noor [2013] UKUT 71 (TCC) ("Noor")
• Trustees of the BT Pension Scheme v HMRC [2015] EWCA Civ 713 ("BT Trustees")

These cases collectively established that the FTT's jurisdiction is confined to the statutory provisions under which it operates, precluding it from engaging in judicial review functions or considering broader public law issues unless explicitly authorized by statute.

Legal Reasoning

The court emphasized that the FTT is a statutory body with jurisdiction strictly defined by legislation. In particular, the Tribunal cannot extend its authority to encompass judicial review functions or considerations of legitimate expectations unless expressly granted such powers by relevant statutes. The Berketts' attempts to introduce considerations of legitimate expectations and human rights infringements fell outside the FTT's purview as outlined in Schedule 36 of the Finance Act 2008.

Furthermore, the Tribunal clarified that appeals under paragraphs 47(a) and 47(b) of Schedule 36 are narrowly tailored. Paragraph 47(a) confines appeals to the decision of whether a penalty is payable, while paragraph 47(b) limits appeals to the amount of the penalty, without extending to the principle of imposing penalties based on legitimate expectations or fairness.

Impact

This judgment reinforces the strict statutory boundaries governing the FTT’s authority. Taxpayers seeking to challenge HMRC decisions on grounds beyond the specific issues outlined in the relevant statutes, such as legitimate expectations or human rights considerations, must pursue judicial review avenues outside the FTT framework. Consequently, this limits the FTT's role to technical assessments of compliance with statutory requirements, thereby discouraging the broadening of its jurisdiction through successive appeals based on broader legal principles.

Complex Concepts Simplified

Legitimate Expectation

A legitimate expectation arises when a public body (like HMRC) has made a promise or has established a consistent practice that individuals rely upon. If the public body deviates from this expectation without proper justification, it can be challenged legally. In this case, the Berketts argued they had a legitimate expectation that daily penalties would be suspended pending their appeal.

Jurisdiction of the First-tier Tribunal (FTT)

Jurisdiction refers to the official power to make legal decisions and judgments. The FTT's jurisdiction is confined to reviewing decisions strictly within the scope defined by statute. It cannot engage in broader judicial reviews or consider principles like legitimate expectations unless explicitly provided for by law.

Human Rights Act 1998

The Human Rights Act 1998 incorporates the European Convention on Human Rights into UK law. It protects various fundamental rights, including the right to peaceful enjoyment of possessions (Article 1 of Protocol 1). The appellants contended that HMRC's imposition of daily penalties violated their human rights under this Act.

Conclusion

The Upper Tribunal’s decision in R & J Birkett v. HMRC reinforces the limited jurisdictional scope of the First-tier Tribunal in tax matters. By denying the consideration of legitimate expectations and human rights assertions within the FTT’s purview, the judgment underscores the necessity for taxpayers to engage appropriate legal channels when seeking remedies beyond the specific confines of their initial appeals. This serves as a critical reminder of the boundaries between statutory tribunals and broader judicial review mechanisms, maintaining a clear separation of functions within the UK’s legal framework.