BPP Holdings v Revenue And Customs

Factual and Procedural Background

This appeal arises from a determination made by Judge Bishopp in the Tax and Chancery Chamber of the Upper Tribunal (UT) on 3 November 2014, which allowed an appeal against a First-tier Tribunal (FtT) decision by Judge Mosedale. The FtT had debarred the Respondent, Her Majesty's Revenue and Customs ("HMRC"), from further participation due to serious and prolonged breach of an order requiring proper particulars of their pleaded case against the Appellant, BPP Holdings Limited ("BPP"). The UT held that the FtT erred in law in debaring HMRC and set aside the debarring order. The key issue concerns the proper approach of tax tribunals to breaches of procedural orders.

The substantive dispute concerns the VAT chargeability on the supply of books and printed materials by a BPP subsidiary, BPP Learning Media Limited, in circumstances where other BPP companies supplied education services. HMRC contended that the supply of printed matter and education were inseparable and thus subject to standard-rated VAT, whereas ordinarily such printed materials would be zero rated under the VAT Act 1994. Two of three cases were conceded by HMRC following a precedent decision, leaving one novel case involving amendments to the Finance Act 2011 to be determined.

The procedural history includes HMRC's delayed and inadequate service of their Statement of Case and replies to Requests for Further Information, despite court orders. BPP applied for a debarring order due to HMRC's failure to comply, which was initially granted by the FtT but overturned by the UT.

Legal Issues Presented

1. Whether the First-tier Tribunal was correct to debar HMRC from further participation in the proceedings for breach of an order requiring particulars of their case.
2. The proper approach of tax tribunals in cases of non-compliance with procedural orders and whether the stricter approach to compliance as set out in the Civil Procedure Rules (CPR) applies analogously to tax tribunals.
3. The extent to which the overriding objective in the Tribunal Procedure Rules requires enforcement of compliance and the weight to be given to non-compliance in case management decisions.
4. The applicability of the CPR 3.9 test for relief from sanctions in tax tribunal proceedings.

Arguments of the Parties

Appellant's Arguments

• The Upper Tribunal (UT) should have no restraint in giving guidance on practice and procedure, including on breaches of orders, even absent explicit rules.
• The stricter approach to compliance with rules and directions as established in CPR cases (Mitchell and Denton) should apply by analogy to tax tribunals.
• The UT erred in overturning the FtT decision that gave significant weight to HMRC's non-compliance when considering the overriding objective.
• The tax tribunal rules are not inconsistent with the CPR approach and do not justify a more relaxed approach to compliance.
• HMRC had no reasonable excuse for non-compliance and caused prejudice through delay and expense.

Respondent's (HMRC) Arguments

• The approach in the UT decision Leeds City Council v HMRC, which favours a more relaxed approach to compliance until formal rule changes, should be preferred over the stricter approach in McCarthy & Stone.
• The weight given to non-compliance by the FtT was disproportionate as it was the sole factor supporting the barring order.
• The barring order was excessive and removed HMRC’s entitlement to present their case, potentially causing unfairness and public interest concerns.
• HMRC’s non-compliance was unintentional and they had explained their case in pre-litigation correspondence.
• The skeleton argument filed was sufficient disclosure of their case.
• The merits of the substantive case and the motivation of BPP in pursuing the appeal are relevant considerations.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analysed the procedural history and the nature of the breach by HMRC, concluding that HMRC's failure to comply with the FtT order was serious, prolonged, and without any adequate explanation. Both the FtT and UT had found prejudice to BPP in terms of delay and expense. The court considered the conflicting UT decisions on whether the stricter approach to compliance under CPR 3.9 applies to tax tribunals, ultimately endorsing the stricter approach as the correct legal policy.

The court reasoned that the Tribunal Procedure Rules' overriding objective to deal with cases fairly and justly includes principles of proportionality, cost-efficiency, and timely compliance, which align with the CPR objectives. There is no express limitation preventing the UT from giving guidance on procedural matters even absent explicit rules, and the UT, as a superior court of record, has authority to develop such guidance.

The court rejected HMRC's arguments for a more relaxed approach, emphasizing that non-compliance should not be tolerated absent good reason, and that the starting point must be compliance. The court found HMRC's conduct and attitude towards compliance disturbing and unacceptable, noting that even state agencies must adhere to procedural obligations.

The court also examined Judge Mosedale's exercise of discretion, finding no error of law in her giving significant weight to non-compliance and the efficient conduct of litigation as part of the overriding objective. The balance of factors, including prejudice and absence of justification, supported the FtT's decision. The court held that the UT erred in overturning the FtT's decision.

Holding and Implications

The court ALLOWED THE APPEAL and restored the First-tier Tribunal's order debarring HMRC from further participation in the proceedings.

The direct effect is that HMRC is barred from continuing to present their case in the substantive appeal due to their serious breach of procedural orders. No broader or novel precedent was established beyond affirming the applicability of a stricter approach to compliance in tax tribunals analogous to the CPR. The decision underscores the imperative of compliance with tribunal orders and the serious consequences of failure to comply without justification.