GB Fleet Hire - Upper Tribunal allows appeal against First-tier Tribunal strike out decision

In GB Fleet Hire Ltd v HMRC [2021] UKUT 225 (TCC), the Upper Tribunal (UT) allowed an appeal against the First-tier Tribunal's (FTT) decision to strike out the taxpayer's claim as the FTT had wrongly concluded that the taxpayer had abandoned its case that supplies were zero-rated.

Background

The underlying dispute was concerned with whether supplies by GB Fleet Hire Ltd (GBFH) of vehicles which were exported to the Far East and Ireland were properly zero-rated (which would have allowed GBFH to recover its input tax on those vehicles). 

GBFH appealed to the UT against a decision of the FTT, following a case management hearing at which HMRC had made an application to strike out GBFH's appeal under Rule 8(3)(c) of the Tribunal Rules, which provides that the FTT may strike out an appeal if it "considers there is no reasonable prospect of the appellant's case, or part of it, succeeding".

The FTT had allowed HMRC's application and struck out GBFH's appeal, on the basis that in a letter to HMRC dated 5 August 2020 (the Letter), GBFH had abandoned its claim to be entitled to zero-rating and therefore GBFH's appeal had no reasonable prospect of succeeding. 

GBFH appealed to the UT on the ground that the FTT erred in its construction of the Letter. 

UT decision

The appeal was allowed.

GBFH made detailed submissions on the merits of the underlying case in order to assist the UT to place the Letter in its proper context, and although the UT described this as "misplaced", it allowed the appeal and remitted the substantive appeal (in relation to the zero-rating) to  the FTT for determination. In the view of the UT, the FTT had erred in law. When construing assertions in the Letter regarding zero-rating, it had failed to consider the Letter as a whole, failed to consider relevant aspects of GBFH's proposed amended grounds of appeal and failed to take a highly relevant factor into account, namely, GBFH's continuing claim to be entitled to recover input tax. 

Comment

The UT accepted that it should be slow to interfere with elements of the FTT's evaluation but concluded that, in this case, there was no discernible evidence that the FTT had evaluated the relevant aspects of the evidence or, if it had done so, it had failed to provide an explanation in its written decision. 

The UT commented that the FTT's construction of the Letter as GBFH abandoning its case that its supplies were zero-rated was "incomprehensible" and, although the FTT was aware of the correct legal test to apply, its finding that GBFH's appeal had no reasonable prospect of succeeding was irrational. The UT was highly critical of the FTT describing it as having not engaged with submissions and ultimately deciding that no reasonable tribunal could, when considering the relevant material before it, have concluded as it did.  

The UT also noted that a simple clarification that GBFH had not abandoned its case that its supplies were zero-rated (despite what appeared to the contrary in the Letter, which was described as "on its face … contradictory") would probably have avoided the necessity for the current proceedings.

HMRC appear to be making more strike out applications to the FTT and this decision is a timely reminder that such applications require careful consideration and should not be granted lightly.

The decision can be viewed here.