Portland Gas Storage Ltd v HM Revenue & Customs

Portland originally entered into an agreement for a lease of land on 11 April 2008 whereupon it took possession and began paying rent prior to the lease being executed. Because this constituted substantial performance of the agreement, it filed, in accordance with its duty, a land transaction return and paid SDLT in the not insubstantial sum of £168,000 odd. However, the lease was not completed as originally agreed. On 1 June 2013, more than four years after the agreement, the parties entered into a deed of variation and reduced both the extent of the land demised and the rent. Portland accordingly sought at that time to recover some of the SDLT and applied to amend its land transaction return and reclaim some £68,000 worth of the tax.

The statute does provide for repayment where an agreement is “to any extent afterwards rescinded or annulled or is for any other reason not carried into effect” (see paragraph 12A(4) of schedule 17A of the Finance Act 2003). This must be done by an amendment to the land transaction return. Paragraph 6 of schedule 10 provides that “except as otherwise provided the amendment must not be made more than 12 months from the filing date”. HMRC accordingly rejected Portland’s application to amend its land transaction return as being considerably out of time. Portland appealed to the FTT, whereupon HMRC contended that there was no jurisdiction. The FTT directed that the issue of jurisdiction be tried as preliminary issue.

The relevant categories of appeal are contained in paragraph 35 of schedule 10. Although it deployed other arguments, Portland contended that the decision in question falls within subparagraph (b), namely “a conclusion stated or amendment made by a closure notice”. The FTT found that there was no jurisdiction under that provision. The Upper Tribunal found that there had been a conclusion stated or amendment made by a closure notice. This was on the grounds that the correspondence showed that HMRC had opened an inquiry into Portland’s returns and had issued a closure notice. It therefore set aside the decision of the FTT and remade it so as to dismiss the application to strike out the appeal. The consequence of that order would have been that the appeal returned to the FTT for the FTT to consider whether the application by Portland to amendits land transaction was indeed out of time.

On 12 September 2014 Vos LJ granted permission for a second appeal to this court on the ground that the appeal raised important points of principle as to the meaning of the statutory provisions governing the jurisdiction of the FTT. However, by a letter dated 20 November 2014 Portland withdrew its application to reclaim the SDLT and acknowledged that the land transaction return was final. Although HMRC did not accept having received that letter for some time, they now accept that they have done so.

Portland, having withdrawn the underlying applications for return of the tax and amendment of the return, there is no longer any lis for the FTT to determine as to whether the amendment was filed in time. Equally, the question of whether the FTT had jurisdiction to hear the appeal has become academic in this case. Portland submitted in correspondence with this court that the appeal should be discontinued. They included a draft order which accepted that they should pay HMRC costs in the Upper Tribunal and on the appeal up to 20 November 2014, the date of that letter. Despite this offer HMRC nevertheless wishes to continue with its appeal.

A similar issue arose in Don Pasquale v Customs & Excise Commissioners [1990] 1 WLR 1108. Lord Donaldson in that case recorded that it was the case on high authority that where there was no live issue between the parties to a private law action it is not for the courts to hear appeals merely because the decision under the appeal has wide-spread ramifications in terms of determining private rights. The position may not be the same where the issue is one of public law. Lord Donaldson thought that the dispute in issue there did involve private rights but also considered that there were analogies with public law, because the issue in that case involved questions of procedure in the administration of justice.

The factor, however, which appears to have influenced the Court of Appeal in that case was not so much the analogy with public law but the fact that it would, for technical reasons, be extremely difficult for another appeal to be brought before the court. In such circumstances the court thought it was a sufficiently extreme case for the court to go ahead with the appeal. It never did so on terms that the taxpayer’s position was protected by imposing a condition that the commissioners did not seek to obtain an order for costs against the taxpayer or reverse the order for costs which was made in his favour below.

Given that it was unlikely that the taxpayer would appear, the court also indicated that it would be likely to ask the Attorney General to present the opposing argument. HMRC contend that this case is the sort of case which the court should continue to hear, notwithstanding the absence of any lis between the parties.

In a letter dated 13 February 2015 they submitted firstly that the matter is of considerable significance as it affects the scope of the jurisdiction of the FTT in this and other areas. In particular it concerns what is meant by a notice of inquiry and closure notice, terms which are used in relation to a wide range of taxes, including income tax, corporation tax and capital gains tax. The uncertainty, they submitted, created by the Upper Tribunal’s decision would mean that HMRC would have to take particular care in correspondence so as not inadvertently to open an inquiry into the person’s tax affairs. The effect will also be to bring more matters within the scope of the FTT jurisdiction. Secondly, they submitted that the chances of this point being raised again were “slim”. Thirdly, they offer similar assurances, as were considered necessary by the Court of Appeal in the Don Pasquale case.

The position this morning is that the respondent has not filed a skeleton argument in opposition to this appeal and has not appeared, despite the offers as to costs made in HMRC’s letter.

I am firmly of the view that the court should not continue to hear this appeal. HMRC’s first point that the appeal has wide ramifications is simply not a sufficient ground for the court continuing to hear an appeal where there is no longer any issue of substance between the parties as to their private law rights.Subject to very limited exceptions indeed, issues of this nature are much better decided on the basis of adversarial argument where the parties have real opposing commercial interests in the outcome.

Moreover, I cannot accept HMRC’s second point that the chances of a suitable opportunity for the Court of Appeal to decide the matter on a proper inter partes basis are slim. Indeed, if HMRC are right, and I have no reason to suppose they are not, that this point is of some general significance, I would consider that the chances of a suitable case appearing in which the matter can be taken on appeal are extremely good. It is only because of an unexpected and inherently unlikely turn of events, namely that a taxpayer who has secured a significant victory in the Upper Tribunal has decided to abandon his reclaim of tax before the matter reaches this court, that the appeal is not going forward. That position is one which is unlikely to occur on any future appeal. In that respect the position is the polar opposite of that in Don Pasquale.

I have considered the alternative of adjourning the appeal to enable an amicus to be appointed by the Attorney General to argue the opposing side of the case. Ms Choudhury, who has appeared this morning for HMRC, has made it clear on instructions that HMRC are prepared to meet the cost of such an exercise.

Whilst it is a possible course forward, it does not seem to me that it meets the point based on Don Pasquale that the mere existence of wide ramifications is not a justification for the court to hear the appeal. Moreover, whilst counsel for the Attorney General would no doubt do his best, it is, in my judgment, an unsatisfactory substitute for proper adversarial argument in an appeal where the outcome matters to both sides.

In those circumstances, I consider this court should not proceed with the hearing of the appeal. I would add that, having read the skeleton argument filed by the Revenue, it cannot be said that there are not reasons for challenging the Upper Tribunal’s decision. The Revenue will therefore be entirely justified seeking to have its question of jurisdiction decided as a preliminary point in a suitable further case and pursuing the matter as far as this court if they considered it proper to do so. Notwithstanding that, I would decide that we should not hear the appeal in the present circumstances.

I agree.

I also agree.