V-Com (Worldwide) Ltd v The Commissioners for HMRC

Article 2 of the PVD provides that the supply of goods for consideration within the territory of any Member State by a taxable person acting as such is subject to VAT. A ‘taxable person’ is defined as any person who carries out, in any place, any economic activity, whatever the purposes. VAT is, therefore, payable by a taxable person carrying out a taxable supply of goods or services: art. 93 PVD.

Article 167 provides:

Article 168 (a) provides:

Every taxable person who carries out supplies of goods or services in respect of which VAT is deductible must be identified by an individual number: art. 214 PVD.

The obligation on suppliers to provide a VAT invoice was imposed by art. 220 of the PVD. The contents of the invoice are laid down by art. 226, which provides that:

Article 228 provides that:

The recipient of a taxable supply, if s/he is also a taxable person, is entitled to deduct the amount of VAT s/he paid in relation to that supply.

The PVD has been transposed into domestic law by VATA. Section 24(1)(a) VATA defines “input tax” in relation to a taxable person as:

Section 24(6)(a) VATA provides that regulations may provide for VAT to be treated as input tax:

Section 25(2) VATA provides that a taxable person shall be:

Section 26 VATA, relevantly, provides as follows:

Regulations made under VATA are the VAT Regulations. Regulation 13(2) of the VAT Regulations provides that the particulars of the VAT chargeable on a supply of goods must be provided on a document containing the particulars prescribed in reg. 14(1).

Regulation 14(1) provides, in so far as is material:

Regulation 29 of the VAT Regulations provides that:

VATA and the VAT Regulations are EU-derived domestic legislation, as defined by s 1B(7) of the European Union (Withdrawal) Act 2018 (‘the Withdrawal Act’). Section 2 of the Withdrawal Act provides that EU-derived domestic legislation, as it had effect in domestic law immediately before IP completion day (i.e., 31 December 2020) continues to have effect in domestic law on and after that day.

This is HMRC’s application to strike out the Appellant’s appeal on the ground that the appeal has no reasonable prospects of success. The appeal relates to HMRC’s decision to disallow input tax, in the sum of £506,678.32, for the VAT period 12/10. The input tax was claimed on the basis of the purchase and sale of mobile phones (Apple iPhones) by the Appellant. HMRC have denied the claim on the basis that the Appellant had failed to provide valid VAT invoices. The conclusion reached was that the evidence was not sufficient to demonstrate that the Appellant was the recipient of the taxable supplies contained in the invoices. The substantive appeal is concerned with the exercise of HMRC’s discretion not to accept alternative information in substitution for invoices which identify the Appellant as the recipient of the supply of mobile phones purchased within the VAT period 12/10.

Returning to the “Ambush point”, Mr Brodsky submitted, in summary, that the Appellant has been ambushed by the development of HMRC’s case since the Strike Out application notice was submitted and that, in any event, HMRC have never been in any doubt that the Appellant was challenging the exercise of HMRC’s reg. 29 discretion.

Mr Way submitted that the Skeleton argument is merely an elucidation of the arguments raised in Strike Out application, as opposed to a departure from it, and that the question of ambush is not relevant to the application under consideration.

I have considered the authorities to which I was referred by Mr Brodsky in support of the ambush point:

The case of Netbusters concerned the proper classification, for VAT purposes, of the supplies made by the Appellant in that appeal. The activities in question were the organisation by the Appellant of various competitive football and netball leagues, and the supply of pitches for these league matches to be played upon. During the proceedings, HMRC made a slightly different point in their Skeleton Argument, after the Statement of Case had been filed. It was argued, on behalf of the appellant, that this amounted to ambush. At [42] to [43], Judge Malek said this:

In AllPay, to which Judge Malek referred, HMRC had pleaded that they could not usefully plead anything as they did not have the burden of proof and were not leading any evidence, but simply intending to challenge the appellant’s evidence. Judge Mosedale said this, at [16] and [18]:

At [23], Judge Mosedale said this:

As considered in AllPay, pleadings are required to mark out the parameters of the case that is being advanced by each party. In particular, they are still critical to identifying the issues and the extent of the dispute between the parties. What is important is that the pleadings should make clear the general nature of the case of the pleader, in reference to the words of Lord Woolf MR in McPhilemy v Times Newspapers Ltd [1999] 3 All ER 775, 792J-793A.

The case of Shinelock Ltd v HMRC [2023] UKUT 00107 (TCC) (‘Shinelock’) (Judges Thomas Scott and Greenbank) concerned an application for permission to make a late amendment to a case before the hearing. The appeal was against amendments made by HMRC to Shinelock’s self-assessment for the accounting period ended 31 March 2015. The amendments increased the corporation tax payable for that period by £18,854, in respect of a chargeable gain which HMRC considered had arisen to Shinelock following the disposal of a property. The arguments between the parties had changed considerably in the course of their dispute. The UT said this, at [118]:

The case of Quah v Goldman Sachs International [2015] EWHC 759 (Comm) (‘Quah’), at [37] to [38] also involved an application to make a late amendment to a claim. Carr J (as she then was), summarised the relevant principles, at [37] to [38]. The UT in Shinelock also considered the case Satyam Enterprises v Barton [2021] EWCA Civ 287, where Nugee LJ set out the position as follows:

The differences in Shinelock and Quah, and the appeal before me, do not negate the need to ensure a fair hearing. The requirement that the pleadings (i.e., the Grounds of Appeal and the Statement of Case) set out a party’s position in full is in order to avoid a “trial by ambush” as the next usual step is a substantive appeal hearing. That is because a party’s change of position would run the risk that a trial date would be lost in circumstances where the parties, and the court, have a legitimate expectation that trial fixtures will be kept.

The Procedure Rules provide a framework for hearings before the FtT, and the overriding objective can be summarised by the requirement to ensure fairness and justice, as follows:

I have considered the submissions made by both representatives, and the pleadings as set out in the Strike Out application and Grounds of Appeal. I am satisfied that the question of ambush does not arise in the circumstances of this application. I give my reasons for so finding:

I find that the decision, dated 20 March 2013, clearly set out the reasons for HMRC’s decision. The decision clarified that purchases where the Appellant could not provide satisfactory evidence of its claim would be disallowed. The value of input tax denied was in the sum of £506,678.32 due to HMRC not accepting the alternative evidence provided. I am satisfied that the Appellant would have been under no illusions as to the reasons for the decision, having accepted that valid invoices were not provided. I find that having received HMRC’s decision, following the exchange of correspondence, the Appellant was clear about what the full parameters of HMRC’s case were.

The Appellant subsequently submitted an appeal against that decision. The Procedure Rules provide for the submission of a notice of appeal against a decision, as follows:

The Appellant will, at this stage, set out the full grounds for the appeal. The requirement to attach a copy of the written decision means that the Appellant would have had an opportunity to address the reasons given in the decision, within its grounds. The requirement to provide a Statement of Case only follows after the appeal proceedings have been started by the filing of a valid notice of appeal, with grounds attaching a copy of the decision appealed against (to show that there is a right of appeal against that decision). The Procedure Rules then require HMRC to provide a Statement of Case in preparation for a substantive hearing, as follows:

There is, however, no similar duty to provide a Statement of Case on the Appellant. This is because the Appellant would already have been required to file a Notice of Appeal in response to a decision which is expected to clearly set out the full parameters of HMRC’s case, in order to facilitate the provision of the Statement of Case. HMRC’s original Statement of Case was filed on 26 March 2014. The Statement of Case set out, at paras. 15 to 19, that the Appellant had not complied with the legal requirements to hold a valid VAT invoice. An application to amend the Statement of Case was made on 6 May 2016, in order for HMRC to raise what was referred to as “the Employee Issue”. This was because a fundamental issue identified in the appeal was the question of whether the Appellant received taxable supplies in respect of the goods which were the subject of the receipts from Apple. Questions that therefore arose were: (i) who the individuals who made the purchases for the Appellant were; and (ii) what their relationship to the Appellant was.

The Employee Issue had not formed part of HMRC’s decision and first arose as an issue when it was identified that the FtT had raised the matter in various cases, leading up to the decision of the FtT in Scandico: [2015] UKFTT 0036 (TC) (and the issue of an undisclosed agent – s 47(2A) VATA). The UT appeal in Scandico was listed to be heard in June 2016 and the Appellant’s appeal was stayed behind that decision. The UT has since handed down its decision in Scandico.

The stay was lifted following the decision of the Supreme Court in Zipvit. I shall return to Scandico and Zipvit later.

By the time this application was listed for a hearing, further case law had arisen. This does not, however, detract from the fact that the issue has always been that concerning the alternative evidence relied on by HMRC (as clearly set out in the amended Statement of Case). All that has happened is that the parties’ positions have become more refined with the passage of time following the stay.

The matter before me concerns a preliminary application, and not consideration of the substantive appeal. That does not mean that the principles of fairness and justice do not apply. I nevertheless find that there is some force in Mr Way’s submission that this hearing differs from a substantive hearing in that it is an interlocutory application. By the same token, however, the Appellant is still entitled to know the case that must be met in relation to such a hearing and in respect of such an application.

HMRC have made the application which is the subject of this hearing. Rule 6 of the Procedure Rules provides that:

This clearly shows that full reasons for making the application must be given at the time that the application is made. I accept that the reasons for the application were that the appeal has no reasonable prospects of success. I am, however, satisfied that the Strike out application did not only make reference to the manner in which the Grounds of Appeal were pleaded, but also to the Appellant’s disagreement with the alternative evidence considered by HMRC (at paras. 21 and 22 of the Strike Out application), and this was elaborated upon in the Skeleton Argument.

Pursuant to Rule 8 of the Procedure Rules, the Appellant has the opportunity to make representations in response to an application to strike out its appeal, as follows:

The Appellant responded to the Strike Out application in its response dated 17 November 2023.

I find that in the application before me, both parties have sought to attack one another’s pleadings. The Ambush point has been raised by the Appellant in relation to the development of HMRC’s case from the Strike Out application to the Skeleton Argument. Mr Way has similarly attacked the development of the Appellant’s case from the Grounds of Appeal to the letter dated 15 August 2014. Mr Way referred to the Grounds of Appeal, which are drafted as follows:

He submitted that the Grounds of Appeal had simply challenged the criteria adopted by HMRC as being too restrictive. I find, however, that the Grounds of Appeal also refer to whether HMRC considered all of the relevant information in the exercise of their discretion, as follows:

Mr Way then submits that the Appellant’s case was set out in starker terms in the letter dated 15 August 2014, which was drafted as follows:

He submits that the Appellant has failed to amend its Grounds of Appeal. I find, however, that despite attacking the Appellant’s letter of 15 August 2014 as being an amplification of the Grounds of Appeal in the absence of an application to amend those grounds, Mr Way has sought to argue that the elucidation of the points raised in the Strike Out application within his Skeleton Argument on behalf of HMRC was merely a consolidation of all of the relevant matters. I find that HMRC cannot have it both ways by attacking the Appellant for doing the very same thing that has been done by HMRC. Moreover, HMRC’s Skeleton Argument was rightly referred to by Mr Brodsky as having been served a mere four days before the hearing, at 5.32pm, and does not form part of HMRC’s pleadings. The Appellant’s letter of 15 August 2014 made reference to the Grounds of Appeal, which I am satisfied clearly sought to launch an attack on the exercise of HMRC’s discretion, and was served many years before the Strike Out application was made by HMRC.

Furthermore, whilst attacking the Appellant’s failure to amend its Grounds of Appeal, it is clear that the substantive submissions made by HMRC in the Statement of Case and Skeleton Argument acknowledge that the Appellant’s position was that HMRC’s decision was unreasonable - in respect of the reg. 29 issue. I find that HMRC’s position was informed by the Grounds of Appeal, as amplified in the letter dated 15 August 2014, from Mr Stern to HMRC. This much is clear from the Skeleton Argument, which includes the following submissions:

I have found that the decision has always clearly set out the reasons for refusing the Appellant’s claim and the Appellant was not taken by surprise when the time came for the appeal proceedings to be commenced by the lodging of a valid notice of appeal, at which point the Appellant was required to state the grounds of appeal and why the decision was wrong. Having considered all of the evidence and submissions, cumulatively, and in light of my findings above, I am satisfied that the question of ambush does not arise in the circumstances of this appeal. My conclusions on the question of ambush are not, however, determinative of the substantive application, which I now proceed to consider.

In support of the strike out application, Mr Way submits, in summary, that the Appellant accepts that the invoices are not valid and, therefore, there is a limitation on the challenge that can be brought to against the decision to refuse the claim. He further submits that in order for the substantive right to deduct input tax to arise, the taxable supply must have been made to the Appellant and the Appellant has failed to show this. Ultimately, he submits that there is no basis on which the FtT could conclude that the criteria adopted by HMRC in the exercise of its discretion was unreasonably applied.

Mr Brodsky submits that case law establishes that the Appellant’s grounds for appealing against the decision invoke the supervisory jurisdiction of the FtT, and that there has been little reference to the underlying alternative evidence submitted to HMRC in respect of the reg. 29 discretion. Furthermore, he submits that there is no requirement for the Appellant to present “such a strong case”, as this is the wrong test. He adds that HMRC issued a winding up petition on the basis of the supplies made, which was wholly inconsistent with the Strike Out application now being made.

I now turn to the circumstances of this application:

Returning to the Procedure Rules, the case management powers of the FtT are provided for at Rule 5, as follows:

Rule 8(3)(c) of the Procedure Rules, which forms the basis of this application, provides that:

The UT formulated the following test for assessing the reasonable prospects of success in Fairford (Simon J and Judge Bishopp). In Fairford, the UT was considering the issue as to the jurisdiction of the FtT under rule 8(3)(c). The appeal related to 36 transactions and more than £13,000,000 of input tax. The appeal was against HMRC’s decision to deny input tax for the periods 03/06 and 06/06 on the basis that the taxpayer’s transactions were connected with the fraudulent evasion of VAT, and that they knew, or should have known, of the connection. The alleged connection forming the basis of HMRC’s decision was the Missing Trader Intra-Community (‘MTIC’) fraud. The fraud in that appeal involved both the “vanilla” version, where transactions carried out by the taxpayers can be traced directly to a fraudulent tax loss, and the “contra-trading” version, where the transactions carried out by the taxpayers can be traced through a “clean” chain to a trader involved in covering up the tax losses of fraudulent, defaulting traders in a linked dirty chain. At [30], the UT held that:

At [41], the UT held that the FtT should consider a strike out application under rule 8(3)(c) in a similar way to the approach to an application under CPR rule 3.4:

At [48], the UT then referred to what it described as a “practical and legitimate” procedure for dealing with applications of the nature in this appeal. The UT concluded that:

And, at [49]:

The UT amplified the guidance previously given in British Telecommunications Plc v R & C Comrs [2023] UKUT 00122 (TCC), at [68] and [69] (Leech J and Judge Aleksander), in The First de Sales Ltd Partnership (Henry Carr J and Judge Sinfield), where the UT cited the judgment of Lewison J (as he then was) in Easyair Limited v Opal Telecom [2009] EWHC 339 and held, at [33], that:

At [74], the UT said this:

Three points that stand out from the decision in The First de Sales Ltd Partnership are (and I paraphrase) that: (i) it is necessary to consider whether the Appellant has a “realistic” as opposed to a “fanciful” prospect of success; (ii) it is not appropriate to conduct a mini-trial; and (iii) if I am satisfied that I have before me all the evidence necessary for the proper determination of the question, and the parties have had an adequate opportunity to address it in argument, I should decide the issue. This would require the point in issue to be a short point of law.

Turning to the circumstances of this appeal:

HMRC have disallowed the Appellant’s claim to input tax due to the evidence submitted in support of the claim. The primary means by which a taxable person may exercise the right to deduction is by possession of a valid VAT invoice whose contents are prescribed by reg. 13 of the VAT Regulations (supra). This is the general rule. In this respect, the invalidity of the invoices submitted is not in issue between the parties. It is accepted that the invoices do not meet the requirements of reg. 14(1)(e) of the VAT Regulations. However, even if the invoices are defective, case law has established that there may be a right to deduct input tax.

There is, further, no dispute as to the legislative provisions governing the exercise of the right to deduct input tax. The relevant legislative provisions in respect of the right to deduct input tax were set out by the Court of Appeal in Tower Bridge GP, where the issue was whether a taxable person is entitled to exercise a right to deduct input tax despite the fact that they held no VAT invoice in respect of the supply. The appellant argued that it was entitled to make the deduction either as of right, or because HMRC unlawfully exercised their discretion to refuse to allow the deduction to be made. HMRC denied the recovery of input tax on the basis that the invoices did not meet the formal legal requirements to be valid VAT invoices. One of the defects in the invoices was that they failed to name the customer.

The court accepted that possession of a valid VAT invoice is HMRC’s “first line of defence against fraud in the system”: at [126]. This is because if the customer’s name is missing, that raises the possibility that the invoice may be used more than once to make duplicate claims: HMRC v Boyce [2017] UKUT 0177 (TCC) (Arnold J). Therefore, where a taxpayer is not in receipt of an invoice which complies with the formalities required to exercise the right to deduct input tax, the taxpayer does not have the ability to exercise any right of deduction as of right.

Of relevance in Tower Bridge GP was reg. 29 of the VAT Regulations. HMRC however refused to exercise their discretion to allow recovery of the input tax on the basis that: (i) the supplier (Stratex) was not VAT registered, (ii) the transactions were connected with fraud, and (iii) Tower Bridge failed to conduct reasonable due diligence in relation to the transactions. In respect of the exercise of discretion by HMRC, the court found that there were two exercises of discretion embedded within the operation of reg. 29 of the VAT Regulations. In this respect, Lewison LJ held, at [123], that:

And at [125]:

At [131], Lewison LJ said this:

The court was satisfied that the case was not a case in which a defective invoice can be corrected by evidence subsequently supplied. The court, nevertheless, considered that although it would be possible for the customer name to be supplied, the VAT Registration Number (‘VRN’) could not, because it did not exist. The court, ultimately, held that the purpose for which Tower Bridge sought to impugn HMRC’s exercise of discretion fell outside of the primary purpose of the proviso to reg. 29. The question of discretion also came up in Zipvit, which was handed down before the stay in the Appellant’s appeal was lifted.

In Zipvit, Royal Mail had supplied services to Zipvit under the mistaken belief that they were exempt supplies. Consequently, the invoices did not specify any VAT as payable. The Court of Justice of the European Union (‘CJEU’) decided that the United Kingdom had not correctly transposed the PVD and that, in fact, the supplies were not exempt and should have been subject to VAT. The question before the court was whether Zipvit could exercise the right to deduct on the basis that the price paid for supplies had to be treated as inclusive of VAT. The Supreme Court referred two questions to the CJEU, namely:

The CJEU considered that it was only necessary to answer the first question. Advocate-General Kokott nevertheless considered both questions and summarised her view, at [48] to [50], and examined the previous caselaw of the court, at [79] to [82]. The Advocate-General did not regard the inclusion of the VRN in the invoice itself as one of the essential items of information, provided that its omission could be, and is, corrected. The Advocate-General further concluded that one of the items that was essential was the recipient of the supply. The court ruled that Zipvit could not exercise the right to deduct because there was no VAT “due or payable”, for the purposes of art. 168 of the PVD (supra). It, therefore, did not need to answer the question about the form of the invoice. When the case returned to the Supreme Court, the Supreme Court also found it unnecessary to rule on that question. The name of the customer was, however held to be “essential” in Zipvit.

The case of Scandico (Rose J and Judge Helier), behind which the Appellant’s appeal was previously stayed, concerned the purchase of Apple iPhones and valid invoices. Scandico purchased export iPhones that were not available in certain countries and Apple did not generally sell to phone traders from its retail stores. Scandico, therefore, employed 80 individuals whom they called “runners”. Employees would purchase iPhones under their own names, false names or without providing names. Cash, or gift cards, were given to the runners to pay for the phones, though sometimes the individuals used debit or credit cards. VAT was reclaimed by the company on the iPhones and HMRC enquired into the reclaims and disallowed input VAT recovery as only simplified VAT invoices were provided. HMRC had invited Scandico to provide further secondary evidence, but were not satisfied that this was provided as there was no audit trail confirming how the phones had been purchased and delivered to the company.

Scandico argued that HMRC should have allowed the appellant the right to deduct on the basis of the invoices which were produced, together with the other evidence which had been produced. The FtT had earlier decided that the employees clearly purchased iPhones on behalf of the company, but that this was irrelevant. The FtT concluded that HMRC was reasonable in its conclusion, and that there were gaps and uncertainties which meant that HMRC was within its rights to refuse the claim.

When the appeal came before the UT, the UT also concluded that HMRC were within their rights to refuse a VAT reclaim due to insufficient evidence on the purchase of the iPhones, and agreed that a simple invoice for the purchase of an iPhone costing more than £250 was insufficient to enable VAT recovery. The UT considered that it was apparent from how the case was presented before the FtT that a practice had grown whereby a tribunal seized with an appeal was invited by both parties to approach its task in two stages. The first stage was for the FtT to consider whether, in fact, the taxpayer made taxable supplies. If s/he did not, then the appeal would fail because the exercise of HMRC’s discretion whether to accept alternative evidence was irrelevant if there was no entitlement to deduct the input tax. If the FtT held that there was a taxable supply, then it would go on to consider the second stage; namely whether HMRC acted unreasonably in refusing to accept the alternative evidence.

The UT disapproved of the two-stage approach and regarded the two-stage approach as “seriously flawed both in juridical and practical terms”. The UT held, at [43] to [44], that:

At [39] to [40], of the decision in Scandico, the UT held that:

The UT further held that it was appropriate for the appellant to raise the question as to whether HMRC’s exercise of discretion had been reasonable, and said this, at [50] and [53]:

The supervisory nature of HMRC’s discretion was also considered in Tower Bridge GP and in Best Buys Supplies Ltd v HMRC [2011] UKUT 497 (TCC). In Tower Bridge GP, Lord Justice Lewison said this:

It is clear from the authorities that in relation to the exercise of discretion by HMRC, all that the FtT is required to consider in any substantive appeal against the refusal by HMRC to exercise discretion favourably is whether the conclusion reached by HMRC in the exercise of its discretion is reasonable.

It is not suggested that Apple has not accounted for the VAT included in the invoices. It is submitted, on behalf of the Appellant, that the phones were purchased via a method that could be traced back to the Appellant. Mr Brodsky submitted that on the reasoning adopted by HMRC in respect of the claims that were accepted, the reasons for rejecting other claims needs to be tested as those other claims relied on the same evidence. In this appeal, following review of the decision, the review officer acknowledged that the Appellant had provided bank statements, which showed large sums of expenditure to Apple, as well as evidence which purported to show that cash amounts had been made available from the Appellant’s retail fuel sales to fund other purchases of individual iPhones.

Due to the significant number of purchases of iPhones, V-UK had to maintain records as to the number of handsets purchased, and by whom they were purchased. The records were cross-referenced to the gift cards given to employees, and the amount of those gift cards. On receipt of handsets, V-UK would scan the phones received, record the unique IMEI number and cross-check this number with the box and the Apple till receipt. The original working sheets were not retained but consolidated versions were prepared, extracting the bulk of the information and converting it into spreadsheet format. These records were then provided to HMRC.

When the Appellant was invited to provide alternative evidence by HMRC on 12 July 2012. The Appellant provided spreadsheets to show the purchases made using funds which originated from the Appellant’s bank account. The evidence also provided to HMRC included: (i) bank statements showing the purchase of all gift cards; (ii) Unique IMEI and unique serial numbers for each iPhone; (iii) all original Apple till receipts; (iv) PAYE records and other evidence of the “runners” employed; and (v) evidence of the onward sale of the phones by reference to the IMEI numbers and unique serial numbers. I find that a significant amount of evidence will need to be explored during a substantive hearing.

I am satisfied that the issues raised in the substantive appeal, and the evidence relied on by both parties, are such that they require detailed consideration in a substantive hearing. In the circumstances, a strike out would not be appropriate. The authorities on the question of whether an appeal has no reasonable prospects of success establish that an application of this nature is relevant if the tribunal is only concerned with a short point of law. It is not appropriate to conduct a mini-trial of the issues, which is what I find would be required in the circumstances of this application, in light of the evidence relied on by the parties and the line of authorities referred to above. I give my reasons for so finding:

In respect of the challenge to the Grounds of Appeal as pleaded, I have found that the Appellant’s case was always based on the reasonableness of the exercise of HMRC’s discretion. The letter dated 15 August 2014 provided further and better particulars in the same manner that Mr Way sought to consolidate all matters on behalf of HMRC. I further find that there is considerable force in Mr Brodsky’s submission that the sphere of litigation concerning the exercise of HMRC’s discretion would not have arisen if the FtT could not consider the manner in which HMRC’s discretion had been exercised in the absence of valid VAT invoices. Furthermore, a two-stage approach has been disapproved by the UT.

Whilst HMRC have referred to the exercise of their discretion and have relied on the statements of a number of witnesses whose evidence was to be relied on during an appeal, I am satisfied that the Appellant’s desire to test HMRC’s evidence does not translate into a finding that the Appellant is attempting to “put the cart before the horse” by putting HMRC to strict proof first, as strongly discouraged by the UT in Fairford. I further find that this is not a case where the Appellant has not placed its cards on the table “face up” in light of my findings on the pleadings submitted by the Appellant, and the development of the issues (and the parties’ positions) after this matter was stayed behind relevant case law.

I find that the issues in this appeal do not amount to a short point of law that can be dealt with summarily. I am further satisfied that HMRC have failed to show that the appeal has no reasonable prospects of success. As correctly submitted by Mr Brodsky, the Appellant is not required to show “such a strong case”. My findings on the preliminary issue should not be taken to mean that the Appellant’s appeal will succeed, but are a balanced appraisal of the information that is before me in this application, in light of the authorities.

I hold that:

Accordingly, therefore, the application is dismissed.

For completeness, I was invited to consider the issue of costs by Mr Brodsky. I have decided not to make a decision as to costs in light of my findings on the refinement of both parties’ cases following the previous stay (the Ambush point). I am satisfied that there has not been any unreasonable conduct by HMRC in this appeal.

This document contains full findings of fact and reasons for the preliminary decision. Any party dissatisfied with this preliminary decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to "Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)" which accompanies and forms part of this decision notice.