Melton Mowbray Conservative Club v The Commissioners for HMRC

With the consent of the parties, the form of the hearing was a video hearing. A face-to-face hearing was not held because it was not expedient to do so. The documents to which I was referred were contained in a bundle of 140 pages plus a skeleton argument prepared by either side.

Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.

This was a hearing to determine HM Revenue & Customs’ (HMRC) application that the appeals brought by Melton Mowbray Conservative Club (Appellant) be struck out pursuant to rule 8(3)(c) Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.

The appeals themselves concern claims made by the Appellant to recover sums it considered to have been overpaid as VAT in connection with supplies made from certain gaming machines. These claims had been rejected by HMRC but following the protected litigation culminating in in the Upper Tribunal judgment in HMRC v The Rank Group and Done Brothers (Cash Betting) Ltd and others [2020] UKUT 117 (TCC) HMRC accept that the Appellant had overpaid output tax in sums that were agreed.

The grounds of HMRC’s strike out application are that the appeals bore no reasonable prospect of success. In that application HMRC contended that the Appellant had deregistered for VAT on 2 January 2022 and had “ceased to exist as a legal entity” and whilst efforts had been made it confirm that the benefit of the Appellant’s claim could be repaid to the Association of Conservative Clubs Ltd, absent a letter of discharge from the trustees of the Appellant in place at the time of the claims, no refund could be made and HMRC therefore had “no method by which they can repay the former club or an attempted transferee”.

I determine the facts from the positions conceded by the parties and the papers in the bundle. There was no witness evidence.

I find the following facts:

The Appellant was constituted as a trust pursuant to its rules (Rules)which were in the form provided by the Association of Conservative Clubs. Relevant to this application the Rules provide:

“Trustees – 26

(a)

All the property whether real or personal shall be vested in the Trustees and shall be held by them upon trust for the Club and for furthering the objects of the Club … In the event of the Club being dissolved all such property after payment of the outstanding obligation of the Club (if any) shall be held by the Trustees for furthering Conservative principles in such manner as the Trustees shall, in their absolute discretion determine.

…

(b)

The Trustees shall be elected at a General or Special General Meeting by a majority of the members present and entitled to vote thereat, and shall remain in office during the pleasure of the Club.

For the purposes of giving effect to such election the Chairman is hereby nominated as the person to appoint new Trustees of the Club within the meaning of section 36 of the Trustee Act 1925 and he shall by Deed duly appoint the person or persons so nominated … as new Trustee or Trustees of the Club and the provisions of the Trustee Act 1925 shall apply to any such appointment. Any statement of fact in any such Deed of Appointment shall in favour of a person dealing bone fide and for value with the Club … shall be conclusive evidence of the fact so stated.”

Section 36 Trustee Act 1925 (Trustee Act) relevantly provides:

“Power of appointing new of additional trustees

(1)

Where a trustee, either original or substituted, … desires to be discharged from all or any of the trusts or powers reposed in or conferred on him, or refuses … to act, then, subject to the restrictions imposed by this Act on the number of trustees:

(a)

the person … nominated for the purpose of appointing new trustees by the instrument , … creating the trust, …

may, by writing, appoint one or more other persons … to be a trustee of trustees in place of the trustee so … desiring to be discharged, refusing … as aforesaid.

…

(7)

Every new trustee appointed under this section as well as before as after all the trust property becomes by law, or by assurance, or otherwise, vested in him, shall have the same powers, authorities and discretions, and may in all respects act as of he had been originally appointed as trustee by the instrument, if any creating the trust.

Pursuant to the provisions of Rule 26, and thereby section 36 Trustee Act, on 27 September 2021 the three Trustees then appointed and who had been trustees when the claims were made (referred to as the Retiring Trustees) entered into the Deed pursuant to which three new trustees (referred to as the New Trustees) were appointed. The Deed expressly provided for the discharge of the Retiring Trustees and for the New Trustees to act in their place.

In accordance with section 36(7) of the Trustee Act and Rule 26(a) all property, including the benefit of the Appellant’s overpaid VAT claim vested in the New Trustees. No formal transfer of the rights was required because the transfer was affected as a matter of law.

Pursuant to Rule 26(b) HMRC shall treat the Deed as conclusive of the fact of appointment and thereby transfer of the right to the proceeds of the claims as there can be no question that HMRC are bone fides.

Nevertheless, on 6 April 2023 the New Trustees wrote to HMRC in the following terms:

“Please treat this letter as authorisation for HMRC to make payment of the claims made by Melton Mowbray Conservative Club to the Association of Conservative Clubs Ltd. This letter also provides the confirmation requested by HMRC that payment f the claims to the Association of Conservative Clubs Limited fully discharges HMRC’s liability in respect of those claims.”

HMRC’s internal manual states that in order to be permitted to repay a claim to a recipient other than the original claimant they must be satisfied that there has been a transfer of the property in the claim (pursuant to section 136 Law of Property Act 1925) and that the party which had submitted the claim has issued a waiver of entitlement to receipt of the sums.

I have concluded that the effect of the Trustee Act section 36, Rule 26 and the Deed are that there was a legal transfer of the property in the claim and an effective discharge of any rights the Retiring Trustees had in the claims. HMRC shall rely without more on the terms of the Deed. There is therefore no obligation on the Appellant to provide further evidence of entitlement of the New Trustees to receive the payment as trustees of the Appellant. Further, those New Trustees are required as there are now no longer any members of the Appellant, to hold the property in the claim for furthering Conservative principles. Absent a continuing bank account in the name of the Appellant and on the basis that the Association of Conservative Clubs Limited is a trustee bound by the Rules, the Appellant, is entitled to direct that the payment be made into a bank account held by the Association of Conservative Clubs Ltd. This they have done.

As such I am satisfied that the overly rigid adherence to non-statutory internal guidance as to the requirements to be fulfilled by the Appellant are unnecessary and unwarranted.

I refuse HMRC’s application. On the basis that they do not dispute that there is an entitlement to receive the overpayment and, through the Deed, the conclusive fact of transfer and discharge is proven, the appeals not only have a realistic prospect of success they must succeed.

As such I also determine the appeals in the Appellant’s favour and direct that HMRC now repay the sums agreed together with statutory interest claimed.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this 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.