Boris Frederiksen as Trustee in Bankruptcy of Alpha Insurance A/S & Anor v The Commissioners for HMRC

These appeals concern Insurance Premium Tax (“IPT”) paid by two Danish-resident insurance companies, Alpha Insurance A/S (“Alpha”) and Qudos Insurance A/S (“Qudos”) (together, the “Insurers”) in the years prior to their respective liquidations (March 2018 for Alpha; November 2018 for Qudos).

The Insurers conducted non-life insurance business on a cross-border basis, including in the UK. Pursuant to an order of the Danish Courts, the Appellants (the “Trustees”) were appointed as trustees of the Insurers’ estates. The UK equivalent would be an administrator or liquidator.

In the ordinary course, the Insurers accounted for and paid IPT to HMRC in respect of all insurance policies which they issued to policyholders in the UK.

As a result of their liquidations, and as a matter of Danish law, all of the then-current insurance policies issued by the Insurers were cancelled. As a matter of both Danish and English law, the policyholders were entitled to receive a payment (whose precise legal nature is in issue in the appeals) referable to the premium which they had paid and calculated proportionately to the unexpired period of insurance at the time of cancellation. In the event, this amount was sufficient to cover the cost of purchasing replacement insurance.

In view of the insolvencies of the Insurers, the Financial Services Compensation Scheme (the “FSCS”) and its Danish equivalent, the Danish Guarantee Fund (the “DGF”) (together, the “Funds”) stepped in – in accordance with their regulatory responsibilities – to ensure that policyholders were protected. They provided the monies necessary to pay to policyholders the sums to which they were entitled as a matter of Danish law (being the law applicable to the insolvency of the Insurers). In the UK, the FSCS implemented arrangements to secure replacement insurance for policyholders, which was done through the same insurance brokers (the “Brokers”) who had arranged the policies in the first place. With a few exceptions, these payments were made directly by the Funds to the Brokers and used by the Brokers to pay for the replacement insurance. IPT was payable (and, it is to be inferred, paid) to HMRC by the replacement insurers in respect of the premiums for the replacement cover.

The outcome, in short, is that HMRC received IPT both in respect of the premium for the full duration of the original policies issued by the Insurers and the premium for the duration of the replacement policies issued by the replacement insurers.

The Funds are creditors in the insolvencies of the Insurers. These appeals are in effect brought by the Trustees so as to enable the Funds (amongst other less significant creditors) to recover in the Insurers’ liquidations that part of their expenditure in this matter referable to the duplication of IPT.

The statutory basis of the appeals arises from section 55(1) of the Finance Act 1994 (“FA 1994”) (“section 55(1)”) and the Insurance Premium Tax Regulations 1994 (SI 1994/1774) (the “Regulations”). The essential ground of appeal (in the language of section 55(1)) is that the Insurers have paid IPT and part of the premium has been repaid, such that the Insurers are entitled to credit in accordance with the Regulations. There is no dispute that the Insurers paid IPT in respect of the original policies. The issue, in its most reduced form, is whether (in the language of section 55(1)) “part of the premium is repaid”.

HMRC have declined to give any credit to the Trustees in this respect. HMRC’s stance involves two disputed contentions:

The tax in dispute is about £6 million.

In summary, the case management issues which I must determine are as follows.

On 8 October 2024 the Trustees applied for an order against themselves for disclosure in relation to certain documents (each a “Document” and together the “Documents”) where they owe contractual obligations of confidentiality to third parties (the “Disclosure Application”). Each of those contractual obligations is, in turn, subject to a proviso (so far as relevant) that disclosure of the Document is permitted if required by a “court of competent jurisdiction”. For this purpose, it is not in dispute that the Tribunal should be regarded as a “court” of competent jurisdiction.

The Appellants’ disclosure application also sought a restriction that HMRC could only make use of the Documents for the purposes of the appeals (the “Collateral Use Issue”). At the hearing I sought clarity whether it was deliberate that this was not subject to a similar carve out as in CPR 31.22(1), so that this restriction would not apply in circumstances including where a Document has been read to or by the court, or referred to, at a hearing which has been held in public. The Trustees accepted that any order should be subject to such limitations.

The Trustees also seek to redact irrelevant and confidential information from the Documents, such as the names of third parties (other than the Funds) and other information capable of identifying such third parties (the “Redaction Issue”).

If the Disclosure Application is granted, the Appellants also seek to amend their grounds of appeal relying on the Documents (the “Amendment Application”).

The chronology of proceedings to date is relevant, not least as HMRC rely on delay by the Trustees as a relevant factor in opposing the Amendment Application. I therefore make the following findings of fact.

Qudos first made its request to HMRC for credit and repayment of IPT on 17 December 2020, subsequently submitting updated and revised requests in terms of amount.

Alpha made its first such request on 6 May 2021, subsequently updating and revising the amount for which credit and repayment was sought.

Measured only from the later of these requests, it took about 16 months for HMRC eventually to reject these claims, in September 2022. Following further representations by the Trustees, HMRC ultimately issued their formal decisions to reject their requests in February 2023. There was then an internal review process which concluded on 29 June 2023 with HMRC maintaining its rejection of the requests for repayment.

The FTT appeals were lodged, separately, on 28 July 2023, together with grounds of appeal in each case.

On 14 August 2023 HMRC wrote to the Appellants’ representatives, Penningtons Manches Cooper LLP (“PMC”), to indicate that they were considering the imposition of a penalty on the purported basis that the claims for repayment were incorrect and requesting the provision of information with a view to mitigation of the amount of the penalty. There was significant correspondence between the parties. On 2 November 2023 PMC made full submissions to HMRC regarding the proposed penalties. No reply was received until 8 February 2024, when PMC chased HMRC. HMRC then responded the same day (8 February 2024) stating that they were no longer proposing to apply any penalties, on the basis that they took “the view that there was a mistake despite taking reasonable care”.

HMRC’s statement of case in both appeals was due on 31 October 2023 (a Tuesday). However, on 27 October 2023, two working days before the deadline, HMRC applied for an extension of two weeks. Then, just within that period of extension (but before the Tribunal had dealt with the application), on 13 November 2023 HMRC made a further application for Alpha’s appeal to be stayed pending determination of Qudos’ appeal. HMRC also applied for an extension of time to serve their statement of case in Qudos’ appeal, until 11 December 2023 or three weeks following the Tribunal’s determination of the stay application, whichever was later.

On 24 November 2023, the Trustees objected to HMRC’s application and instead applied for the appeals to be joined. They had previously asked HMRC to agree to this course, but HMRC had refused. The Tribunal agreed with the Trustees – on 11 January 2024 it ordered that the appeals should be joined and that HMRC’s application for a stay of Alpha’s appeal should be refused. The effect of joining the appeals was that the 60-day period for service of HMRC’s statement of case was then, in effect, renewed from 11 January 2024, thereby allowing HMRC until 11 March 2024.

HMRC served their statement of case on 11 March 2024.

The parties then liaised promptly to agree draft directions to include disclosure (of documents relied on) and preparation of a statement of agreed facts and issues. These draft directions were filed with the Tribunal on 19 April 2024, although they were never in fact endorsed by the Tribunal.

The draft directions proposed that there should be an exchange of lists and documents by 21 June 2024, which by agreement was extended to 28 June 2024. There was a further short extension, at HMRC’s request, to 1 July 2024 for the production of their documents.

Shortly before the agreed date PMC received (amongst other materials) the Documents. However, PMC considered that the confidentiality restrictions in the Documents meant that it was not practically feasible to deal with the issues raised in the Disclosure Applicationin advance of disclosure. For this reason, the Trustees’ lists of documents did not include the Documents.

On 12 September 2024, PMC wrote to HMRC Legal to raise the subject of the Documents, explaining the difficulty with regard to confidentiality. The parties agreed the terms of a temporary case management stay, which was filed with the Tribunal on 20 September 2024.

Following certain correspondence with HMRC (which included discussion of the Collateral Use Issue), the Trustees subsequently made the Disclosure Application, on 8 October 2024. The Disclosure Application specifically drew attention to the likelihood of a further application for permission to amend the grounds of appeal so as to plead specifically the basis of their reliance on the Documents for the purpose of the appeals (as well as certain other amendments and all subject, of course, to the Tribunal’s permission).

In order to deal with HMRC’s concern that they must see the Documents before responding to the Disclosure Application, an interim order was sought that the Trustees provide redacted copies of the Documents to HMRC for that purpose.

The matter was put before me by the Tribunal administration. I issued directions on 6 December 2024, including:

“DISCLOSURE

1.

Not later than 16 December 2024 the Appellants shall send or deliver to the Respondents redacted copies of the Documents. Such redaction shall be carried out in accordance with the approach set out in the Appellants’ supplementary submissions of 6 November 2024.

2.

Such order is made:

(1)

on the basis that the Respondents have agreed to maintain the confidentiality of the Documents pending the determination of the Disclosure Application; and

(2)

without prejudice to the Respondents’ case on the Collateral Use Issue and the Redaction Issues, which will be determined at the case management hearing.

…

AMENDMENT APPLICATION

5.

Not later than 3 January 2025 the Appellants should make an application for permission to amend the Grounds of Appeal (the “Amendment Application”), with a draft of the proposed amendments.”

On 17 December 2024, the Trustees served the redacted Documents on HMRC. They were served in an electronic bundle which comprises 1,169 pages.

Having sought unsuccessfully to agree the matter in correspondence with HMRC, the Trustees applied on 18 December 2024 for a 14-day extension to make the Amendment Application, due to annual leave over the Christmas/New Year period. Due to delays with the Tribunal administration, on 31 December 2024, the Tribunal sought HMRC’s representations concerning the application for extension of time by 14 January 2025, but HMRC did not respond.

The Trustees proceeded to prepare and file the Amendment Application on 17 January 2025, in accordance with their then pending request.

The Trustees’ application for an extension of time was made on the basis of HMRC receiving a corresponding extension for their response, so to 31 January 2025. However, that deadline passed without HMRC engagement. On 11 February 2025 HMRC Legal wrote to request a retrospective and prospective extension of time for the response, until 28 February 2025. HMRC then made an application, which the Tribunal dealt with promptly, on 18 February 2025, granting a shorter extension to 24 February 2025. HMRC then filed their response in accordance with that direction.

On 27 September 2024, PMC first wrote on behalf of the Trustees to the 11 third parties who have contractual rights of confidentiality in relation to the Documents. The position of the third parties is as follows:

The Trustees say that the Documents are relevant in that they show the flows of money. This is not disputed by HMRC.

The Trustees say that the Court of Appeal has made clear that a party can make an application against themselves for disclosure: Mitchell v HMRC [2023] EWCA Civ 261; [2023] STC 603 (“Mitchell”) per Whipple LJ at [67]-[69] and Carr LJ at [74] (the dissent of Arnold LJ on this point at [82] not representing current law).

The Trustees say that it is open to the Tribunal to order specific disclosure of the Documents under r.5, particularly r.5(3)(b) of The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273) (as amended) (the “FTT Rules”) which, insofar as relevant, say:

“Case management powers

5.—(1) Subject to the provisions of the 2007 Act and any other enactment, the Tribunal may regulate its own procedure.

(2)

The Tribunal may give a direction in relation to the conduct or disposal of proceedings at any time, including a direction amending, suspending or setting aside an earlier direction.

(3)

In particular, and without restricting the general powers in paragraphs (1) and (2), the Tribunal may by direction—

…

(d)

permit or require a party or another person to provide documents, information or submissions to the Tribunal or a party;”

HMRC do not in principle seem to oppose disclosure. Whilst in their skeleton argument they suggested that it would be open to the Tribunal to dismiss the application on the basis that “the time for disclosure of documents has long passed” and “allowing… late disclosure at this stage would be contrary to the overriding objective”, they also concede that the “[D]ocuments could, in principle, be exhibited in due course to a witness statement—where the deadline for service has not yet expired.

HMRC suggest that their “primary concern is the issue of restricted disclosure which is sought by the Appellants.”

At the hearing I indicated that I would be granting the application for disclosure. I agree that it is in the interests of justice to order the disclosure as the Documents are relevant and the Trustees (who wish to rely on them) consider that they cannot lawfully do so without being directed by the Tribunal to disclose the Documents.

Admitting the Documents now does not cause delay, as HMRC concede that the Documents could have been exhibited to witness statements. Indeed, the application per se is not strongly opposed by HMRC. What is very strongly opposed is any disclosure being subject to restrictions (the Redaction Issue and the Collateral Use Issue) and to amending the Trustees’ joint grounds of appeal as a result of such disclosure.

The Trustees observe that HMRC do not object to the amendment to the joint grounds of appeal on the basis of merit (it is accepted that the changes are arguable, not being wholly without merit), factual basis, coherence or particularity.

HMRC’s timing objection is misplaced. HMRC treat the application as if made at the eve of trial, but in reality, it was filed well before witness evidence or listing of a hearing. The application was made with reasonable promptness once document disclosure issues were resolved.

Indeed, much of the delay to-date stems from HMRC’s own actions, including long delays in responding to the initial claims and delayed service of their joint statement of case (due to an unsuccessful application to stay proceedings).

The Trustees say that the relevant principles are found in Quah v Goldman Sachs International [2015] EWHC 759 (Comm) (“Quah”) at [36]-[38] and CIP Properties v Galliford Try Infrastructure [2015] EWHC 1345 (TCC) at [19]. The overriding objective is of the greatest importance.

A consideration in a tax appeal is also the “venerable principle” that it is in the public interest for taxpayers to pay the correct amount of tax: Henderson J in Tower MCashback LLP1 v HMRC [2008] EWHC 2387 (Ch); [2008] STC 3366 at [116], approved by the Supreme Court in the same case, [2011] UKSC 19, [2011] STC 1143 at [15]. In Exchequer Solutions Ltd v HMRC [2022] UKFTT 181 (TC) at [22]-[29] Judge Vos treated this as a factor to be taken into account, albeit not decisive or supplanting an approach which is procedurally fair and in accordance with the overriding objective.

The Court of Appeal has reminded courts (and tribunals) to focus on their important function of deciding the relevant issues and warned against the dangers of “too schoolmasterly an approach”: see Abercrombie v Aga Rangemaster Ltd [2013] EWCA Civ 1148, [2014] ICR 209 at [49] (including footnote 6, which cites Cropper v Smith (1885) 26 Ch D 700).

The Trustees say that HMRC are wrong to suggest that the appropriate test is found in the case law for relief from sanctions, notably Denton v White [2014] EWCA Civ 906 (“Denton”) and Martland v HMRC [2018] UKUT 178. HMRC have relied on Wolf Rock (Cornwall) Ltd v Langhelle [2020] EWHC 2500 (Ch) (“Wolf Rock”) at [35]. However, this decision has subsequently been explained as an instance of an “implied sanction”: see XX v YY [2021] EWHC 3014 (Ch) at [65] (“XX”) and Toner v Telford Homes Ltd [2022] EWHC 634 (QB) (“Toner”) at [53]. In any event, this argument cannot survive the comments of the Court of Appeal (Birss LJ) in Yesss (A) Electrical Ltd v Warren [2024] EWCA Civ 14 (“Yesss”) at [34].

HMRC oppose the application which they say is far too late and without good justification. The proposed amendments are extensive (spanning over 10 pages) and would effectively restart the appeal, which is already at an advanced stage.

HMRC first say that the correct approach is to be found in Quah at [36]-[38] and Kawasaki Kisen Kaisha Limited v James Kemball Limited [2021] EWCA Civ 33 at [17]-[18]. Those principles were applied by this Tribunal in Butt v HMRC [2024] UKFTT 893 at [13]-[19] and Mypay Limited v HMRC [2023] UKFTT 890 (TC) at [22]-[23].

HMRC say in their skeleton that the correct test is found in Denton, citing Wolf Rock. They emphasise that the approach to compliance with directions should be similar to the courts, quoting the SPT in BPP Holdings v HMRC [2016] EWCA Civ 121; [2016] STC 841 who remarked:

“…the terms of the overriding objective in the tribunal rules likewise incorporate proportionality, cost and timeliness. It should not need to be said that a tribunal’s orders, rules and practice directions are to be complied with in like manner to a court’s. If it needs to be said, I have now said it.”

Applying those principles to the facts they say there is significant and material delay since the Trustees first filed their joint grounds of appeal.

It is clear from the case law that the Trustees are right and this is not a “relief from sanctions” case. What made Wolf Rock such a case was that the application had the potential to disrupt a fixed trial date. That is apparent from XX at [62] and [65] and Toner at [53]-[54]. It is also clear from the judgment of the Court of Appeal in Yesss at [33]-[34] where Birss LJ remarked that permission to amend a statement of case was an example that “springs to mind” of where permission is required but it is “plainly not there” as a sanction for breach.

I recall the events set out at [16]-[35] above. There has been substantial delay from HMRC: measured only from the last of the claims, it took HMRC about 16 months to reject the claims.

Conversely the Appellants have acted with reasonable promptness. The prospect of the Amendment Application was raised in the Disclosure Application itself. I accept that there were clear difficulties for the Appellants making the Disclosure Application before the Interim Disclosure Order, due to many of the amendments being based on the Documents and the Appellants had a contractual obligation to keep the Documents confidential. I therefore consider that the Appellants have provided a good explanation of the delay.

This is not a “very late amendment”, in the terminology of Quah. The trial date has yet to be fixed and it follows that there is no risk of it being lost. The Amendment Application has, in relative terms, been made at an early stage of the proceedings, before any directions to a final hearing have been given, including any listing directions. There is no disruption to the Tribunal system or to other Tribunal users.

There is not and should not be significant prejudice to HMRC, who will have plenty of time before any substantive hearing in which to formulate their response to the joint amended grounds of appeal. Whilst there will be some cost to HMRC in responding to the joint amended grounds of appeal, in the context of what I would anticipate to be the overall costs of the appeal and the amount of tax in issue, that is relatively slight.

However, there would be very real injustice to the Trustees in not allowing the amendments as the amendments are clearly arguable and supported by evidence, in the form of the Documents.

Having regard to the overriding objective, I find it is fair and just to allow the Amendment Application because the prejudice to the Trustees from refusing the application outweighs the slight prejudice to HMRC by allowing the application; and that allowing the application allows the real issues in the dispute to be determined, mindful of the “venerable principle” that it is in the public interest for taxpayers to pay the correct amount of tax.

I therefore allow the Amendment Application.

The Commissioners for Revenue and Customs Act 2005 (“CRCA 2005”) is the enactment which merged HM Customs & Excise and the Inland Revenue, to form HMRC. Sections 17-23 of CRCA 2005 are in the (unnumbered) part of the Act headed “Information”.

Section 17 of the CRCA 2005, as amended, states:

“17 Use of information

(1)

Information acquired by the Revenue and Customs in connection with a function may be used by them in connection with any other function.

(2)

Subsection (1) is subject to any provision which restricts or prohibits the use of information and which is contained in—

(a)

this Act,

(b)

any other enactment, or

(c)

an international or other agreement to which the United Kingdom or Her Majesty’s Government is party.

(3)

In subsection (1) “the Revenue and Customs” means—

(a)

the Commissioners,

(b)

an officer of Revenue and Customs,

(c)

a person acting on behalf of the Commissioners or an officer of Revenue and Customs,

(d)

a committee established by the Commissioners,

(e)

a member of a committee established by the Commissioners,

(f)

the Commissioners of Inland Revenue (or any committee or staff of theirs or anyone acting on their behalf),

(g)

the Commissioners of Customs and Excise (or any committee or staff of theirs or anyone acting on their behalf), and

(h)

a person specified in section 6(2) or 7(3).

(4)

In subsection (1) “function” means a function of any of the persons listed in subsection (3).

(5)

In subsection (2) the reference to an enactment does not include—

(a)

an Act of the Scottish Parliament or an instrument made under such an Act,

(aa) an Act of the National Assembly for Wales or an instrument made under such an Act, or

(b)

an Act of the Northern Ireland Assembly or an instrument made under such an Act.

(6)

Part 2 of Schedule 2 (which makes provision about the supply and other use of information in specified circumstances) shall have effect.”

Section 18 CRCA 2005, as amended, states:

“18 Confidentiality

(1)

Revenue and Customs officials may not disclose information which is held by the Revenue and Customs in connection with a function of the Revenue and Customs.

(2)

But subsection (1) does not apply to a disclosure—

(a)

which—

(i)

is made for the purposes of a function of the Revenue and Customs, and

(ii)

does not contravene any restriction imposed by the Commissioners,

(b)

which is made in accordance with section 20 or 21,

(c)

which is made for the purposes of civil proceedings (whether or not within the United Kingdom) relating to a matter in respect of which the Revenue and Customs have functions,

(d)

which is made for the purposes of a criminal investigation or criminal proceedings (whether or not within the United Kingdom) relating to a matter in respect of which the Revenue and Customs have functions,

(e)

which is made in pursuance of an order of a court,

(f)

which is made to Her Majesty’s Inspectors of Constabulary, the Scottish inspectors or the Northern Ireland inspectors for the purpose of an inspection by virtue of section 27,

(g)

which is made to the Director General of the Independent Office for Police Conduct, or a person acting on the Director General’s behalf, for the purpose of the exercise of a function by virtue of section 28,

(h)

which is made with the consent of each person to whom the information relates

(i)

which is made to Revenue Scotland in connection with the collection and management of a devolved tax within the meaning of the Scotland Act 1998.

(j)

which is made to the Welsh Revenue Authority in connection with the collection and management of a devolved tax within the meaning of the Government of Wales Act 2006, or

(k)

which is made in connection with (or with anything done with a view to) the making or implementation of an agreement referred to in section 64A(1) or (2) of the Scotland Act 1998 (assignment of VAT ).

(2A) Information disclosed in reliance on subsection (2)(k) may not be further disclosed without the consent of the Commissioners (which may be general or specific).

(3)

Subsection (1) is subject to any other enactment permitting disclosure.

(4)

In this section—

(a)

a reference to Revenue and Customs officials is a reference to any person who is or was—

(i)

a Commissioner,

(ii)

an officer of Revenue and Customs,

(iii)

a person acting on behalf of the Commissioners or an officer of Revenue and Customs, or

(iv)

a member of a committee established by the Commissioners,

(b)

a reference to the Revenue and Customs has the same meaning as in section 17,

(c)

a reference to a function of the Revenue and Customs is a reference to a function of—

(i)

the Commissioners, or

(ii)

an officer of Revenue and Customs,

(d)

a reference to the Scottish inspectors or the Northern Ireland inspectors has the same meaning as in section 27, and

(e)

a reference to an enactment does not include—

(i)

an Act of the Scottish Parliament or an instrument made under such an Act,

(ia) an Act of the National Assembly for Wales or an instrument made under such an Act, or

(ii)

an Act of the Northern Ireland Assembly or an instrument made under such an Act.”

The final part of the Act, headed “General” contains section 51 which, so far as is relevant, specifies:

“51 Interpretation

…

(2 ) In this Act—

(a)

“function” means any power or duty (including a power or duty that is ancillary to another power or duty), and

(b)

a reference to the functions of the Commissioners or of officers of Revenue and Customs is a reference to the functions conferred—

(i)

by or by virtue of this Act, or

(ii)

by or by virtue of any enactment passed or made after the commencement of this Act.

…

(4)

In this Act a reference to information acquired in connection with a matter includes a reference to information held in connection with that matter.”

The Trustees’ case is as follows. The common law position is that an order for disclosure is granted on the basis of an “implied undertaking” given by the receiving party that it would not use or allow the documents or their contents to be used for any purpose other than the proceedings in which disclosure was given. This approach was designed to advance the interests of the administration of justice (by encouraging full and frank disclosure) and arose independently of any question of confidentiality. In support of this they cite:

For civil proceedings this is now codified in CPR 31.22. However, the Court of Appeal has applied the common law approach to Employment Tribunal proceedings, where the procedural rules do not contain any express provision as to the use of disclosed documents: IG Index Ltd v Cloete (“IG Index”) [2014] EWCA Civ 1128; [2015] ICR 254 at [28] and [42]-[43] (Christopher Clarke LJ). It follows that the common law position on collateral use applies in proceedings before the First-tier Tribunal, even if the position is not express in the rules.

The Trustees say that ss 17-18 CRCA 2005 do not alter this position, since:

HMRC say they should not be restricted in their use of the Documents which the Trustees seek to rely upon. Such an application goes against the grain of the legislation which specifically ensures HMRC are permitted to use information across its different functions.

The relevant safeguard is that HMRC are also subject to a statutory duty of confidentiality: s 18(1) CRCA 2005. That defines and delineates the scope of what HMRC can do with the Documents. Disclosure of such information is only permitted where an exception under s 18(2) CRCA 2005 applies. These exceptions are designed to enable HMRC to fulfil their primary statutory function of the collection and management of taxes, citing Mitchell (Whipple LJ) at [4].

HMRC are entitled to share any information which comes into their possession for all other functions (i.e. the information within the Contracts): s 17(1) CRCA 2005. This was made clear in Newcastle United Football Company Ltd v HMRC [2023] EWHC 3021 (Admin); [2024] STC 73 (“Newcastle United”) (Singh LJ) at [83].

Restrictions on the use of information by other parts of HMRC can only be imposed by statute or an international agreement: s 17(2) CRCA 2005.

HMRC are a single body of persons. They cannot artificially restrict the knowledge which comes into their possession. Further, to artificially restrict access to knowledge which comes into HMRC’s possession would be contrary to HMRC’s statutory duty which is set out in s 5(1) CRCA 2005.

The only basis for challenging any decision by HMRC to disclose information and/or documents under s 18(2) is by judicial review: Mitchell at [49], [59], [65] and [70].

If HMRC decide to rely on any of the Documents for the purposes of any tax appeal the FTT has the power, in those proceedings, to exclude such evidence if it would otherwise be unfair to admit the evidence: r 15(2)(b)(iii) of the FTT Rules.

I have reached the view that, despite the FTT Rules not mentioning the prohibition on collateral use, the common law operates so that an order for disclosure is granted on the basis that an implied undertaking is given by the receiving party that it will not use or allow the documents or their contents to be used for any purpose, other than the proceedings in which disclosure was given. However, in the case of documents disclosed to (as opposed to by) HMRC, that undertaking is qualified by section 17 CRCA 2005 – which allows HMRC to use such information in connection with any of their other functions. The prohibition on collateral use does not qualify this as it is a common law rule, not in statute or in an international or other agreement to which the UK or HMRC are party: section 17 CRCA 2005. This is consistent with the decision in Newcastle United.

In reaching this view I have taken into account that the policy reasons for the prohibition on collateral use in civil proceedings weigh less in proceedings before this Tribunal, since standard disclosure in tax cases only requires parties to disclose documents on which they rely. There is therefore no reason to adopt a strained construction in order to protect fundamental rights. I also note that the position is different in civil proceedings, where parties are required to disclose documents adverse to them and the policy reasons for the prohibition on collateral use is engaged, as the CPR is an enactment which qualifies section 17 CRCA 2005.

Even if I have a discretion to order that HMRC will not use the Documents for purposes other than the litigation, I have come to the conclusion that it is not, having regard to the overriding objective, fair or just to do so.

I expand on these points at greater length in the following parts of this section.

In proceedings governed by the Civil Procedure Rules, the applicable provision is CPR 31.22(1), which provides:

“A party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed, except where-

(a)

the document has been read to or by the court, or referred to, at a hearing which has been held in public;

(b)

the court gives permission; or

(c)

the party who disclosed the document and the person to whom the document belongs agree.”

The Civil Procedure Rules do not apply to these proceedings, which are governed by the FTT Rules. There is no provision equivalent to CPR 31.22(1) in the FTT Rules.

However, I accept that CPR 31.22(1) is based on well-established common law principles. Specifically, prior to the CPR, the long-standing general principle was that an order for disclosure was granted on the basis of an implied undertaking given by the receiving party that it would not use or allow the documents or their contents to be used for any purpose other than the proceedings in which disclosure was given. This approach was designed to advance the interests of the administration of justice and arose independently of any question of confidentiality: Riddick, 896E-H (Lord Denning MR), 901H-902A (Stephenson LJ), 912B-D (Waller LJ); Harman, 304G-305A (Lord Diplock), 308F- G (Lord Keith), 312A-B (Lords Scarman and Simon); Process Development, 51 (Lord Bingham MR); Bourns, 169d-170h (Aldous LJ). The CPR approach (embodied in CPR 31.22) is to make express provision for the applicable rules, rather than have them depend on the concept of an implied undertaking. But the position as a matter of substance is the same.

This approach has been applied in relation to Employment Tribunal proceedings, even where the procedural rules do not contain any express provision as to the use of disclosed documents. In IG Index, at [28], the Court of Appeal regarded it as “implicit” that the same restriction on disclosure by the recipient should apply. As Christopher Clarke LJ put it:

“the common law would necessarily imply some form of undertaking and the appropriate application is that the person to whom disclosure is made… should be under the same restriction as if he had given disclosure in the County Court”.

At [42]-[43] the Court of Appeal expressly applied the underlying principles deriving from Riddick and Process Development.

I thus accept, for the reasons advanced by the Trustees, that the common law does impose an implied undertaking to information disclosed in proceedings before this Tribunal. However, like any other part of the common law it is subject to statutory modification. Subsection 17(1) CRCA 2005 is such a limitation. Subsection 17(2) CRCA 2005 expressly provides that subsection 17(1) is qualified by “any other enactment”, but does not state that it is qualified by “any rule of law”.

The effect is therefore that information disclosed by HMRC to an appellant is fully subject to the prohibition on collateral use. However, in the case of information disclosed by an appellant to HMRC, HMRC may use such information in connection with any other function. Whilst the common law “remains the bedrock of the English legal system” (Ingenious) Parliament has chosen to modify it in this instance through section 17(1) CRCA 2005.

In reaching this view I take account of the fact that the policy reasons for the prohibition on collateral use have much less force in relation to proceedings before this Tribunal than in civil litigation governed by the CPR.

Standard disclosure in tax cases only requires parties to disclose documents on which they rely: r.27(2)(b) of the FTT Rules. In contrast, under the CPR a party is also required to disclose documents that adversely affect his case or support his opponent’s case: CPR 31.6. Standard disclosure is the default in tax cases and it is open to a party to apply for specific disclosure against the other party. However that is rare. It is not the case in this appeal. I also note in IG Index at [44] Christopher Clarke LJ comments that the “reach of the rule must be assessed so as to cater for the usual case”.

The reasons for the rule against the collateral use of documents disclosed in civil litigation were summarised in IG Index at [42]-[43] as comprising two separate points:

In relation to standard disclosure before the Tribunal, the Trustees concede that the second of the reasons in IG Index cannot apply. However, they say that the first still applies, since:

“Disclosure is still compulsory, in that it is a requirement of participating in the litigation and will be mandated by tribunal order, even if a party is willing to provide it in support of its own case.”

I find this unconvincing. That is not the nature of compulsion that the case law contemplates when it offers this justification for the rule against collateral use. It contemplates compulsion of a higher degree. In Riddick Waller LJ (910E)stated that:

“The final argument put forward on behalf of the company is that to allow this claim is an abuse of the process of the court. It is said that it is of fundamental importance that discovery should not be interfered with. In the earlier action between the plaintiff and the company the document of April 16 was disclosed. It was disclosed as part of the compulsory process whereby any relevant information has to be made available to the opposite side unless there is some ground of privilege to protect it. The argument is that to allow such a: document to form the basis of another claim is an abuse of the process of the court.”

In Marcel v Commissioner of Police [1992] Ch 225 (“Marcel”) Sir Nicolas Browne-Wilkinson VC stated that:

“Further, there is a close analogy between documents obtained under statutory powers of compulsion and documents obtained on discovery in civil proceedings. Parties to civil litigation are compelled by law to disclose to each other all relevant documents in their custody or power. This duty is enforced by order of the court. But, since such discovery of documents is done under compulsion and involves a gross interference with the right to privacy of the person giving discovery, the law imposes a duty on the party who obtains discovery not without the leave of the court to use the documents disclosed for any purpose other than the conduct of the action in which discovery is given. Since the whole process of discovery is conducted under the control of the court, this duty is imposed by means of implying an undertaking by the party to observe those conditions. But the underlying principle is that private information obtained under compulsory powers cannot be used for purposes other than those for which the powers were conferred.

So, in my judgment, where the police or any other public authority use compulsory powers to obtain information and documents from the citizen, the relationship between them is such that the information or documents are received solely for those purposes for which the power was conferred and equity imposes on the public authority a duty not to disclose them to third parties, save under order of the court.”

It is clear to me from these quotations that the compulsion is from having to disclose documents that the party would rather not disclose, because they are adverse to their case, rather than simply having to disclose because they are relying on them and engaged in litigation.

I accept, of course, that the rule against collateral use also applies to voluntarily disclosed documents: see IG Index at [45] and Bourns, 170 (Aldous LJ). However, as Christopher Clarke LJ comments “That does not, however, as it seems to me, alter the rationale of the rule in so far as it applies to compulsory disclosure”: IG Index at [45]. [my emphasis]

The Trustees rely on the dictum of Lord Hoffmann in R v Secretary of State for the Home Department, Ex p Simms [1999] UKHL 33; [2000] 2 AC 115, that “fundamental rights cannot be overridden by general or ambiguous words”, as applied by Lord Toulson JSC in Ingenious. Lord Toulson was here referring to the expression “for the purposes of a function of” HMRC, in section 18 CRCA 2005 (rather than section 17 CRCA 2005 that concerns this application). Even if what is a function of HMRC are to be construed as general words, in the context of section 17 in relation to appeals before the Tribunal they are not overriding “fundamental rights” since (i) the prohibition against collateral use is not a “fundamental right” in the context of appeals before this Tribunal, as the policy reasons for the prohibition on collateral use have much less force in relation to proceedings before this Tribunal than in civil litigation governed by the CPR; and (ii) HMRC are still subject to their statutory duties of confidentiality under section 18 CRCA 2005.

The Appellants’ skeleton argument says that:

“There is nothing in [CRCA 2005] which impinges in any way on these principles. One imagines that the High Court would be mightily surprised to be treated to the submission that HMRC is, by an unarticulated sidewind, granted an exceptional immunity from CPR 31.22. Yet, if it were right, that would be the effect of HMRC’s case.”

However a crucial distinction is that (i) proceedings in the High Court are governed by the CPR; (ii) the CPR expressly prohibits collateral use; and (iii) the CPR is an “enactment” that limits section 17 CRCA 2005.

As noted HMRC rely on [83] of Newcastle United. The Trustees dispute their interpretation. I find it helpful to set out that part of Singh LJ’s decision in full:

“Questions 3 and 4: section 17 of the CRCA

[81] Mr Nelson made it clear in his oral submissions that his arguments are confined to those documents which he described as being “in quarantine”, i.e. before the examination required by section 53 has been completed. He accepts that, once the section 53 examination is concluded, the information can be shared as between the criminal and civil departments of HMRC.

[82] Mr Bird responded by submitting that in fact HMRC has confined its wish to retain and use information by way of copies to copies of material which has already passed the section 53 sift, for example excluding material which is subject to legal professional privilege or journalistic material.

[83] In our judgment, the Judge was plainly correct to hold that the terms of section 17(1) of the CRCA permit the Respondents to share information which they have obtained for the purpose of a criminal investigation with others within HMRC for their (civil) tax collection purposes even after the criminal investigation has been concluded. Both are ‘functions’ of HMRC. The language of section 17(1) is about ‘use’ of ‘information’ and not about the retention of the underlying documents, let alone the original documents which were seized. Section 22(1) of PACE is, for the reasons we have set out above, concerned with the latter, and so does not restrict or prohibit the use of the information such as to fall within section 22(2).

[84] This interpretation would not have the undesirable consequence that HMRC can simply treat the information arbitrarily and violate the Appellant’s privacy interests with impunity. Mr Bird is clearly right to submit that HMRC would not be free to use the power in section 17 in any way that they please. They will be constrained in the exercise of that power by the principles of public law.

[85] Furthermore, it is clear that they will be subject to an obligation to respect the confidentiality of the information which they have obtained using compulsory powers. This was made clear by the Court of Appeal in Marcel, which was followed by Eder J in Tchenguiz v Director of the Serious Fraud Office [2013] EWHC 2128 (QB); [2014] 1 WLR 1476, at paras 10 and 15, citing the judgment of Sir Nicolas Brown-Wilkinson in Marcel at page 237; the judgment of Dillon LJ at page 256; the judgment of Nolan LJ at page 261; and the judgment of Sir Christopher Slade at page 265.

[86] The point was expressed most clearly by Nolan LJ, who said:

‘In the context of the seizure and retention of documents, I would hold that the public law duty is combined with a private law duty of confidentiality towards the owner of the documents. … It arises from the relationship between the parties. It matters not, to my mind that in this instance, so far as the owners of the documents are concerned, the confidence is unwillingly imparted.’

[87] Last but not least, HMRC would be subject to their obligation to comply with Convention rights in the HRA, in particular the privacy rights which are set out in Article 8 of the ECHR.”

The Appellants say that HMRC have mis-stated the effect of Newcastle United and HMRC would still be subject to an obligation to respect the confidentiality of the information and subject to their obligation to comply with convention rights in the Human Rights Act 1998, in particular the privacy rights set out in Article 8 of the European Convention on Human Rights.

It is clear that Newcastle United establishes information obtained through compulsory powers may be used for other functions of HMRC, due to section 17 CRCA 2005. Whilst HMRC are subject to public law limitations (and the duty of confidentiality in section 18 CRCA 2005) that does not alter the primary proposition that HMRC can use information obtained through compulsory powers for other functions of HMRC.

There seems to me no good reason why the same reasoning should not apply to information disclosed to HMRC in litigation before this Tribunal.

In conclusion, the default position is that due to section 17 CRCA 2005 HMRC may use information disclosed to them for any other function of HMRC.

Even if I have the power to order otherwise, I have come to the conclusion that it is not, having regard to the overriding objective, fair or just to do so.

The strongest argument in favour of ordering against collateral use is that the privacy belongs to the third parties, who are not party to this litigation. However, I consider that their privacy is adequately protected through the redactions which I have permitted (see below). Whilst I was told there were a relatively small number of market participants at this time, so it might be possible to identify the third parties, regardless of redaction, I regard this as speculative. We have no evidence to that effect.

If I have a discretion to order against collateral use, the starting point must be that HMRC may use information disclosed to them for any other function of HMRC.

The public policy rationale for the rule against collateral use has much less force than in civil proceedings (see above at [88] to [95]).

I have therefore concluded that, even if I have the power to make an order restricting collateral use of the Documents, I should not do so in this case.

The Trustees say that their case is identical to that on the Collateral Use Issue, subject to one additional point. The additional point is that HMRC confuse information which HMRC have acquired with information which HMRC have not acquired. The point of redaction is legitimately to withhold the communication of irrelevant and confidential information or irrelevant material protected by rights of privacy.

HMRC’s position is that they should not be provided with redacted documents because such an approach is inconsistent with HMRC’s obligations relating to the collection and management of taxes. The statutory regime set out in ss 17-23 CRCA 2005 is a complete code that sets out the basis on which HMRC are required to control and use information. To impose additional restrictions on what HMRC can see in respect of documents is contrary to those legislative provisions.

This is further supported by the way in which Parliament has given HMRC the power to issue information notices under Finance Act 2008, Schedule 36. Under that regime there is no restriction on obtaining documents on the basis of confidentiality – the restrictions are limited as set out in Part 4 of Schedule 36 (eg privileged material). They refer to the comments of the Court of Appeal in R (oao Derrin Brothers Properties Ltd & Ors) v A Judge of the First Tier Tribunal (Tax Chamber) [2016] STC 1081 (Sir Terence Etherton C) at [74]-[78].

HMRC do not suggest that the redacted information is relevant to the Trustees’ appeals. However, they say in their skeleton:

“HMRC in performing its duty in respect of the collection and management of taxes under s 5 CRCA should not be restricted in knowing who are the counterparties or other participants in transactions entered into in the context of such contracts (or any other terms of such documents). HMRC cannot discount the possibility that the knowledge of such facts might be relevant now or in the future to another function of HMRC.”

Any redaction of documents for use in tax appeals, which by default are heard in public, requires a specific application by a party under rules 14 and 32 FTT rules. The starting position is that there should not be any redaction. On this point HMRC rely on HMRC v Banerjee [2009] EWHC 1229 (Ch); [2009] STC 1930 (“Banerjee”) (Henderson J) at [35].

To the extent information should not justifiably be referred to in public proceedings, such as sensitive commercial information, protection is available to the Trustees and any third parties by way of:

HMRC say that any justification for redactions must pass a high bar before the Tribunal will exercise its discretion to restrict the use of documents under r 14 FTT Rules. On this point HMRC rely on HFFX LLP v HMRC [2023] UKUT 73 (TCC); [2023] STC 678 (“HFFX”) at [139]-[140].

In the passage of Banerjee on which HMRC rely, Henderson J said at [35]:

“It is relevant to bear in mind, I think, that taxation always has been, and probably always will be, a subject of particular sensitivity both for the citizen and for the executive arm of government. It is an area where public and private interests intersect, if not collide; and for that reason there is nearly always a wider public interest potentially involved in even the most mundane-seeming tax dispute. Nowhere is that more true, in my judgment, than in relation to the rules governing the deductibility of expenses for income tax. Those rules directly affect the vast majority of taxpayers, and any High Court judgment on the subject is likely to be of wide significance, quite possibly in ways which may not be immediately apparent when it is delivered. These considerations serve to reinforce the point that in tax cases the public interest generally requires the precise facts relevant to the decision to be a matter of public record, and not to be more or less heavily veiled by a process of redaction or anonymisation. The inevitable degree of intrusion into the taxpayer’s privacy which this involves is, in all normal circumstances, the price which has to be paid for the resolution of tax disputes through a system of open justice rather than by administrative fiat.”

This does not, however, assist HMRC’s case. It is common ground that the information the Trustees wish to redact is irrelevant information with regards to this appeal. That passage in Banerjee concerns the importance of “facts relevant to the decision” being made public.

Similarly, the passage in HFFX on which HMRC rely is similarly not on point. That passage concerns when the Tribunal may redact information from its decisions. However, only relevant information should be in a well-written decision. It does not address the issue of the redaction of irrelevant information from documents that are before the Tribunal.

The redactions relate to the identity of counterparties to contracts (e.g. Brokers, Sub Brokers and Policy Holders). These redactions do not appear relevant to the substance of the appeals.

In Hancock v Promontoria (Chestnut) Ltd [2020] EWCA Civ 907; [2020] 4 WLR 100 (“Hancock”) Henderson LJ observed that:

“It has been settled law in this jurisdiction for well over a century that a litigant giving disclosure of documents is entitled to redact parts of a document which are irrelevant, and in all normal circumstances a certificate to that effect by the party's solicitor will be treated as conclusive.”

In support of this proposition Henderson LJ also referred to GE Capital Group Ltd v Bankers Trust Co [1995] 1 WLR 172 (CA) (Hoffmann LJ) at 174B and (Leggatt LJ) at 176H. Earlier in Hancock, at [75], Henderson LJ observed:

“Considerations of confidentiality, by contrast, give rise to very different considerations. Seldom, if ever, can it be appropriate for one party unilaterally to redact provisions in a contractual document which the court is being asked to construe, merely on grounds of confidentiality… Confidentiality alone cannot be a good reason for redacting an otherwise relevant provision in a contractual document which the court has to construe, and there are other ways in which problems of that nature can be addressed. I have already given the example of a confidentiality ring. Another solution, if the parties all agree, could be for the judge alone to see the document in its unredacted form.”

It is therefore clear that in civil litigation redaction is permissible if what is redacted is irrelevant to the issue in dispute. That principle has also been applied in the Employment Tribunal, where a party was permitted to redact commercially sensitive irrelevant information: Frewer v Google UK Ltd & Ors [2022] EAT 34; [2022] IRLR 472. I see no good reason why the same principle should not apply in proceedings before the Tax Chamber of the First-tier Tribunal, so if a party has a good reason they may redact part of a document when disclosing it, if the redacted text is irrelevant. I accept preserving confidentiality of the third parties is a good reason, given the confidentiality undertakings in the agreements.

I do not consider this to be altered by section 17 CRCA 2005. That provision deals with information that HMRC have acquired.

Section 17 CRCA 2005 does not, as HMRC suggest, give them a right toacquire information because it may be useful to them, by insisting that documents not be redacted. It applies to information that has already been “acquired” by HMRC. As the Appellants rightly observe, HMRC do not acquire information which is redacted and which they never have had sight of. More generally, sections 17-23 CRCA 2005 do not govern what information HMRC may acquire, but deal with information they have acquired.

In conclusion, I therefore grant the Disclosure Application allowing the Trustees to redact irrelevant and confidential information from the Documents.

During the hearing I rose to give the parties time to agree Case Management Directions. At the hearing they agreed these in principle, and provided me with a draft to endorse on 3 April 2025. I endorsed these directions on 4 April 2025.

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.