Malcolm Gray v The Commissioners for HMRC

On 11 January 2024, Mr Gray’s estate was sequestrated. Dunedin Advisory Ltd (“Dunedin”) was subsequently appointed as his trustee in bankruptcy.

On 18 March 2025, HMRC applied for the Tribunal to determine as a preliminary issue whether Mr Gray had the standing to continue with his appeal against discovery assessments (“the Appeal”), and if not, to strike out the Appeal (“the Application”).

Neither party objected to the Application being decided on the papers. I issued directions on 13 October and 1 December 2025 for the parties to provide further evidence and submissions; responses were received from HMRC on 13 November and 22 December 2025, and from Dunedin on 15 December 2025.

For the reasons set out below, I decided that Mr Gray does have standing to continue with the Appeal, and I issue a direction for HMRC to file and serve a statement of case, see §32 below.

The facts are taken from the documents on the Tribunal file and from the further information provided by HMRC and Dunedin.

Mr Gray was issued with various VAT assessments and surcharges for the periods 06/13 through to 12/22. He was also issued with various self-assessment late filing penalties plus a wrongdoing penalty under FA 2008, Sch 41 of £55,090.60.

Mr Gray did not appeal or pay those assessments or penalties, and on 14 November 2025, HMRC’s enforcement and insolvency service in Scotland filed a sequestration petition with Dundee Sherrif Court for £153,900.88.

Meanwhile, on 14 February 2022, following a review of Mr Gray’s bank statements, HMRC issued him with discovery assessments for the years 2011 to 2018. On 26 October 2023, an HMRC review officer upheld the assessments: the total extra tax was £212,247. On 24 November 2023, Mr Gray notified the Appeal to the Tribunal against those assessments. On 6 December 2023, the Tribunal informed HMRC of the Appeal. Mr Gray applied for Alternative Dispute Resolution (“ADR”) and on 20 December 2023, HMRC accepted that application.

The hearing of the sequestration petition was listed for 11 January 2024. On 4 January 2024, Officer Kyle Miller carried out a pre-hearing check, and identified that Mr Gray had appealed against the discovery assessments. He contacted Officer Branigan of the Fraud Investigation Service and clarified that the discovery assessments were not among the sums included in the petition. However, Mr Branigan said that if Mr Gray were to win the Appeal, this could change the wrongdoing penalty. Mr Miller removed that penalty from the petition so that the claim was reduced to £99,218.05. Thus, the amount sought by HMRC by the petition did not include either the wrongdoing penalty or the discovery assessments against which Mr Grey had appealed.

On 11 January 2024, Mr Gray’s estate was sequestrated under the Bankruptcy (Scotland) Act 2016 (“BSA”) on the petition of the Advocate General on behalf of HMRC. The effect, as set out on the Award of Sequestration, was that the Sheriff declared that “the estate now belonging or which shall hereafter belong to [Mr Gray] before the date of discharge…belong[s] to his creditors for the purposes of the Bankruptcy (Scotland) Act 2016”.

On 12 January 2024, Dunedin were appointed as the trustee. On 25 January 2024, Dunedin wrote to the Tribunal saying:

“It is our understanding that there is currently an outstanding appeal action which has been raised by Mr Gray. Please note that the Trustee will not become involved in the appeal process. We would further add that we have no objection to Mr Gray continuing the appeal should he wish to do so...”

On 23 March 2024, the Tribunal wrote to Mr Gray, asking him whether he wished to proceed with the Appeal. Mr Gray did not respond. The Tribunal issued a chaser letter on 9 April 2024, again with no response.

On 14 June 2024, Judge Alexander issued Mr Gray with an Unless Order, which stated that the Appeal would be struck out unless he confirmed within fourteen days that he intended to proceed. On 28 June 2024, Mr Gray confirmed he wished to continue. Both parties asked for the Appeal to be stayed while they took legal advice.

On 19 December 2024, Dunedin confirmed that HMRC was the main creditor in the bankruptcy, with their claims amounting to 89% of the “agreed creditor claims”.

On 18 March 2025, HMRC made the Application, which as set out at the beginning of this Decision, was for the Tribunal to determine as a preliminary issue whether Mr Gray had the standing to continue with the Appeal, and if not, to strike out the Appeal. . On 6 May 2025, HMRC provided submissions and related case law. On 23 May 2025, Dunedin wrote to HMRC and the Tribunal saying that Mr Gray had been discharged from bankruptcy “given that he has co-operated fully with the Trustees”.

I considered the following issues:

Section 78(1) of the BSA reads:

“The whole estate of the debtor vests for the benefit of the creditors in the trustee in the sequestration, by virtue of the trustee's appointment, as at the date of sequestration”

BSA s 106(5) provides, inter alia, that the trustee “may…bring, defend or continue any legal proceedings relating to the estate of the debtor”. There is thus no doubt that a trustee in bankruptcy has the right to continue an appeal which was brought by the debtor, and thus that Dunedin has the right to continue the Appeal.

I next considered whether the position was affected by the fact that Mr Gray had been discharged from bankruptcy. HMRC say this, with which I agree:

“Discharge from bankruptcy signifies that the debtor is no longer subject to the restrictions imposed by bankruptcy, and creditors are prevented from enforcing pre-bankruptcy debts, as provided for by Section 87(4) of the Bankruptcy (Scotland) Act 2016. However, the bankruptcy estate itself persists until it is fully administered, which may involve the realisation of assets or the completion of payment agreements that extend beyond the date of discharge”.

I therefore also find that Mr Gray’s discharge from bankruptcy does not change the position.

HMRC accept that the legal position is as set out in Dickson v United Dominions Trust Ltd 1988 SLT 19, where Lord McClusky said that “if the trustee for the creditors abandons any right to pursue the claim, the bankrupt is entitled to pursue it”, but that:

“the bankrupt cannot be allowed to litigate in such a way that he competes with the creditors, or the trustee as representing them, for any part of the assets sequestrated; and accordingly where such a competition exists or may exist the bankrupt will have no title to sue”.

HMRC submitted that if Mr Gray were allowed to litigate, it would “reduce HMRC’s claim in the estate”. However, I disagree. HMRC excluded the discovery assessments from their claim, with the result that allowing the Appeal to proceed cannot reduce the sums they have claimed. Those remain the same whether or not the Appeal continues.

HMRC did not submit that allowing the Appeal to continue might prevent HMRC from making a claim against the estate in the future, to recover the amounts in the discovery assessments, and that Mr Gray was “competing with HMRC as a creditor” for that reason. I agree that HMRC were right not to make that submission, because:

HMRC also submitted that if the Appeal continues, it could only be on the basis that Mr Gray is an agent for Dunedin, which would then “be liable for any costs awarded”. The final part of that submission was difficult to understand, because the FTT is essentially a no-costs jurisdiction. Although there are a few exceptions to the no-costs rule, none of those exceptions applies here.

Dunedin’s position is that Mr Gray has standing in his own right, because he would not be competing with the creditors. That submission is consistent with Chiswell v Chiswell [2016] CSOH 45, in which Lady Wolfe held that there was no bar to the bankrupt pursuing a legal action which would not be detrimental to the position of the trustee or the creditors.

Both Dunedin and HMRC therefore accept that Mr Gray has the requisite standing: HMRC say he can act as agent, and Dunedin says he can continue the Appeal in his own right. That is sufficient to determine the preliminary issue.

HMRC nevertheless asked the Tribunal to decide whether Mr Gray would be acting on his own behalf or as agent, so they knew “who would be liable for costs”. It is again unclear why HMRC need this point resolving, given the no-costs jurisdiction at the FTT.

In my judgment, it follows from Chiswell v Chiswell that Mr Gray has the necessary standing, because allowing the Appeal to continue will have no negative effect on the assets in the estate available to pay the claims which have been made by creditors. In the alternative, he has standing as agent for Dunedin.

I add by way of conclusion that I found it difficult to understand the position taken by HMRC in this case. Officers Miller and Brannigan had made an explicit and conscious decision to exclude the discovery assessments from the sequestration petition, and in doing so they rightly recognised that Mr Gray had already appealed those assessments. However, HMRC then sought to have the Appeal struck out in reliance on the sequestration. That made it look as if HMRC had been merely paying lip service to the existence of the Appeal and to Mr Gray’s appeal rights, and were also acting without reference to HMRC’s obligation to assist the Tribunal to deal with the Appeal fairly and justly.

As Mr Gray has standing to act in the Appeal, by 45 days from the date of issue of this Decision, HMRC are directed to provide a Statement of Case both to Mr Gray and to Dunedin as well as to the Tribunal. I have reduced that time limit by 15 days from that given by the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (“the Tribunal Rules”) because HMRC have been aware of the Appeal for over two years.

HMRC are also directed to copy both Mr Gray and Dunedin on their future correspondence with the Tribunal Service, and Mr Gray is directed to copy his Tribunal correspondence to both Dunedin and to HMRC. Those directions are given because, although Mr Gray will be taking the Appeal forward and Dunedin will not play any active role, it is important that it is aware of what is happening.

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 Rules. 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.