PRB Trading Limited v The Commissioners for HMRC

On 14 November 2018 the Appellant appealed against VAT assessments issued by HMRC covering the monthly prescribed accounting periods 04/15 – 02/18 (Assessments). The Assessments were raised to deny input tax recovery claimed by the Appellant in those periods. The reasons given by HMRC for denying such recovery being:

An appeal in respect of associated deliberate and concealed penalties was lodged on 20 October 2019 (Penalties).

The appeals were consolidated under the present Tribunal reference number.

The appeals have a protracted history, predominantly due to repeated non-compliance by the Appellant with Tribunal directions. However, the appeals are listed for substantive hearing for four days commencing on 3 March 2026.

By the Application and Submissions HMRC contend that the appeals have no prospect of success and, in accordance with Rule 8(3)(c) of the Rules I should strike out the appeal.

For the reasons set out below I refuse the application.

In consequence of the procedural history in this matter the evidence available to determine the appeal is limited to the following:

The Appellant failed to serve a witness statement by the extended due date and despite there being an unless order in place. In consequence, and by a direction dated 19 August 2025, the Appellant was barred from relying on witness evidence in the substantive appeal.

The Application is made on the basis that as the Appellant bears the burden of proving that the Assessments are either not made to best judgment or are excessive and in the absence of the ability to lead evidence there can be no reasonable prospect of success for the appeal against Assessments. As regards the Penalties it is contended that on the basis of the documents and absent evidence rebutting Officer Glen’s conclusion as to the nature of the Appellant’s conduct, HMRC have met the burden on them to establish the necessary requirements for imposing a penalty such that the Penalties must be upheld.

HMRC’s submission provides a brief analysis of the evidence which will be available to the Tribunal hearing the substantive appeal and by reference to which it is contended that each of those grounds has no reasonable prospects of success. I summarise HMRC’s position as follows:

The Appellant was directed to provide submissions both in response to the Appellication and in respect to the forum for the determination of the Application. The directions were made on an unless order basis. The Appellant failed to comply with these directions with the consequence that I am determining the matter on the papers before me and without submissions from the Appellant.

The Application references rule 8(3)(c) of the Rules which provide that the Tribunal may strike out the whole or part of the proceedings if “the Tribunal considers there is no reasonable prospect of the appellant’s case, or part of it succeeding. Neither the Application nor the Submissions address the relevant case law on the meaning of “reasonable prospects of success” or the approach I am required to adopt in assessing whether such prospects exist. Absent any submission from the Appellant, I was entirely unassisted in this regard.

However, the relevant test and approach I am to adopt are relevantly summarised by the Upper Tribunal in the judgment in First de Sales v HMRC [2018] UKUT 396 (TCC) (paragraph [33]) (First de Sales), which suitably adapted to the Application, is as follows:

By reference to First de Sales it should have been plainly apparent to HMRC that applying that test their strike out application could not succeed in this case.

It may very well be the case that the Appellant’s case on each and all of the grounds of appeal is weak and that on the balance of probabilities the appeal will be unsuccessful. However, in order to determine that outcome the Tribunal will need to carefully consider all the evidence available including the documents and by way of cross examination of Officer Glen.

A challenge to VAT assessments, and thereby these Assessments, is a multi-factorial exercise in which the principal issue for the Tribunal to determine is the correct amount of tax due on the evidence before it and by reference to the burden of proof which rests on the Appellant (HMCE v Pegasus Birds Ltd [2004] EWCA Civ 1015). Even where the Tribunal is satisfied that HMRC have acted to the best of their judgment in reaching a figure to assess the Tribunal must roll its sleeves up and determine the amount the Appellant has demonstrated is reasonable upholding HMRC’s assessed quantum unless satisfied that an alternative quantum is appropriate. That exercise will require that the Appellant either leads evidence showing the assessment to be overstated and/or challenges the detail of the evidence used/relied on by HMRC on to calculate the best judgment assessment.

The parties were advised that I would determine this matter on the papers supplied in connection with the Application. That included 1212 pages of exhibits to Officer Glen’s statement and the 56-page statement itself. The Appellant has not indicated that it accepts that statement and it is therefore reasonable for me to assume that the Appellant intends to cross examine the officer. It is not uncommon for HMRC’s position in respect of assessments to change as a consequence of cross examination of their officers; frequently as to quantum, but occasionally cross examination reveals a flaw in analysis which causes HMRC to withdraw assessments entirely and/or for appeals to be allowed. That is so even where no positive evidence is led by the Appellant.

Without the service of additional evidence and/or a pleaded challenge to Officer Glen’s integrity it is highly unlikely that the Tribunal will determine the Assessments are not made in exercise of best judgment but that is not to conclude that a best judgment challenge in the wider sense envisaged in Pegasus is fanciful without consideration of all of the evidence served in the appeal which extends to at least 1200 pages.

In this case the Appellant has chosen or simply negligently failed to serve witness evidence. However, without conducting the actual trial itself, never mind a mini trial, it is impossible for me to identify unaided whether there are documents which indicate that the claims to input tax were appropriately made and as such whether there is a fundamental flaw in the assessment and/or that the quantum is overstated.

Concerning section 29(2) VATA the Tribunal’s power is limited to reviewing whether HMRC a) had any evidence on which to permit recovery as an alternative to valid VAT invoices, b) review HMRC’s the refusal to exercise the discretion and c) determine whether any such refusal was reasonable in all the circumstances (see Kohanzad v CEC [1994] STC 967). Given that, in this regard, the Tribunal’s jurisdiction is supervisory in nature I take the view that the wider question of any legitimate expectation as to recoverability is a matter which can be considered by the Tribunal (see as a comparative example the decision of the Upper Tribunal in HSBC Electronic Data Processing Limited v HMRC [2022] UKUT 41 (TCC) concerning a similar supervisory jurisdiction concerning VAT grouping in which the Upper Tribunal determined whether a decision to refuse grouping was in breach of a taxpayer’s legitimate expectation was an appropriate matter for consideration when exercising the Tribunal’s supervisory jurisdiction). Whilst I accept that the Appellant cannot rely on any new evidence to establish its case that HMRC’s prior conduct established a legitimate expectation as to recovery entitlement I cannot be confident that there are no disclosed documents on which such an argument may be founded. Again it would require an examination of the detail of the evidence which is not appropriate in a strike out application (see points 3 and 6 First de Sales).

As regards the Penalties, HMRC accept that they bear the burden of proving that the Appellant’s behaviour was deliberate and concealed. That burden is imposed on them by virtue of Article 6. The Appellant has a right to be presumed innocent because the Penalties are in the nature of a criminal charge. The Application is predicated, prior to cross examination, on an assumption that Officer Glen’s conclusion on the evidence is the only realistic view of the evidence. It therefore assumes that Officer Glen’s evidence will simply be accepted. In my view, the Application confuses a failure by the Appellant to lead evidence with an inability for the Appellant to challenge the evidence which has been served, either on the interpretation of contemporaneous documents and/or by way of cross examination. To allow the strike out application would preclude the Appellant from challenging Officer Glen’s evidence and thereby breach Article 6.

Applying the correct test for a rule 8(3)(c) strike out application I have no hesitation in concluding that this matter requires a full hearing of all the evidence and cannot be determined at an interlocutory stage in the matter sought by HMRC.

That said however, the Appellant should be under no illusion that its failure to adduce evidence in this appeal is likely to have seriously prejudiced its case. Further, the Appellant must be aware that it is not the job of the Tribunal Panel hearing the appeal to forensically review, of its own volition, the each of the many documents available to it. To the extent that the Appellant proposes to challenge either (1) the Assessments and/or (2) Officer Glen’s evidence that the Appellant’s behaviours are demonstrated as deliberately overclaiming input tax to which there was no entitlement and concealing such overclaim, it must expect to take the Tribunal to each and every document on which it relies explaining its relevance. The Appellant must also cross examine Office Glen on each of his statements or conclusions with which the Appellant disagrees. A failure to do so is likely to result in the upholding of the Assessments and Penalties.

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.