Judge censures HMRC over ‘austerity’ excuse for compliance failure

Topics: Tax law,Litigation,Courts business,Government & politics

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HM Revenue & Customs has been debarred from a dispute with law school owner BPP Holdings after the Court of Appeal criticised the revenue for suggesting it should be treated like a litigant in person to excuse its failure to comply with a tribunal order.

Ruling in BPP Holdings vs Revenue and Customs, the senior president of tribunals, Lord Justice Ryder, described HMRC’s approach to compliance as ‘disturbing’. 


He said: ‘At times it came close to arguing that HMRC, as a state agency, should be treated like a litigant in person and that the constraints of austerity on an agency like HMRC should in some way excuse unacceptable behaviour.

‘I remind HMRC that […] a litigant in person is expected to comply with rules and orders and a state party should neither expect to, nor work on the basis that it has some preferred status – it does not.’

The dispute arose after HMRC breached an order made by the First-tier Tribunal (Tax Chamber), which required it to give particulars of its case against BPP, which owns BPP Law School, over how it pays VAT on its supply of education and printed matter.

The order was made after HMRC delayed serving its statement of case and failed to plead the facts of its case.

At the time the tribunal judge, Judge Mosedale, said there was ‘clear prejudice’ in BPP not knowing HMRC’s case, and that it delayed the progress of the appeal by around eight months.

The case progressed to the Court of Appeal after the Upper Tribunal (Tax and Chancery Chamber) ruled the First-tier Tribunal had made an error in law and should not have debarred HMRC, as it said the tribunal gave non-compliance a ‘disproportionately prominent role’ in its decision.

In the appeal court, HMRC said the First-tier Tribunal should have considered an alternative remedy rather than barring it from the case, which HMRC said prevented a fair hearing, and handed BPP a windfall to which BPP was not entitled.

But Ryder said that a more relaxed approach to compliance with directions of the tribunals ‘would run the risk’ that non-compliance with orders would have to be tolerated, which he described as the ‘wrong starting point’.

He said: ‘The interests of justice are not just in terms of the effect on the parties in a particular case but also the impact of the non-compliance on the wider system including the time expended by the tribunal in getting HMRC to comply with a procedural obligation.’

He added that not only was there no reason for the non-compliance, but as a consequence BPP was prejudiced against due to the delay and expense. He said this meant non-compliance was not the only factor that led to HMRC being disbarred.

Ryder ruled that the debarring order should be restored. Lord Justice Richards and Lord Justice Moore-Bick agreed.

Readers' comments (14)

  • Don't we all just love cases like this?

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  • Leo Rosten in The Joys of Yiddish defines chutzpah as "gall, brazen nerve, effrontery, incredible 'guts', presumption plus arrogance such as no other word and no other language can do justice to". In this sense, chutzpah expresses both strong disapproval and condemnation. In the same work, Rosten also defined the term as "that quality enshrined in a man who, having killed his mother and father, throws himself on the mercy of the court because he is an orphan". Chutzpah amounts to a total denial of personal responsibility, that renders others speechless and incredulous ... one cannot quite believe that another person totally lacks common human traits like remorse, regret, guilt, sympathy and insight. The implication is at least some degree of psychopathy in the subject, as well as the awestruck amazement of the observer at the display.

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  • Quite right Court of Appeal. HMRC only has itself to blame - outrageous it should think it has any excuse for non-compliance with a Tribunal order.

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  • Did Counsel appearing for HMRC manage to advance that argument with a straight face?

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  • I can foresee this argument being run by liability insurers after the small claims limit rises. Oh wait, they'll still be using a lawyers - well, an ABS anyway.

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  • The judgement says 'came close to..', it doesn't say say they did. Nor does it explain why an order for wasted costs wouldn't have met the justice of the case. Or take account of the fact that unlike private litigants HMRC's job in these sorts of cases is not to win at all costs but to help the tribunal to reach a decision by putting forward arguments about what the law actually is. Now the tribunal is going to have to do that without the benefit of any cross-argument and work out for itself what may be the flaws in the Appellants' case. I can see it living to regret making this order. Finally, as taxpayers yourselves, are you really happy that someone else may be getting away with a wholly unmeritorious win and underpay tax because of some technical mix-up? If you do I trust you won't be complaining about Google and other corporates taking advantage of the rules.

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  • As a tax payer, I am somewhat less than enthusiastic about paying for HMRC and their lawyers to treat the tribunals and senior courts as their own personal fiefdoms, where they may dabble and potter and dally according to their whim, condescending to the inconvenience of obeying orders and directions only as and when it suits them.

    They brought this upon themselves. I am paying now having to pay for it. As are you.

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  • Sadly, as someone who has the misfortunate of dealing with HMRC solicitor’s office fairly regularly, this story is not in the least bit surprising.

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  • Does anyone remember the minister who said a few years ago it was ok to pay legal aid lawyers low fees, and that government departments were served by lawyers of a very different calibre so naturally their remuneration had to reflect that ( dubious) fact?
    I remember the comment but not the name of the inconsequential person who said it.

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  • Government lawyers (the ones actually doing the day to day case work) aren't paid that much - certainly nothing like their equivalents in the private sector. The fact that legal aid lawyers like I used to be have been screwed is irrelevant. And like all civil servants they are under pressure to produce more with fewer resources. So sometimes people make mistakes. Always have, always will. It's hardly a question of 'treating the courts as their own personal fiefdoms', whatever that comment is based on. Personally I think "there but for the grace of God..."

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