Judge censures HMRC over ‘austerity’ excuse for compliance failure
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.