This is a First-tier Tribunal case. The key dispute was whether HMRC could stop the British Institute of Technology Ltd (BIOT) from bringing a second appeal before the Tribunal while an earlier appeal had already been struck out.
Written by Yitong Guo, Senior Associate Solicitor
Background
The claim centred around an underlying VAT dispute. The Appellant company, BIOT, claimed input VAT connected with a building purchase. HMRC’s position was that the building was not bought by BIOT but was bought by its director personally.
Notably, BIOT previously appealed a related VAT assessment.
However, the earlier case never reached a full hearing on the facts. The appeal was struck out due to BIOT’s failure comply with an unless order. Therefore, the previous appeal ended procedurally. The facts were never heard, and the underlying dispute was not resolved.
Legal Issues
HMRC argued in the new case, that BIOT had a chance at first appeal, and that was struck out. Given that, it should not be allowed to start again on effectively the same dispute by way of abuse of process.
The Tribunal considered on this point extensively in respect to the conduct in the case if court procedures had been used unfairly, repetitively or in a way that undermines finality.
We note that the Tribunal had distinguished between the court’s substantive decision and a procedural strike-out.
Conclusion and our thoughts
The Tribunal concluded that the earlier BIOT appeal ended only for procedural reasons, and that the actual VAT issue was never decided.
The Tribunal further disagreed with HMRC’s argument that the new appeal had no reasonable prospect of success. The Tribunal, without stating BIOT will win, stated that the Appellant’s argument is arguable and that it deserves a proper hearing. Therefore, the appeal was not entirely hopeless. The struck-out application had failed.
Under UK VAT rules, input VAT is normally recoverable only by the person who received the supply. So, if the director bought the property in his own name, BIOT would usually not be entitled to reclaim the VAT.
However, the Tribunal said BIOT’s case was still arguable because there may be evidence that: the director acted for or on behalf of BIOT; BIOT paid for or funded the purchase; BIOT treated the property as its asset; or the economic reality may differ from the legal paperwork.
This is a good example of the principle: access to justice and deciding matters on their merits. No one should lose a case without ever having the real issue heard, unless there is a clear legal reason.
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