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Ebuyer Ltd (TC8853)
In December 2021, the First-tier Tribunal issued an unless order directing HMRC to disclose specified documents in relation to an appeal by Ebuyer. In April 2022, the taxpayer applied for a direction barring HMRC from further participation in the proceedings because it failed to comply with the unless order. HMRC applied for relief from sanctions for the breach.
The First-tier Tribunal applied the three-stage approach set out by the Court of Appeal in Denton v TH White Ltd [2014] EWCA Civ 906, which require identification and assessment of the seriousness of the failure to comply with the unless order, consideration of the reasons for the default, and evaluation of the circumstances of the case, with particular weight given to the need for litigation to be conducted efficiently and at proportionate cost.
HMRC maintained that its failure to disclose seven documents – which were progress logs – out of the 161 demanded, until three months after the time set by the unless order was not 'serious and significant'. On its assertion that Ebuyer should have brought to its attention that seven documents were missing, the tribunal said there was no such obligation on Ebuyer to do so. The tribunal concluded that HMRC’s non-compliance was ‘serious and significant’.
HMRC said it had cause for the delay because a paralegal working on the case caught Covid-19. The tribunal dismissed this, saying in an organisation as large as HMRC, the illness of one person ‘should not equate to HMRC being unable to comply with tribunal directions’. It caused a problem because HMRC had left the disclosure exercise to the last moment.
Finally, in considering all the circumstances, the tribunal said the appeal had been ‘particularly vexatious and protracted’. HMRC had acted slowly in complying with the order and ‘realistically the case would not be listed now until well into 2024 at the earliest’. Had it not been for HMRC's delay, the case could have been listed for 2023.
HMRC’s application for relief from sanctions was denied.
Andrew Hubbard said: ‘On the face of it, debarring HMRC from any further participation in the appeal seems a very harsh result where the illness of a paralegal meant that seven documents, out of a total of 161, were accidentally omitted from disclosure. The judge’s conclusion that the public interest in court orders being respected and the court’s time being used efficiently outweighed HMRC interest in pursuing an appeal where some £7m of VAT was due does seem surprising. But there is a very long and complex history to this appeal, which has already been running for almost ten years and the decision needs to be seen in that context. I expect, however, that HMRC will want to appeal against this debarring order.’
