Judgment summary
This is a decision on a renewed application for permission to appeal to the Upper Tribunal (Tax and Chancery Chamber) from a decision of the First-tier Tribunal (Tax Chamber) released on 13 March 2026, following a hearing on 18 February 2026 [1].
The FTT had refused the Applicant's hardship application made under section 84(3B) of the VAT Act 1994 [2]. The FTT accepted that at the time of the hearing the Applicant had insufficient funds to pay the disputed VAT, but found that this was caused by the Applicant's own deliberate act of paying away monies that would otherwise have been available, rather than by the requirement to pay the VAT itself [4].
The FTT refused permission to appeal on 28 May 2026 [5]. The Applicant renewed its application to the Upper Tribunal on 20 June 2026, and Judge Rupert Jones refused permission on the papers on 18 August 2026 on all four grounds then pursued [6]. The Applicant renewed the application for an oral hearing, held by video on 28 September 2026, at which Oleg and Alex Senechko (father and son) appeared for the Applicant, with Alex Senechko making oral submissions, and Milan Chudasama appeared for HMRC [7].
At the oral hearing only one ground of appeal was pursued, namely that the FTT had misapplied the hardship test by assessing the Applicant's financial position at an earlier point in time, when it had funds, rather than at the time of the hardship application [12]-[13]. The Upper Tribunal refused permission to appeal on this ground, finding no arguable error of law [15], [19].
Background
Alesen Direct Solutions Limited applied to the FTT for relief from the requirement under section 84(3) of the VAT Act 1994 to pay or deposit disputed VAT before its appeal could proceed, relying on the hardship provision in section 84(3B) [2], [10].
The FTT found that the Applicant had received funds owed to it in connection with an ongoing building project, and that these funds were paid away, including a refund to a customer identified as MS (the mother of Oleg Senechko and grandmother of Alex Senechko) and payments to a company called PPBeer, which was under Mr Oleg Senechko's control [14], [18].
The FTT rejected the Applicant's explanations for these payments, including the suggestion that MS had requested that part of the sum be redirected to PPBeer, and found this inconsistent with earlier correspondence referring to the Appellant having the opportunity to "help" PPBeer [18]. The FTT also found no corroborating evidence, such as company accounts, bank statements, or a loan agreement, to support the claim that an agreement to pay PPBeer had been made before the Applicant learned it needed to pay the VAT in dispute [19].
The FTT concluded that the decisions to make the payments to MS and PPBeer were made after the company realised the VAT was payable, and that the principal intention of the Senechkos was to create an impression of impecuniosity in order to avoid paying the disputed tax upfront [20].
Core dispute
The sole ground pursued at the oral hearing was that the FTT had wrongly applied the hardship test by reference to the company's previous financial situation, at a time when it held funds from its building project and had money owing to it, rather than by reference to its financial position at the time of the hardship application, when it had no financial stability or funds available [13]-[14].
Mr Oleg Senechko argued that the funds paid to MS were not a withdrawal but a refund to the customer, and that because the construction project did not proceed to completion, no profits arose and MS, as the party first entitled to be repaid, was repaid before the hardship application was made [14].
HMRC's position, as reflected in the FTT's reasoning applied below, was that the correct legal test required consideration of whether the Applicant's inability to pay without hardship was itself caused by its own prior deliberate actions, applying the principles in Elbrook, Totel 2 and NT Ada [11], [16].
Court findings
The Upper Tribunal held that the FTT had correctly identified that the hardship test under section 84(3B) is to be applied as at the date of the hearing, but that prior events leading up to the hearing can be taken into account where the Applicant is found to be responsible for putting itself in a position where it cannot pay [15]-[16].
Applying the principles summarised in NT Ada Ltd v HMRC [2019] UKFTT 333 (TC) at [33], derived from HMRC v Elbrook (Cash & Carry) Limited [2017] UKUT 181 (TCC), and from Nugee J's reasoning in Totel 2 at [45]-[47], the Upper Tribunal found that the FTT had not misdirected itself as to the statutory test nor wrongly applied it at an earlier point in time [16]-[17].
The Upper Tribunal found that the FTT gave sufficient reasons at [11]-[20] and [27]-[30] of its Decision explaining why funds it accepted were unavailable at the date of hearing should nonetheless be treated as not causing hardship, because the real cause was the Applicant's own deliberate dissipation of funds [18].
The Upper Tribunal further held that the FTT's conclusion at [20] of the Decision, that the payments were made with the principal intention of creating an impression of impecuniosity to avoid paying the tax upfront, was a finding of fact the FTT was entitled to make on the evidence, applying the Edwards v Bairstow [1956] AC 14 standard, and disclosed no arguable error of law [19].
Outcome
Permission to appeal to the Upper Tribunal was refused on all grounds, including the single ground pursued at the oral hearing, as it did not disclose a realistic prospect of success or an arguable error of law in the FTT's Decision [15], [20].
The decision was signed by Judge Rupert Jones, Judge of the Upper Tribunal, on 28 September 2026.
Major issues / areas of contention
- Whether the FTT applied the hardship test under section 84(3B) of the VAT Act 1994 at the correct point in time.
- Whether the FTT was entitled to find that the Applicant was the cause of its own hardship by deliberately paying away funds to a related party (MS) and a connected company (PPBeer).
- Whether the FTT gave adequate reasons for concluding that funds accepted as unavailable at the date of hearing should nevertheless not be treated as causing hardship.
- Whether the FTT's factual findings withstood scrutiny under the Edwards v Bairstow standard for challenging findings of fact on appeal.