Judgment summary
This decision concerns an application by HMRC dated 1 December 2025 to strike out part of Mr Andrew Parish's appeal against a Personal Liability Notice (PLN) issued to him under paragraph 19 of schedule 24 to the Finance Act 2007 (1). HMRC sought strike-out under rule 8 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 on the basis that certain grounds had no reasonable prospect of success and/or were an abuse of process because they sought to re-litigate facts already determined in an earlier tribunal decision (1).
The appellant was a director of Minstrell Recruitment Limited (MRL), Minstrell Recruitment (North) Limited and Minstrell Recruitment (South) Limited (2). On 19 January 2024 the tribunal upheld HMRC's decisions denying MRL's input tax claims on a Kittel basis for various VAT periods, and refused to register North and South for VAT (2)-(4).
Following that VAT decision, HMRC issued a penalty notice to MRL under schedule 24 in the sum of £2,889,346.95 and a PLN to the appellant in the same sum (5). The appellant appealed, raising several grounds including that schedule 24 could not apply because the VAT penalties regime in sections 69C and 69D VATA, introduced from 16 November 2017, ought to have been used instead (6)-(8).
The tribunal, Judge Harriet Morgan, concluded that the appellant's argument that HMRC could only issue a penalty for VAT accounting periods starting on or after 16 November 2017 under the VAT penalties regime had a realistic prospect of success (27). It declined to decide that point itself at this hearing, holding it should be considered after full argument at a further hearing (29). The tribunal refused to allow the appellant to rely on late-raised arguments about human rights articles 6 and 7, and about the amount of the underlying tax loss and an asserted 'Fini' basis of assessment, as these had not been properly pleaded and had no realistic prospect of success (28), (30). The ground that there was no inaccuracy in the VAT returns was withdrawn by the appellant at the hearing (31).
Background
The appellant was a director of MRL, North and South (2). On 19 January 2024 the tribunal upheld HMRC's decisions, made under the Kittel principle, denying MRL credit for input tax claimed in various VAT periods between 05/17 and 02/19, and refusing to register North and South for VAT as phoenix companies (2)-(4).
Following the VAT decision, HMRC issued a penalty explanation letter to MRL on 19 October 2024, a Notice of Penalty Assessment on 23 November 2024 in the sum of £2,889,346.95, and a Personal Liability Notice to the appellant on 20 December 2024 in the same sum, attributing the penalty to him as director (5). HMRC's review conclusion letter of 15 May 2025 upheld the decision to issue the PLN (7). The appellant filed his notice of appeal on 11 June 2025 (7).
Core dispute
HMRC applied under rule 8 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 to strike out parts of the appellant's grounds of appeal, on the basis that they had no reasonable prospect of success and/or were an abuse of process because they sought to challenge facts already determined in the earlier VAT decision (1).
The central legal question was whether HMRC could lawfully issue a penalty under schedule 24 to the Finance Act 2007 in respect of VAT accounting periods commencing on or after 16 November 2017, given the introduction from that date of the VAT penalties regime in sections 69C and 69D VATA, which is specifically directed at Kittel-type cases (6)-(8), (14)-(16).
HMRC argued that it had a discretion, consistent with its collection and management powers under section 5 of the Commissioners for Revenue and Customs Act 2005, to choose between schedule 24 and the VAT penalties regime, and that sections 69C(12) VATA and paragraph 21ZA of schedule 24 were intended only to prevent double taxation (18), (23). The appellant argued that, for periods from 16 November 2017 onward, only the VAT penalties regime was available, and that HMRC's approach, if correct, could expose him to a higher penalty than the bespoke regime allows (21), (24).
Court findings
The tribunal applied the test from The First de Sales Limited Partnership and Ors v HMRC [2018] UKUT 396 (TCC), itself drawing on Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch), for whether an appeal has a realistic prospect of success (12). It also considered the principles on abuse of process in tax appeals as set out in Revenue and Customs Commissioners v Kishore [2021] EWCA Civ 1565 (13).
The tribunal found that the appellant's argument, that HMRC could only issue a penalty for VAT accounting periods starting on or after 16 November 2017 under the VAT penalties regime, had a realistic prospect of success, noting that the interaction between schedule 24 and the VAT penalties regime did not appear to have been considered previously by any tribunal or court (27). It was not obvious to the tribunal that HMRC could simply choose between the two regimes (27).
The tribunal declined to decide this point at the hearing itself, holding that it should be considered after full argument at a further hearing, since the hearing had been convened solely to determine HMRC's strike-out application and not as a preliminary issue hearing (29).
The tribunal disregarded the appellant's arguments based on articles 6 and 7 of the Human Rights Act, as these were raised for the first time in the appellant's skeleton argument, were unparticularised and vague, and HMRC had not had sufficient time to consider them (28).
The tribunal also refused to allow the appellant to rely on newly raised arguments that HMRC needed to prove the amount of the underlying tax loss for schedule 24 purposes and that HMRC's penalty was predicated on a 'Fini' assessment, holding these had not been properly pleaded and, in any event, had no realistic prospect of success (30).
Outcome
The tribunal directed that the appellant is permitted to rely on his grounds of appeal against the PLN, except for (a) the ground that there was no inaccuracy in the relevant VAT returns, which was withdrawn at the hearing, and (b) the arguments raised in the appellant's skeleton argument and at the hearing regarding the amount of the tax loss and the asserted 'Fini' basis of assessment, which had not been properly pleaded and had no realistic prospect of success (31).
The appellant's appeal was struck out to the extent necessary to give effect to that direction, with immediate effect (31).
Major issues / areas of contention
- Whether HMRC's application to strike out part of the appellant's appeal under rule 8 should succeed on the basis of no reasonable prospect of success and/or abuse of process (1).
- Whether schedule 24 to the Finance Act 2007 could lawfully be used by HMRC to issue a penalty and Personal Liability Notice in respect of VAT accounting periods commencing on or after 16 November 2017, given the introduction of the VAT penalties regime under sections 69C and 69D VATA (6)-(8).
- Whether HMRC had an unfettered discretion to choose between schedule 24 and the VAT penalties regime, or whether section 69C(12) VATA and paragraph 21ZA of schedule 24 were intended only to prevent double taxation (18), (23)-(24).
- Whether the appellant could challenge the existence of an inaccuracy in MRL's VAT returns, a ground later withdrawn at the hearing (8), (31).
- Whether the appellant could raise, for the first time at the hearing, arguments based on articles 6 and 7 of the Human Rights Act (28).
- Whether the appellant could raise, for the first time at the hearing, arguments that HMRC needed to prove the underlying tax loss for schedule 24 purposes and that the penalty was predicated on a 'Fini' assessment rather than Kittel (30).
- Whether raising these points amounted to an abuse of process given the earlier findings of fact in the VAT decision, including findings on the appellant's knowledge and control of the fraudulently defaulting companies (19), (25).