Judgment summary
This decision concerns an application by HMRC under Rule 8(3)(c) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 to strike out Apricot Umbrella Limited's appeal against VAT assessments of £405,422.00 (paras 1-2).
The Tribunal considered whether the Appellant had failed to identify a coherent factual and legal basis for its appeal despite repeated directions and requests for information, including a significant late acknowledgement that earlier explanations of its business had been inaccurate (paras 2-3, 63).
The Tribunal found that, notwithstanding serious inconsistencies in the Appellant's case, an identifiable case remained capable of determination and refused HMRC's strike out application (paras 65-70, 95-100).
Background
Apricot Umbrella Limited was incorporated on 16 June 2014. Its accounts for the year ended 30 June 2021 described its principal activity as "temporary employment agency activities" (para 4).
HMRC opened a VAT enquiry on 16 July 2021 covering periods 07/20 to 04/21 and issued information requests, including a Schedule 36 notice on 4 October 2021 (paras 5-7). The Appellant's then advisers, ETC Tax, described the Appellant on 17 November 2021 as "an umbrella company, providing payroll umbrella service to contractors" with an agreement with Adye Limited in Cyprus (para 11).
Following further information requests, a second Schedule 36 notice was issued on 25 March 2022, and HMRC imposed daily penalties of £10 per day for continuing non-compliance on 26 September 2022 (paras 13, 15).
On 15 December 2022, HMRC explained that, unable to verify sales or input tax claims due to outstanding invoices, it treated all sales without VAT charged as taxable supplies and disallowed all input tax claimed (para 16). Assessments totalling £405,422.00 (output tax £136,330.00 and input tax disallowance £269,092.00) were issued under s 73 VATA 1994 on 28 February 2023 (para 17).
The Appellant appealed on 21 March 2023 in general terms (para 18). The appeal was struck out for non-compliance with an unless order made by Judge Perez on 16 August 2024, and reinstated by Judge Bailey on 14 August 2025 (paras 21-22).
Further grounds served on 9 October 2025 described the Appellant as an umbrella company whose employees supplied medical services to overseas customers (para 24). On 3 November 2025, further particulars relied on ss 7A and 9 VATA 1994 (para 26).
On 23 March 2026, Mr Andrew Thornhill KC, acting for the Appellant, wrote that "the facts are different from those previously understood" and that the Appellant's business was not the supply of medical services but the provision of payment services, acknowledging that previous information had been inaccurate or incomplete (para 31).
Core dispute
HMRC applied to strike out the appeal under Rule 8(3)(c) on the basis that, despite repeated requests and directions, the Appellant had failed to identify a coherent factual and legal basis capable of challenging the assessments, pointing to successive and inconsistent descriptions of its business, including the March 2026 acknowledgement that earlier information had been inaccurate (paras 2, 32-38).
The Appellant opposed strike out, submitting that a substantive dispute remained as to the nature of its supplies, their VAT treatment and its entitlement to recover input tax, and that HMRC's criticisms went to the weight and sufficiency of the evidence rather than establishing that the appeal was bound to fail (paras 3, 40-50).
HMRC's written application relied on Rule 8(3)(c), but during the hearing HMRC also sought to rely on Rules 8(3)(a) and (b) (paras 39, 52-53).
Court findings
The Tribunal held that HMRC's application had been made and responded to solely on the basis of Rule 8(3)(c), and that this could not be converted into an application under Rules 8(3)(a) and (b) by way of skeleton argument and oral submissions alone; the application was therefore determined solely by reference to Rule 8(3)(c) (paras 54-56).
Applying the principles in Fairford Group plc v HMRC [2014] UKUT 0329 (TCC), the Tribunal held that the test under Rule 8(3)(c) mirrors the CPR Part 24 summary judgment test, requiring assessment of whether the appeal has a realistic, rather than fanciful, prospect of success, without conducting a mini-trial or resolving disputed facts (para 58).
The Tribunal accepted that the Appellant's account of its business had changed materially and that the 23 March 2026 email from Mr Thornhill KC raised serious concerns about the reliability of previously supplied information, but found this did not amount to a concession that the assessments were correct or an abandonment of the appeal (paras 63-64, 72-75).
The Tribunal rejected HMRC's submission that the Appellant had failed to identify any case, finding that the substance of the challenge to both the output tax and input tax assessments could be identified and understood, as evidenced by HMRC's own detailed analyses of the material (paras 65-70).
The Tribunal found that the inconsistencies in the Appellant's position were serious and relevant to the eventual determination of the appeal but were not sufficient, of themselves, to justify strike out (paras 76-81).
On output tax, the Tribunal found the challenge could not be characterised as fanciful, given documentary material said to evidence supplies to overseas business recipients, including material relating to GEA Dutch Holding BV, the significance of which required findings of fact (paras 82-87).
On input tax, the Tribunal found it was not persuaded that the Appellant had no realistic prospect of establishing entitlement to recover any part of the disputed £269,092.00, this being an evidential dispute requiring consideration of the evidence as a whole (paras 88-94).
Outcome
HMRC's application to strike out the appeal under Rule 8(3)(c) was refused (para 100).
The Tribunal declined to make a further unless order sought in the alternative by HMRC, considering that directions attached to the decision were sufficient to manage the future conduct of the appeal (para 99).
The decision recorded a right to apply for permission to appeal under Rule 39, with any application to be received within 56 days of the decision being sent (para 101).
Major issues / areas of contention
- Whether HMRC's strike out application, brought under Rule 8(3)(c), could be expanded at the hearing to rely also on Rules 8(3)(a) and (b) without a formal amendment application.
- Whether the Appellant had failed to identify a coherent factual and legal basis for its appeal given successive and inconsistent descriptions of its business activities.
- The significance of the 23 March 2026 email acknowledging that information previously supplied to HMRC and the Tribunal was inaccurate.
- Whether the output tax assessments could be challenged on the basis that some supplies were made to overseas business recipients falling outside UK VAT.
- Whether the Appellant had a realistic prospect of establishing entitlement to recover any part of the £269,092.00 input tax disallowed by HMRC.
- Whether strike out under Rule 8(3)(c) was appropriate given the distinction between a weak case and one with no reasonable prospect of success.