Judgment summary
This decision concerns an application by Avios Group (AGL) Limited (AGL) to stay its appeal against a taxpayer information notice issued by HMRC under Schedule 36 to the Finance Act 2008 (the Information Notice Appeal). AGL sought a stay until the later of the final determination of its VAT Appeal or judicial review proceedings (the JR). HMRC opposed the stay.
The Tribunal, applying rule 5(3)(j) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 and the overriding objective in rule 2, considered the burden rested on AGL to justify a stay, noting the general principle that appeals should proceed to conclusion.
The Tribunal found that Schedule 36 expressly empowers HMRC to require information for checking a taxpayer's tax position, including penalties, and that this power is not conditioned on final determination of the underlying VAT liability. It held that the risks of delay, the compression of statutory time limits under Schedule 24 Finance Act 2007, and the need to avoid undue delay in penalty matters outweighed the compliance burden and potential future efficiencies raised by AGL.
The application for a stay was refused.
Background
HMRC commenced a VAT enquiry in October 2021 and issued assessments under section 73 Value Added Tax Act 1994 for periods March 2018 to February 2024, totalling approximately £550 million (3).
On 29 October 2024, HMRC issued a VAT decision, which was upheld on review on 5 February 2025. AGL lodged the VAT Appeal with the Tribunal on 14 February 2025. The JR claim was filed on 15 January 2025 (3).
On 2 December 2024, HMRC issued an information notice under Schedule 36 Finance Act 2008 seeking documents and information said to be reasonably required to check the tax position as regards potential penalties under Schedule 24 Finance Act 2007. AGL appealed that notice and applied, on 14 February 2025, for a stay of that appeal pending the outcome of the VAT Appeal and the JR (1, 4).
Core dispute
The dispute concerned whether the Information Notice Appeal should be stayed until the later of the final determination of the VAT Appeal or the JR.
AGL argued that the penalty dispute was premature because penalties only arise if VAT is found to be due, that the 'reasonably required' scope of the notice was uncertain until then, that compliance would require reviewing approximately 900,000 items for relevance and privilege, and that HMRC had agreed to separate internal governance on VAT and penalty matters, consistent with HMRC's Compliance Handbook CH83040 (9).
HMRC opposed the stay, submitting that delay was inconsistent with the overriding objective, that the statute entitled it to check penalties in parallel with the VAT enquiry, that a multi-year hiatus risked loss or degradation of information and personnel knowledge, that it would compress the statutory 12-month period for issuing penalties under Schedule 24, and that HMRC practice, reflecting Article 6 ECHR concerns as discussed in King v UK (Application no. 13881/02, 16 February 2005), aimed to determine penalties at or around the time of tax decisions (10).
Court findings
The Tribunal held that the burden of establishing grounds for a stay rested on AGL, and that the general presumption is that appeals should proceed to hearing and determination without interruption, citing GAP Group Limited v HMRC [2022] UKFTT 397 (TC) at [52] (11).
It found that Schedule 36 Finance Act 2008 expressly empowers HMRC to require information for checking a taxpayer's tax position, including penalties, and that this power is not conditioned on final determination of the underlying tax liability (12).
The Tribunal accepted that HMRC's internal manual CH83040 recognises that contemporaneous penalty determination is not always possible, but held that this guidance is not a legal authority and does not create a presumption in favour of a stay (13). It also found that HMRC's internal governance decision to sequence VAT and penalty consideration separately did not alter the statutory position or the Tribunal's procedural discretion (14).
On proportionality, the Tribunal accepted that compliance would involve reviewing approximately 900,000 documents, a significant burden, but found that any future hearing-time savings were speculative and dependent on how the VAT issues were ultimately resolved (15, 16).
The Tribunal accepted that AGL had taken genuine preservation steps, but found that a prolonged stay carried inherent forensic and practical risks, including staff turnover, system migrations, access limitations and degradation of recollection (17). It also found that a prolonged stay would materially compress the practical time available for HMRC to act within the Schedule 24 paragraph 13(3)-(5) time limits, which was inconsistent with efficient administration of the penalty regime (18).
The Tribunal accepted both that contemporaneous assessment is not always possible and that King v UK underlines the need to avoid undue delay in penalty matters, finding that, in a case involving a likely multi-year deferment, these considerations weighed against a stay (19). It declined to treat the decision as setting a precedent for other cases, stating that each application must be decided on its own facts (20).
Weighing all factors, the Tribunal concluded that the risks and prejudice to HMRC from deferment outweighed the compliance burden on AGL and the uncertain future cost savings (21-23).
Outcome
The Tribunal was not satisfied that a stay would better serve the overriding objective (24). The application for a stay was refused (25).
The decision records full findings of fact and reasons, and notes the parties' right to apply for permission to appeal within 56 days under Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (26).
Major issues / areas of contention
- Whether the Information Notice Appeal under Schedule 36 Finance Act 2008 should be stayed pending final determination of the VAT Appeal or the judicial review
- Where the burden lies in an application for a stay and the general presumption that appeals should proceed to conclusion
- Whether HMRC's power to check penalties under Schedule 36 is conditioned on final determination of the underlying VAT liability
- The relevance and weight of HMRC's internal guidance (CH83040) acknowledging that contemporaneous penalty determination is not always possible
- Whether HMRC's internal governance decision to sequence VAT and penalty matters separately affects the Tribunal's procedural discretion
- The proportionality of requiring AGL to review approximately 900,000 documents for relevance and privilege
- The forensic and practical risks of a multi-year delay, including preservation of evidence, staff turnover and system changes
- The impact of a prolonged stay on the statutory time limits in Schedule 24 paragraph 13(3)-(5) Finance Act 2007
- The relevance of Article 6 ECHR and King v UK to the need to avoid undue delay in penalty matters
- Whether granting or refusing the stay would set a precedent for other cases involving Schedule 36 appeals