Judgment summary
Josoemag Services Limited (JSL) appealed against income tax assessments issued by HMRC following a challenge to CJRS support payment claims. The First-tier Tribunal (FTT) dismissed the appeal in a decision issued on 15 August 2024, including finding that it had no jurisdiction to consider complaints about HMRC or a breach of legitimate expectation (paras 1 to 3, 14).
JSL was granted permission to appeal to the Upper Tribunal on a single ground, namely that the FTT erred in law in deciding it had no jurisdiction to determine a claim that JSL had a legitimate expectation that the assessments would not be issued. HMRC objected that this was a new point not run before the FTT and that it would be procedurally unfair to allow it to be raised for the first time on appeal (paras 3 to 5, 15 to 16).
The factual basis of the claim was a telephone call, described as the 'Bulch Call', said to have taken place in around December 2020 between JSL's director, Mr Joshua, and HMRC Officer Bulch, in which Officer Bulch was alleged to have said JSL's CJRS calculations had been accepted and no further issues would arise (paras 6, 29).
The Tribunal decided to deal with the procedural issue (whether the point was new and could be relied on) and the jurisdiction issue, but not the substantive issue of whether any legitimate expectation claim would succeed on the facts, since the FTT had made no findings on that matter (paras 9 to 11).
After reviewing the chronology of the FTT proceedings in detail, the Tribunal concluded that HMRC had not been given fair notice that JSL intended to rely on the Bulch Call as the basis for a legitimate expectation claim, and that this was therefore a new point which required permission to be raised on appeal. The Tribunal refused permission, citing the risk of prejudice to HMRC, who would have wished to adduce evidence and cross-examine on the call, and the absence of pleaded reliance on the other essential elements of a legitimate expectation claim (paras 50, 56 to 61).
As the procedural issue was decided against JSL, the jurisdiction issue became academic, but the Tribunal nonetheless set out its views. It concluded that, having regard to the statutory framework in Schedule 16 to the Finance Act 2020 and related TMA 1970 provisions, the FTT did not have jurisdiction to consider a claim of legitimate expectation in this type of appeal, and that the FTT would not have erred in law in reaching that conclusion (paras 63, 86).
The appeal was dismissed (para 87).
Background
JSL made claims under the Coronavirus Job Retention Scheme (CJRS) for support payments relating to employees, submitted between April and August 2020. HMRC opened a check into the claims on 30 November 2020 and later wrote on 5 July 2022 stating it planned to raise an assessment due to an overclaim. HMRC issued assessments to income tax in respect of amounts said to have been overpaid (paras 1, 42(1), 42(2), 42(4)).
JSL sought an internal review on 14 September 2022, referring to a conversation with Officer Bulch in which he was said to have confirmed no overclaim had occurred. HMRC's review conclusion letter of 12 December 2022 upheld the assessments and did not refer to the Bulch Call (para 42(5), 42(6)).
JSL appealed to the FTT on 2 February 2023 and filed amended grounds of appeal on 19 September 2023 following an HMRC application for further and better particulars. HMRC filed a detailed Statement of Case on 15 November 2023 and a skeleton argument on 26 June 2024, neither of which referred to the Bulch Call as a basis for legitimate expectation. Mr Joshua's witness statement, filed 18 March 2024, described the Bulch Call in some detail (paras 42(7) to 42(13)).
Core dispute
The dispute concerned whether JSL could rely, for the first time on appeal to the Upper Tribunal, on an argument that it had a legitimate expectation (based on the Bulch Call) that HMRC would not issue the assessments, and whether the FTT had erred in law in finding it lacked jurisdiction to consider such a claim (paras 3 to 5, 15 to 17).
This required the Tribunal to resolve the 'procedural issue', namely whether the legitimate expectation argument based on the Bulch Call was a new point not properly raised before the FTT, and if so whether JSL should be permitted to rely on it now, and the 'jurisdiction issue', namely whether the FTT had jurisdiction under the relevant statutory scheme to consider a legitimate expectation defence to the assessments at all (paras 5, 17).
Court findings
The Tribunal held that HMRC had been on sufficient notice before the FTT hearing that JSL asserted the Bulch Call had taken place and had various complaints about HMRC conduct and guidance, but had not been on sufficient notice that JSL sought to rely on the Bulch Call as the basis for a legitimate expectation claim that no assessments would be made. This was therefore a new point on appeal (para 50).
The Tribunal found that the FTT had not erred in law or fallen into procedural error by failing of its own motion to identify that JSL sought to rely on the Bulch Call as founding a legitimate expectation claim, because the call was ambiguous and the other essential elements of such a claim had not been identified or readily evident (paras 50(3), 54 to 55).
Applying the principles in Singh v Dass and Notting Hill Finance Ltd v Sheikh, the Tribunal held that the point lay towards the prejudicial end of the spectrum of 'newness', since it was not a pure point of law, would likely have required further evidence and cross-examination, and HMRC would have been entitled to put JSL to proof on the other elements of a legitimate expectation claim. Permission to rely on the new point was refused (paras 58 to 61).
On the jurisdiction issue, although academic given the procedural ruling, the Tribunal considered the statutory scheme under Schedule 16 to the Finance Act 2020 and sections 31 and 50(6) and (7) of the Taxes Management Act 1970, together with the TCEA 2007 provisions on judicial review. It concluded that the wording of section 50(6) TMA, directing the FTT's powers to the amount charged by an assessment, pointed away from a legitimate expectation jurisdiction, and that the FTT did not err in law in finding it lacked jurisdiction to consider such a claim (paras 74 to 86).
Outcome
The appeal was dismissed. The Tribunal refused JSL permission to rely on the new point concerning legitimate expectation based on the Bulch Call, and, although it was not necessary to decide, also found that the FTT would not have erred in law in holding it lacked jurisdiction to consider a legitimate expectation claim in this context (paras 61 to 62, 86 to 87).
Major issues / areas of contention
- Whether the FTT erred in law in deciding it had no jurisdiction to determine a claim of legitimate expectation in relation to the income tax assessments.
- Whether JSL's legitimate expectation argument based on the Bulch Call was a new point not raised before the FTT.
- If the point was new, whether JSL should be granted permission to rely on it for the first time on appeal.
- The relevance of JSL being a litigant in person before the FTT when assessing whether the point was new or should be allowed.
- The correct approach to statutory construction in determining whether the FTT has jurisdiction to consider legitimate expectation arguments under Schedule 16 to the Finance Act 2020 and the Taxes Management Act 1970.