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First-tier Tribunal (Tax)
You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> THE APP ACCOUNTING GROUP LTD v Revenue & Customs (PROCEDURE - application to be joined as a party - appeals against tax liabilities) [2024] UKFTT 100 (TC) (25 January 2024)
URL: http://www.bailii.org/uk/cases/UKFTT/TC/2024/TC09051.html
Cite as: [2024] UKFTT 100 (TC)
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Neutral Citation: [2024] UKFTT 100 (TC)
Case Numbers: TC09051
FIRST-TIER TRIBUNAL
TAX CHAMBER
By remote video
Appeal references: TC/2022/13503
TC/2022/13682
PROCEDURE - application to be joined as a party - appeals against tax liabilities under managed service company legislation in Chapter 9 of Part 2 of the Income Tax (Earnings and Pensions) Act 2003 - application by alleged managed service company provider to be joined as a respondent - Rules 9(2)-9(4) First-Tier Tribunal (Tax Chamber) Rules - application allowed
Heard on: 11 January 2024
Decision date: 25 January 2024
Before
TRIBUNAL JUDGE ROBIN VOS
Between
THE APP ACCOUNTING GROUP LIMITED
Applicant
UBERDEV LIMITED
ROSETTA SOFTWARE LIMITED
Appellants
and
THE COMMISSIONERS FOR HIS MAJESTY'S REVENUE AND CUSTOMS
Respondents
Representation:
The Appellants' representative observed the hearing but did not participate
For the Applicants: RORY MULLAN KC of Counsel
For the Respondents: DILPREET DHANOA of counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs
DECISION
1. This is the decision of the Tribunal in respect of applications made by The App Accounting Group Limited (TAAG) to be joined as a respondent to the appeals made by each of Uberdev Limited (Uberdev) and Rosetta Software Limited (Rosetta).
2. The hearing took place by video using the Tribunal's Video Hearing System. Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.
3. I announced at the end of the hearing that the applications would be allowed and briefly explained my reasons. This is written record of my decision.
Background
4. Uberdev and Rosetta are personal service companies which are both clients of TAAG. HMRC's position is that they are both managed service companies within the meaning of Section 61B Income Tax (Earnings and Pensions) Act 2003 (ITEPA) and so they have issued determinations under Regulation 80 of the Income Tax (Pay As You Earn) Regulations 2003 (the PAYE Regulations) to Uberdev and Rosetta in relation to tax liabilities which they say are due under the managed service companies legislation in Chapter 9 of Part 2 of ITEPA. The amount involved in respect of Rosetta is approximately £21,000. For Uberdev, the amount is just over £28,000.
5. In order to be a managed service company, one of the requirements (in Section 61B(1)(d) ITEPA) is that an MSC provider is "involved with" the company. An MSC provider is a person who carries on a business of promoting or facilitating the use of personal service companies.
6. HMRC say that, in the case of Uberdev and Rosetta, TAAG is an MSC provider and that TAAG was involved with each of Uberdev and Rosetta within the meaning of Section 61B(2) ITEPA.
7. TAAG has over a thousand other clients to which HMRC have issued Regulation 80 Determinations on a similar basis, some of which I am told have also made appeals to the Tribunal. Although no direction as to lead cases has been made under Rule 18 of the Tribunal Rules, Ms Dhanoa (appearing for HMRC) confirmed that HMRC intended to apply for such a direction and acknowledged that, if a direction is made, it may well be the case that the appeals made by Uberdev and Rosetta will be designated as the lead cases.
8. On 17 February 2023 and 3 March 2023, TAAG made applications to be joined as a respondent to the appeals made by Uberdev and Rosetta on the basis that it has a significant interest in the outcome of the appeals (as it can in certain circumstances be made liable to pay the tax due from Uberdev and Rosetta if it is in fact an MSC provider) and that it is in the best position to provide evidence and submissions as to whether it is an MSC provider as well as being able to assist in relation to the question as to whether, if it is an MSC provider, it was "involved with" Uberdev and Rosetta.
9. The representative acting for Uberdev and Rosetta observed the hearing of the applications made by TAAG to be joined as a respondent but took no part in it. They had previously provided a letter questioning whether adding TAAG as a respondent would add anything over and above what might be gained by simply asking TAAG to provide witness evidence but ultimately confirmed that Uberdev and Rosetta did not object to the applications in principle.
10. On the other hand, HMRC do object to the applications. Their position is that it would be sufficient for TAAG simply to provide evidence should it be thought that this would be helpful and that there is no need for it to become a party to the proceedings.
11. In particular, they say that TAAG has no direct financial interest in the outcome of the appeals and that adding it as a party will add complexity and cost as well as delay matters.
12. HMRC also refer to separate judicial review proceedings initiated by TAAG in 2022 in which it challenged HMRC's decision that it was an MSC provider. They submit that it would be an abuse of process for TAAG, in effect, to be allowed to make another challenge to that decision by being added as a party to the appeals made by Uberdev and Rosetta.
The Tribunal's power to add a party
13. The Tribunal's power to add a party as a respondent is contained in Rule 9(2) of the Tribunal Rules. Any person who is not a party may apply to be added (Rule 9(3)).
14. The Tribunal Rules do not impose any conditions which must be satisfied before a party may be added as a respondent. Nor do the Rules giver any guidance as to what factors should be taken into account. Essentially, this is a case management decision (see the decision of the Upper Tribunal in Pierhead Drinks Limited v HMRC [2019] UKUT 7 (TCC) at [31]) to be taken in accordance with the overriding objective of dealing with cases fairly and justly set out Rule 2 of the Tribunal Rules. The need to focus on the interests of justice was stressed by the Tribunal in MCashback Software 6 LLP v HMRC [2013] UKFTT 679 (TC) at [85].
15. Although the Upper Tribunal in Pierhead did not need to decide the point, it commented at [31] that it is unlikely that the First-tier Tribunal would add a person as a respondent unless the outcome of the appeal would have some direct effect on that person. Typically this would be as a result of some financial interest in the outcome of the appeal but it might also be some other effect such as reputational damage or the ability to conduct business.
16. This is however only one (albeit an important) factor to be taken into account. It is necessary for the Tribunal to consider all other relevant circumstances in reaching its decision.
17. Mr Mullan (appearing for TAAG) also referred the Tribunal to the decision of the High Court in AerCap Ireland Limited v AIG Europe SA [2023] EWHC 96 (Comm). In that case, a claim was made against two insurers under an insurance policy both on their own behalf and, in a representative capacity, on behalf of all the insurers potentially liable under the policy. One of the insurers which was not a party applied to be joined as a party as it wished to conduct its own defence rather than being represented by the two insurers who had been chosen as defendants.
18. To that extent, AerCap is not analogous to the current situation, as the applicant insurance company in that case would have a direct liability to the claimant should the claimant be successful whereas TAAG would only have a liability to HMRC if certain further steps are taken by HMRC. It would not therefore be right to follow the approach taken in that case.
19. However, Mr Mullan observed that, in AerCap, Butcher J referred at [25] to the decision of Mann J in LB Holdings Intermediate 2 Limited v Lehman Bros Holdings Scottish LP 3 [2018] EWHC 2017 (Ch), a case where the financial interest of the entity applying to be joined as a party was only indirect. Mann J considered at [11] that, in the context of the relevant civil procedure rule (CPR 19.2(2)) the question to be asked is whether the proposed party "can, or might with sufficient certainty, be able to bring something to the party without at the same time imposing any unnecessary, unfair or disproportionate burdens on the other parties to the proceedings".
20. Although the civil procedure rules are different in that there is a threshold requirement before a party can be added, Mann J had decided that the threshold was met and his comment was made in the context of the exercise by the Court of its discretion as to whether or not to add the applicant as a party. This is very similar to the exercise by the Tribunal of its discretion in this case and, in my view, the question proposed Mann J is a relevant factor to take into account in deciding whether a party should be added where the interest of the party seeking to be added is not direct or immediate.
21. Bearing these principles in mind, I will now turn to the key considerations which have led me to conclude that it is in the interest of justice for TAAG to be added as a respondent in these appeals.
Key considerations
22. As well as the submissions made the parties, the Tribunal had available to it a bundle of documents and correspondence which had been prepared for the purposes of the hearing. That bundle included a witness statement from Mr Christopher Clark who is the sole director of TAAG and holds a majority of its voting rights.
23. Although perhaps unusual for a case management hearing, I permitted some limited cross examination of Mr Clark by Ms Dhanoa and so also had the benefit of hearing some oral evidence from Mr Clark. However, his evidence related mainly to explaining the areas where TAAG could usefully provide additional evidence if its application were granted. As Ms Dhanoa accepted that TAAG had relevant evidence which it would be able to provide, nothing really therefore turns on the detail of that evidence.
24. It is convenient to start with the question as to whether TAAG has a direct interest in the outcome of the proceedings.
25. In its applications, there was some suggestion from TAAG that there was a reputational impact or a possible effect on the value of its business. However, Mr Mullan accepted in his submissions that these were points which could not realistically be pursued given that any damage to TAAG's business has already occurred. In giving evidence, Mr Clark also noted that there were potential reputational issues for him personally but this cannot in my view be a significant factor given that, although he may be the sole director of TAAG, he is not the person seeking to be joined as a party.
26. Instead, the interest relied on is the potential for TAAG to become liable for any tax which is found to be due. This arises as a result of the combined effect of Section 688A ITEPA and Regulation 97C PAYE Regulations.
27. These provisions allow the tax in question to be recovered from the MSC provider in circumstances where HMRC believe that the tax cannot be recovered in full from the managed service company, they make a direction authorising the recovery of the tax from various categories of people mentioned in Section 688A(2) ITEPA (which includes an MSC provider) and they then issue a transfer notice to the person they wish to make liable. The transfer notice must generally be issued within 12 months of the date on which the Regulation 80 determination becomes final.
28. It is important to note that under Regulation 97G PAYE Regulations, the recipient of a transfer notice may appeal against the notice. One of the grounds of appeal is that the recipient is not one of the categories of people mentioned in Section 688A(2) ITEPA - i.e. in this case TAAG would be able to argue as part of such an appeal that it is not an MSC provider.
29. Mr Mullan argues that TAAG has a direct (or at least sufficient) financial interest in that, subject to certain steps which, he submits, it is to be expected HMRC would take if they were unable to recover the tax from the MSC, TAAG will itself be liable for the tax. The liability is not, he says, indirect in the sense being considered by the Upper Tribunal in Pierhead where the individual in question was just a shareholder and director of the company which would suffer the direct financial loss.
30. In support of his submission, Mr Mullan observes that, if HMRC are not able to collect the tax from the managed service company, they would have a duty to exercise their powers to transfer the liability to TAAG. Therefore, whilst HMRC's powers are discretionary, there can be little doubt in his view that they would exercise them should the need arise. Mr Mullan suggests that this can be inferred from an extract from a note of meeting with HMRC which formed part of the evidence before me in which HMRC noted that where an MSC cannot settle a tax liability it can be transferred to TAAG.
31. Ms Dhanoa on the other hand submits that any liability TAAG may have is hypothetical or indirect as there is no suggestion that HMRC have taken any steps to issue a transfer notice to TAAG.
32. In determining the extent of any financial interest TAAG may have in the outcome of the appeals, it is in my view necessary to look not only at the position of Uberdev and Rosetta but also all of the other clients of TAAG to which HMRC have issued Regulation 80 determinations given the prospect of these appeals being designated as lead cases and the disposal of other cases depending on the outcome of these appeals.
33. Whilst I have no evidence as to the likelihood of Uberdev and Rosetta being able to pay any tax which is ultimately found to be due nor whether there are any other clients of TAAG which may be unable to pay the tax, given the sheer number of Regulation 80 determinations issued by HMRC there must, on any view, be a high likelihood that there will be cases where the MSC is unable to pay and where HMRC will therefore seek to issue a transfer notice to TAAG.
34. As Mr Mullan observes, were that not the case, it is of course unlikely that TAAG would seek to intervene in these proceedings. I consider that this conclusion is also supported by the reference made by HMRC in the meeting I have mentioned to the possibility of liability being transferred to TAAG.
35. Mr Mullan notes that the potential tax liability for TAAG could be very significant. If Uberdev and Rosetta are representative of TAAG's clients, the liability of each client might be in the region of £25,000. However, the liability of TAAG could be many times that amount depending on how many of the thousand plus clients are unable to pay the liabilities which have been imposed on them.
36. Taking all of this into account, in my view, TAAG does have a significant financial interest in the outcome of these appeals (bearing in mind the potential impact on other cases). The liability is direct in the sense it is TAAG itself which will have the liability should it crystalise. I accept that the liability could be described as hypothetical or contingent but, given HMRC's duty to collect any tax which may be due, I do not regard this as a significant issue.
37. However, whilst the existence of a significant financial interest is an important factor, as I have said, the Tribunal must take into account all other relevant factors.
38. One particular point which I have already referred to is the fact that, if a transfer notice is issued to TAAG, it has its own right of appeal against the transfer notice and, in that context, would be able to put forward its own evidence and submissions in support of any such appeal.
39. Mr Mullan suggested that it would be a breach of the rules of natural justice if TAAG is not added as a party to these appeals as it would be denied the right to be heard in circumstances where a significant liability could be imposed on it. However, it is difficult to see how there can be a breach of the rules of natural justice given that TAAG itself has a right of appeal against any possible liability as it clearly does have a right to be heard before that liability crystalises.
40. However, Mr Mullan put forward two further points as to why the existence of this separate right of appeal should not preclude TAAG from being added as a party to these appeals.
41. The first point he makes relates to the risk of inconsistent findings in circumstances where, in the absence of full evidence and submissions, a Tribunal might find in favour of HMRC in the Rosetta and Uberdev appeals but, in a subsequent appeal by TAAG against a transfer notice, and with the benefit of further evidence and submissions, the Tribunal might come to the conclusion that TAAG was not in fact an MSC provider.
42. In this context, Mr Mullan refers to the decision of the Tribunal in Bradonbay Limited v HMRC [2015] UKFTT 229 (TC), a case in which the Tribunal did add a party to proceedings noting at [64] "that there is a general public interest in avoiding inconsistent findings of fact". As Mr Mullan suggests, no doubt the reason for this is that it would undermine public confidence in the administration of justice if different Tribunals come to different conclusions in relation to the same point arising out of the same facts.
43. Ms Dhanoa suggested that the risk of inconsistent findings of fact is part of the nature of jurisdiction of the Tribunal although did not elaborate on this. It is not clear to me on what basis the jurisdiction of the First-tier Tax Tribunal would make it particularly prone to the possibility of inconsistent findings of fact but, even if that were the case, given the public interest in avoiding inconsistent findings, if there is a route available from a case management perspective which reduces this risk, it is something which a Tribunal should seriously consider taking into account all other relevant factors.
44. The second point made by Mr Mullan is that in circumstances where a Tribunal has already found that TAAG is an MSC provider, TAAG will inevitably be at a disadvantage in any subsequent appeal against a transfer notice where it seeks to argue that the decision of the first Tribunal is wrong.
45. Whilst I would be confident that any Tribunal Judge would understand that the earlier decision was not binding on them and would approach the appeal with an open mind and make a decision based on the evidence before them, I accept that, to some extent, TAAG would be starting off on the back foot and that, to this extent it would be preferable for TAAG to be able to put forward its submissions and evidence in the initial appeals rather than waiting until it has its own right of appeal if, taking into account other factors (such as delay, additional cost etc), this is in accordance with the overriding objective.
46. Ms Dhanoa objects that this would be contrary to the statutory framework laid down by Parliament under which, as we have seen, any appeals should be made only by the person who has the liability. Ms Dhanoa points out that, initially, this is the entity which is said to be the managed service company. Although the answer to the question as to whether a company is a managed service company will, to a large extent, depend on whether there is an MSC provider, Ms Dhanoa submits that it is telling that Parliament has only given the MSC provider a right of appeal if HMRC seek to make it liable for the tax.
47. Ms Dhanoa suggests that in setting out this framework, Parliament would have been aware of Rule 9(2) of the Tribunal Rules and cannot have intended that the process which it had carefully laid out could be short circuited or circumvented by adding the MSC provider as a respondent to any appeal made by the company which HMRC says is a managed service company.
48. However, I cannot accept this submission. Whilst Parliament should no doubt be taken to have been aware of the provisions of the Tribunal Rules, it is in my view stretching matters too far to suggest that Parliament can have intended that an MSC provider can never be added as a party to an appeal brought by a potential managed service company.
49. In this context, it is in my view important to remember that Rule 9(2) of the Tribunal Rules confers a case management power to be exercised where there is some good reason to do so in the interests of justice. The fact that an MSC provider would have its own right of appeal before it can be made liable for any tax is no doubt a significant factor to be taken in to account in deciding whether to exercise the power but it cannot be taken to implicitly preclude any exercise of the power irrespective of the circumstances.
50. Another relevant factor which I have referred to is whether TAAG is able to bring something to the party. There is no dispute that, in determining whether TAAG is an MSC provider, it is necessary to look at its business as a whole and its interactions with clients generally and not just with Uberdev and Rosetta. Clearly TAAG will therefore be in possession of key evidence which is not available to Uberdev and Rosetta. Ms Dhanoa accepts this but submits that TAAG can provide this evidence whether or not it is a party.
51. A further point made by Mr Mullan however is that TAAG has a much greater incentive than any individual appellant in making sure that all relevant evidence is made available and that all possible submissions in support of the position that TAAG is not an MSC provider are put forward. The reason for this is that the amounts at stake for each individual appellant, whilst not small, pale into insignificance compared with the potential liability of TAAG given the number of Regulation 80 determinations which has been issued to its clients. TAAG therefore is able and willing to devote more resources to the appeals than would be available to Uberdev and Rosetta.
52. In relation to this point Mr Mullan suggested in his submissions that, if TAAG were not made a party to the proceedings, it would need to consider what evidence it would be prepared to provide and that it may wish to keep some of its powder dry in order to support a subsequent appeal against a transfer notice if necessary. It seems to me that this is a somewhat unattractive submission as it suggests that, if permitted or required to provide evidence in circumstances where the Tribunal does not agree to TAAG being made as a party, it might withhold relevant evidence. Mr Mullan did, however, ultimately accept that, if TAAG were permitted to give evidence, it would provide all the relevant evidence voluntarily.
53. Without intending any disrespect to those representing Uberdev and Rosetta, I accept that TAAG has a greater incentive (and is therefore willing to devote more resources) in ensuring that all possible arguments are put forward in support of the position that it is not an MSC provider and that it will no doubt leave no stone unturned in doing so, a point perhaps borne out by the fact that it has instructed Kings Counsel to appear on its behalf at the hearing of these applications..
54. As Mr Mullan noted, what evidence is required will, to a large extent, depend on what submissions are made. The two are clearly linked. TAAG will therefore be in the best position to decide what evidence is needed. I do therefore accept that, if TAAG is added as a respondent to these appeals, it will have something important to bring to the party which will be of assistance to the Tribunal in making its decision as to whether TAAG is in fact an MSC provider.
55. I have also considered (as suggested in AerCap) whether adding TAAG as a party would impose a disproportionate burden on the existing parties.
56. Looking first at HMRC there seems little doubt that they will at some point have to grapple with the submissions and evidence which TAAG wishes to put forward, whether this is in the context of the present appeals or any future appeal TAAG may make if it is issued with a transfer notice. There is therefore no significant additional burden for HMRC and in any event it is not disproportionate given the total amount of tax at stake in relation to all of TAAG's clients who have been issued with regulation 80 determinations.
57. The position of Uberdev and Rosetta is somewhat different as the amount of tax at stake for each of those companies is much more modest. It is undeniable that there is likely to be some increase in costs as proceedings with an additional party will be more complex, there will be more evidence and more submissions and therefore there is likely to be a longer hearing.
58. Having said this, it seems to be accepted on all sides that the evidence which TAAG has available should be provided even if TAAG is not added as a party and so, whilst this may be voluminous, it is something that Uberdev and Rosetta will need to review come what may.
59. So far as any additional submissions are concerned, it might be thought that Uberdev and Rosetta would in any event want to liaise with TAAG, even it is not a party, as to what submissions should be made. If so, again, any additional costs are likely to be minor.
60. In addition, Mr Mullan makes the point that if TAAG becomes a party, Uberdev and Rosetta may in fact be relieved of some costs which they would otherwise have to bear; for example, TAAG may well be prepared to take on the burden of producing bundles for the hearing although this seems to me a relatively minor point.
61. There are in my view also benefits to Uberdev and Rosetta in TAAG becoming a party as it will of course be focussed on making submissions and providing evidence which is designed to persuade the Tribunal that it is not an MSC provider which, if successful, will assist Uberdev and Rosetta in discharging their burden of proof that they are not managed service companies. It may perhaps be for this reason that Uberdev and Rosetta do not object to TAAG's applications to become a respondent in each of their appeals which is itself a significant factor leading to the conclusion that any impact on Uberdev and Rosetta should not be a reason for refusing to add TAAG as a respondent.
62. I should mention at this point that one of Ms Dhanoa's objections to adding TAAG as a party is that it is Uberdev and Rosetta which have the burden of showing that they are not managed service companies. She submits that it is inappropriate for TAAG to become a party and, in effect, to take over the appeals.
63. However, it cannot in my view be assumed that TAAG would take over the appeals. Nor can it be said that the fact that it is made a party somehow changes the burden of proof. As I have said, no doubt it will be of assistance to Uberdev and Rosetta to have evidence and submission from TAAG in support of their appeals, but this does not alter the fact that it is Uberdev and Rosetta that have to convince a Tribunal to find in their favour.
64. Another point relied upon by Mr Mullan is the likelihood of other cases being settled if TAAG is added as a party to the Uberdev and Rosetta appeals.
65. Looking first at the position if the Uberdev and Rosetta appeals are designated as lead cases, Mr Mullan submits that it is desirable to have all of the best evidence and submissions before the Tribunal in order to increase the likelihood of the decisions in those lead cases being binding on any related cases. In accordance with Rule 18(4) of the Tribunal Rules, the appellant in any related case may apply to the Tribunal for a direction that the decision does not apply to and is not binding on them. Mr Mullan suggests that it is much less likely that an appellant would seek to distinguish their case if they knew that the Tribunal had made its decision in the lead cases with the input available as a result of TAAG being a party.
66. I accept this submission. If TAAG is not a party, it seems to me inevitable that an appellant in another case would be more likely to consider that there may be some basis in fact or law on which their case can be distinguished and that there are likely to be more appeals which the Tribunal has to deal with at a full hearing. Adding TAAG as a party is therefore likely to preserve the Tribunal's own resources.
67. Even if there were no Rule 18 direction in place and other appellants are entirely free to pursue their own appeals irrespective of the outcome of the Uberdev and Rosetta appeals, it is in my view again more likely that appellants would think twice about this should HMRC be successful in the Uberdev and Rosetta appeals in circumstances where TAAG is a party to the appeals and the other appellants can therefore be confident that the Tribunal had before it all the relevant evidence and any possible submissions.
68. I also accept Mr Mullan's submission that the "venerable principle" that there is a public interest in ensuring that the right amount of tax is paid (see Rose LJ in Investec Asset Finance Plc v HMRC [2020] EWCA Civ 579 at [60] and [72]) has a part to play.
69. Although, in my view, this principle is directed more at ensuring that the correct legal principles are applied rather than at the scope of the evidence which a party chooses to put before the Tribunal (see the extract from the decision of Henderson J in the High Court in Tower MCashback LLP 1 v HMRC [2008] EWHC 2387 (Ch) at [115] referred to at [60] by Rose LJ in Investec), as I have said, if TAAG is added as a respondent, for the reasons I have already explained, this will help to ensure that the Tribunal has all the relevant legal arguments before it.
70. As Ms Dhanoa has noted, it would be perfectly possible for TAAG to provide the evidence which it has available and to make submissions to the Tribunal whether or not it is added as a respondent. Indeed, if the Tribunal were to refuse to add TAAG as a party it is required to consider whether to permit TAAG to provide evidence and/or to make submissions (Rule 9(4) of the Tribunal Rules).
71. Mr Mullan puts forward two further arguments (in addition to the fact that it has a significant financial interest in the outcome of the appeals) as to why TAAG should nonetheless be added as a party.
72. The first is that, as a party, TAAG would have a right of appeal should the Tribunal find in favour of HMRC and should TAAG believe that there are good grounds for challenging that decision. He submits that this is important as, bearing in mind the amounts potentially at stake for each individual appellant compared with the amount which could potentially be at stake for TAAG, it is more likely that TAAG will have an incentive to appeal and be prepared to pay the costs of any appeal. If TAAG were not a party, it may be that Uberdev and/or Rosetta would not be prepared to appeal even if there were good grounds for doing so.
73. Ms Dhanoa's only answer to this was that this was the way that statutory framework has been designed and that TAAG's right of appeal should be limited only to an appeal against a transfer notice. However, I do not accept this. It is important to bear in mind, as I have said, that the question whether to add a party is a case management decision to be taken in accordance with the interest of justice.
74. In that respect, if there is someone who is able and willing to pursue an appeal which has merit as opposed to a risk that there will be no appeal even if there is merit, that is an important factor to take into account. This is particularly the case in circumstances where it may well be that these appeals are designated as lead cases and are therefore likely to have a significant impact on many other cases. It must be in the interest of justice that there is a proper determination of the appeals, including, if necessary, by the Upper Tribunal or by a higher court.
75. The second reason put forward by Mr Mullan is that, if TAAG is a party to the appeals, both TAAG and HMRC will be bound by the outcome. This, he says, will be of benefit as it will in practice mean that if, in the future, a transfer notice is issued to TAAG it will not be able to appeal against the transfer notice on the basis that it is not an MSC provider.
76. Again, Ms Dhanoa had no response to this other than referring back to the statutory framework and the right of appeal against the transfer notice.
77. However, if TAAG is to be permitted to provide evidence and to make submissions to the Tribunal, it would not in my view be in the interests of justice for TAAG to be able to argue in subsequent proceedings that it was not an MSC provider.
78. Although it is arguable that it would be an abuse of process for TAAG, in subsequent proceedings, to argue that it was not an MSC provider in circumstances where it had been fully involved in the initial appeal (albeit not as a party), that question itself would no doubt spawn satellite litigation which would be undesirable and would be wasteful of Tribunal resources. Adding TAAG as a party gives certainty in this respect.
79. By way of further objection, Ms Dhanoa submitted that adding TAAG as a party rather than simply allowing it to provide evidence and to make submissions would give rise to additional delay, cost and complexity.
80. It is not however clear to me why this should be the case. Looking at the grounds of appeal put forward by Uberdev and Rosetta, these relate entirely to the question as to whether or not TAAG is an MSC provider and, if so, whether it was "involved with" those companies. These are the very points in respect of which TAAG wishes to provide evidence and submissions.
81. I cannot therefore see that there is likely to be any material difference in terms of delay, cost or complexity whether TAAG becomes a party to the proceedings or whether it is simply given permission to provide evidence or submissions. Bearing in mind the other points raised by Mr Mullan which I have accepted, it is not therefore a reason for refusing to add TAAG as a party.
Judicial review proceedings - abuse of process
82. The final point I have to deal with is whether, as a result of TAAG's attempt to challenge HMRC's decision by way of judicial review, it would be an abuse of process for it to be allowed to challenge that decision in the tax Tribunal.
83. No submissions were made by either party as to the principles to be applied in deciding whether TAAG's involvement in any Tribunal proceedings would be an abuse of process but it is clear from Ms Dhanoa's submissions that the objection turns on whether the High Court has already decided that TAAG is an MSC provider when refusing consent to bring judicial review proceedings and whether TAAG should have raised any further points it wished to make as part of those proceedings rather than now seeking to make further submissions to the Tribunal in these appeals.
84. As to the first point, in her skeleton argument, Ms Dhanoa submitted that the High Court had handed down a clear ruling on the question of whether TAAG met the definition of an MSC provider and that it should not therefore not be able to relitigate this point.
85. Mr Mullan however submits that the focus of the judicial review application was a narrow legal point relating to the correct interpretation of Section 61B(3) ITEPA which provides that a person will not be an MSC provider merely by virtue of providing legal or accountancy services.
86. Looking at TAAG's application for permission to bring judicial review proceedings, HMRC's summary grounds of defence and the skeleton arguments of both parties, it is clear that the focus was indeed on this narrow legal point. Whilst, as Ms Dhanoa observes, the counsel acting for TAAG spent a significant amount of time in his oral submissions dealing with factual issues, the Judge hearing the permission application (Sir Ross Cranston) firmly rejected the suggestion that any evidential challenge had been made by TAAG as opposed to a challenge based on the interpretation of Section 61B(3) ITEPA.
87. Although, as Ms Dhanoa points out Sir Ross Cranston refers in paragraph [2] of his judgement to a challenge by TAAG to HMRC's decision that TAAG was an MSC provider, it is clear from his conclusion in paragraph [31] that the only point which he decided was that Section 61B(3) should be interpretated in the way submitted by HMRC.
88. As far as the second point raised by Ms Dhanoa is concerned, it was in my view not unreasonable for TAAG to take the view that the application for judicial review should be limited to the narrow legal point relating to the interpretation of the relevant legislation. The Tribunal is the more natural forum for making findings of fact and determining the application of that legislation to the facts of the case.
89. In my view, it would not therefore be an abuse of process for TAAG to make submissions to the Tribunal to the effect that it is not an MSC provider as long as those submissions are consistent with the interpretation of Section 61B(3) accepted by the High Court in the permission application which, although not a decision which can be cited as authority (see paragraph 6 of Practice Direction (Citation of Authorities) [2001] 1 WLR 1001) is nonetheless binding on the parties to those proceedings, being TAAG and HMRC.
CONCLUSION
90. Taking into account all of the relevant considerations in the light of the overriding objective, it is in my view in the interest of justice in this particular case that TAAG should be added as a respondent to the appeals made by both Uberdev and Rosetta.
91. The Tribunal now needs to make directions so that these appeals can be brought to a hearing as soon as possible. I indicated to the parties that it would make sense for TAAG to be directed to provide a statement of case (which it will be able to do relatively swiftly given that Mr Mullan indicated that most of the points it would wish to make are set out in its applications to be joined as a party) and that HMRC should be given an opportunity to reply to that statement of case. Uberdev and Rosetta should also be given an opportunity to respond to these further pleadings should they wish to do so.
92. I made a direction at the hearing that that parties should seek to agree proposed case management directions by 4 pm on 26 January 2024. Should it not be possible to reach agreement, each party should provide to the Tribunal and to each other their own proposed directions marked up to show any areas of disagreement by the deadline just mentioned.
93. I should also mention, by way of reminder, that there is still an outstanding application made by HMRC on 12 December 2023 for permission to produce an amended statement of case in relation to the Rosetta appeals outside the time limit originally allowed by the Tribunal.
94. I directed that Rosetta should indicate as soon as possible to the Tribunal and to HMRC whether it has any objection to HMRC's application so that the Tribunal can deal with this application. I now further direct that such indication should be also be provided by 4pm on 26 January 2024. The Tribunal will decide the application whether or not any response is provided by Rosetta.
Right to apply for permission to appeal
95. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to "Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)" which accompanies and forms part of this decision notice.
ROBIN VOS
TRIBUNAL JUDGE
Release date: 25th JANUARY 2024