On Friday 4 March 2016 the First Tier Tribunal – Tax Chamber issued the written decision in Peter Nichols & Colin French and HMRC ordering HMRC to issue Closure Notices (‘CN’s”) for twelve enquiry cases into Enterprise Zone Syndicates (“EZS”) administered by Valhalla Private Client Services LLP. The full text is available as a matter of public record at from the web at www,justice.gov.uk/tribunals/tax. It remains to be seen if HMRC will appeal.
In essence, Nichols and French who are both partners in Valhalla and also investors in the EZS sought CN’s as they believed HMRC was deliberately dragging out its enquiries by continually seeking information that had been previously provided, was unnecessary or not relevant to the enquiries and in some instances simply did not exist. The earliest of the enquiries related to EZS formed in the March 2007 with the latest in April 2011.
In September 2015, the FTT directed that the parties should exchange witness statements and evidence 14 days before the hearing on 1 March 2016. Valhalla complied with the direction, HMRC did not. In fact, HMRC only delivered its witness statements and skeleton arguments late on 29 February and the supporting evidence just before the FTT commenced the following day. All of this after HMRC’s request to postpone the hearing on 25 February (well after the deadline set for the exchange of documentation) failed.
HMRC’s lack of compliance with the FTT’s direction to exchange documents on time was seen to be contemptuous behaviour and Valhalla’s counsel, Keith Gordon and Ximena Montes Monzano, asked for its evidence to be struck out. Judge Brooks agreed it should. Similarly, the Judge ruled that the witness statements for Nichols and French could be withdrawn and neither could be cross examined since this would advantage HMRC given that its evidence could not be tested.
HMRC was not able to show good reason why the CN’s should not be issued and its request to defer the issue of these until 31 August 2016 was also rejected in favour of an earlier date, 31 May 2016.
What comes across in this case is HMRC’s total lack of regard for the FTT rules describing (as it did) the matter as satellite to its enquiries. It is clearly wrong for HMRC to believe that it is exempt from the FTT requirements or that it should be treated as a litigant in person pleading lack of resources for its non-compliance.
Whilst the settlement of HMRC’s enquiries still has some way to go at least the applicants can appeal against the CN assessments when issued and work to a timetable set by the tribunal for the substantive arguments to be dealt with.
HMRC will do well to learn that it has no special powers or privileges before the FTT and like the taxpayer must adhere to the rules.