In Roderick Thomas & Stuart Thomas v HMRC [2014] TC 03412 the taxpayers attempted to prevent HMRC from proceeding in tax litigation on the grounds that it had “no reasonable prospect of success”.
- The Thomas brothers were in dispute for many years with HMRC over an offshore trust that had been set up in 1997.
- They disputed HMRC’s assertion that the trust had been settled by them, rather than by their brother-in-law, who was not UK resident and disputed the amounts assessed claiming that the Discovery Assessments were technically flawed.
- Closure notices had been issued by HMRC for tax years 2002/2003 onwards; and these had been bitterly disputed by the brothers.
- The brothers were deeply upset by what they perceived as HMRC’s bad behaviour. For example, the Appeal Proceedings for 2008/2009 alleged that HMRC “had just fabricated a figure of £200,000” and that “The Appellants wished to move on and get on with their lives but were still being constantly assailed by unreasonable assessments.”
They applied under Tribunal Procedure Rule 8 that HMRC is barred from proceeding on the grounds that it had no reasonable prospect of success.
The FTT pointed out that:
"... the Appellants face a high bar in relation to their application. It is not sufficient to cast doubts on whether HMRC would be successful at the substantive hearing of the Appeal Proceedings. Rather, the Appellants must show that HMRC’s defence of the Appeal Proceedings is no more than fanciful.”
The tribunal noted that:
- The brothers had not provided details for, in particular, tax year 2008/2009.
- The trustees had informed HMRC that figures for this tax year would be sent to the brothers and the brothers had told HMRC that they would provide these to HMRC, but did not.
- The brothers were able to provide full details of losses for 2009/2010.
The FTT held that the brothers had not convinced the tribunal that HMRC had no reasonable prospect of success. This was despite the fact that it noted that they may subsequently succeed in connection with the settlor issue, flaws in the discovery assessments and/or the amounts assessed.
External link:
