Supreme Court upholds barring order against HMRC

28 Jul 2017

The Supreme Court has upheld the barring order on HMRC originally imposed by the First-tier Tribunal (FTT) in BPP University College of Professional Studies v HMRC [2014] UKFTT 644. Nick Skerrett, partner at Simmons & Simmons acted for BPP, instructing Sam Grodzinski QC of Blackstone Chambers. The decision is significant in being the first time that the approach to be taken by the Tax Tribunals to directing sanctions for non-compliance with procedural directions has been considered by the Supreme Court and its comments on the standards to be expected of HMRC as a public law litigant are noteable.


The case involved a long running dispute between BPP, advised by Simmons & Simmons, and HMRC concerning the VAT treatment of supplies of printed materials supplied in connection with professional courses. HMRC issued three different decisions and BPP appealed. Directions were issued for HMRC to serve its statement of case in October 2013. HMRC not only served its statement of case late but failed to adequately particularise its case. BPP then sought further and better particulars from HMRC resulting ultimately at a hearing in January 2014 at which the First Tier Tribual (FTT) issued a direction that HMRC should provide further and better particulars. This direction was in terms that “unless” these were provided by 31 January 2014, HMRC might be barred from taking further part in the proceedings.

When HMRC served its further and better particulars it again failed to set out any facts or arguments upon which HMRC intended to rely in relation to the third decision. BPP, therefore, sought to have HMRC barred from the proceedings. In the meantime, HMRC conceded its case in relation to the first two decisions leaving HMRC with essentially no pleaded case in relation to the remaining open issues.

The case

Following a careful and lengthy review of all the circumstances of the case and, in particular, the then recent guidance which had been given in Mitchell v News Group Newspapers Ltd, Judge Mosedale took the draconian step of barring HMRC from further involvement in the appeal. The FTT noted that both the statement of case and further and better particulars failed, despite repeated requests, to provide any facts on which HMRC intended to rely in its argument that the supplies of printed matter did not qualify for zero-rating. Indeed, BPP had not been given any indication of the facts to be relied on until shortly before the hearing, when HMRC produced a skeleton argument setting out the basis of its case. Moreover, no explanation had been offered to the FTT as to why the original “unless” order had not been complied with.

Whilst accepting that the Mitchell guidance was not strictly relevant, both on the basis that the CPR was not applicable to Tribunal proceedings and her decision concerned a judicial discretionary sanction rather than an application for relief from an automatic sanction, the FTT nevertheless considered that the Mitchell guidance was relevant in this context and should be heeded.

The Upper Tribunal allowed HMRC’s appeal against the barring order, but the Court of Appeal subsequently reinstated it in a judgment that was scathing of HMRC’s conduct. In a single judgment delivered by Lord Neuberger, the Supreme Court has unanimously dismissed HMRC’s appeal, considering that the original decision of Mosedale J was not unreasonable and was not one that an appellate court should interfere with.

The Supreme Court noted that the need for litigation to be conducted efficiently and at proportionate cost and the need to enforce compliance with rules, directions and orders is equally important in proceedings before the FTT, and as such, there was no reason to depart from the Mitchell line of authority or to apply a more lenient test.

HMRC response

HMRC contended that the judge should have taken into account the fact that the debarring order prevented HMRC from carrying out its public duty in this case. Lord Neuberger considered that this argument would set a “dangerous precedent” if accepted as it would discourage public bodies from living up to the standards expected of private individuals in the conduct of litigation. Lord Neuberger went further suggesting that “there is at least as strong an argument for saying that the courts should expect higher standards from public bodies than from private bodies or individuals”.

Final decision

The court indicated that it considered the decision of Mosedale J in this case to be “tough” and not far from the permissible limit of harshness, however, it was not on the wrong side of the line “given the combination of the nature and extent of HMRC’s failure to reply to BPP’s request, the length of the delay in rectifying the failure and the length of the consequential delay to the proceedings, the absence of any remedy to compensate BPP for the delay, and the absence of any explanation or excuse for the failure, coupled with the existence of other failures by HMRC to comply with directions”. 

BPP Holdings Ltd v HMRC [2017] UKSC 55.

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