British Institute of Technology Limited v The Commissioners for HMRC

HMRC have made an application for the appeal made by the appellant, British Institute of Technology Limited (“BIOT”) against a VAT assessment to be struck out as an abuse of process. The question raised by the application is whether it is an abuse of process to make an appeal against a tax assessment where a previous appeal against a different tax assessment but which related to the same underlying transaction had been struck out on procedural grounds without a hearing.

HMRC had previously also pursued their strike out application based on issue estoppel but have recognised that this is not viable given that there was no substantive decision on the merits of the previous appeal.

HMRC do however, as an alternative argument, say that the appeal against the VAT assessment should be struck out on the basis that the appeal has no reasonable prospect of success.

As well as the main VAT assessment, HMRC have issued a penalty assessment based on deliberate and concealed conduct. BIOT’s appeal is against both the VAT assessment and the penalty assessment. HMRC’s strike out application includes the appeal against the penalty assessment but only on the basis that it has no reasonable prospect of success.

Neither party had identified a strand of authority (discussed below) dealing specifically with abuse of process in circumstances where a second action is brought in circumstances where the first action had been struck out on procedural grounds. I therefore made directions permitting both parties to provide written submissions on the approach to be adopted by the Tribunal in the light of the authorities which I had drawn to their attention. Both parties have done so, although the submissions made on behalf of BIOT do not really address the authorities in question. I confirm, I have taken account of the submissions which have been made. Although I refer to other case law authorities, these are cases which are discussed in the authorities which the parties were asked to consider.

During the hearing, My Nyoni, appearing on behalf of HMRC, made an application for two documents to be admitted as part of the evidence for the hearing. The documents were as follows:

The purpose of these documents was to support HMRC’s assertion that the invoice was false and that they were therefore entitled to assess a penalty on the basis of deliberate and concealed conduct.

In refusing the application, I applied the approach explained in Rushby Dance and Fitness Centre v HMRC [2025] UKFTT 00594 (TC) at [11-12]. This looks at the length of the delay in providing the documents, the reasons for that delay and then weighs up all of the relevant circumstances including the presumption that relevant evidence should be admitted unless there is a compelling reason to the contrary, but that it is not acceptable to spring surprises on opponents at a late stage.

Although the evidence was relevant, the Tribunal issued directions on 1 December 2025 requiring HMRC to prepare a bundle of all relevant documents to be provided at least 14 days before the hearing. Mr Nyoni very fairly accepted that there was no good reason for HMRC’s failure to include these documents in the bundle.

Having failed to do so, it would not in my view have been in accordance with the overriding objective to allow such documents to be admitted as part of the evidence during the course of the hearing. The allegation is effectively one of dishonesty (providing a knowingly false invoice) and BIOT has had no opportunity to consider the documents or to respond to them. It would therefore suffer significant prejudice if the documents were admitted as part of the evidence at such a late stage.

I was provided with a bundle of documents prepared by HMRC in accordance with the directions made by the Tribunal on 1 December 2025.

Whilst there are significant factual disputes relevant to the prospects of success of the underlying appeals (which I shall mention when discussing that aspect), I set out below the facts which are relevant to the determination as to whether the current appeal against the VAT assessment is an abuse of process.

Dr Muhammad Farmer, who represented BIOT at the hearing, was at all material times the owner and sole director of BIOT.

In its VAT return for the 06/14 VAT period, BIOT claimed an input tax credit of £587,000 relating to the purchase of a property in Forest Gate. HMRC rejected the claim for the input tax credit. HMRC’s decision was based on their view that the purchaser was Dr Farmer personally and not BIOT. The result of this was that there was a VAT liability of £6,856.31 for the relevant VAT period instead of a repayment of £580,143.69. An assessment was accordingly issued for £6,856.31.

This decision was upheld on review in November 2019.

BIOT appealed to the Tribunal on 18 December 2019 against HMRC’s refusal to allow the input tax credit. However, in accordance with the relevant VAT legislation, the appeal could not proceed unless BIOT either paid the outstanding VAT of £6,856.31 or made a successful application to HMRC to allow the appeal to proceed without the payment of the VAT on the basis that paying the VAT would cause hardship. The Tribunal sent a letter to BIOT on 14 January 2020 to explain this.

BIOT did not respond to this letter despite a reminder from the Tribunal and so, on 24 February 2020, the Tribunal directed that, unless BIOT confirmed by 13 March 2020 that it intended to proceed with its appeal, the proceedings would be struck out. It was also directed that the proceedings may be struck out if BIOT failed to make a hardship application to HMRC by the same date.

No confirmation of intention to proceed and no hardship application having been made by BIOT by 13 March 2020, HMRC sent an email to Dr Farmer and the Tribunal on 16 March 2020 which attached a copy of the “Unless Order” made by the Tribunal on 24 February 2020. This elicited a response from Dr Farmer who said that it was the first time that he had seen this document. He requested that BIOT’s appeal should be heard on the documents already provided. The Tribunal confirmed the following day (17 March 2020) that the matter would be referred to a judge for further action.

On 23 June 2020, the Tribunal issued further directions:

No response was received from BIOT to this direction and so, on 2 November 2020, the Tribunal wrote to BIOT to confirm that it had now closed its file.

BIOT denies having received the correspondence from the Tribunal in June and November 2020. I make no finding of fact as to whether this correspondence was in fact received by BIOT. Neither party provided any evidence in relation to this at or prior to the hearing. Whilst BIOT attached some documents to its subsequent written submissions purporting to show that the relevant correspondence had not been received, I decline to admit such evidence. It has been provided much too late. There is no explanation as to why it was not previously provided if it was thought to be relevant. HMRC have had no opportunity to test that evidence in cross-examination.

Nothing further was heard from BIOT until 10 September 2021 when Dr Farmer emailed the Tribunal in response to the Tribunal’s email of 17 March 2020 asking for an update as it said it had not received anything from the Tribunal since that email.

Dr Farmer followed this up with a further email on 16 September 2021 asking for the appeal to be reinstated. HMRC objected to the reinstatement application. In response, BIOT provided various documents and witness statements in support of their application which was decided on the papers by Judge Rankin on 9 February 2022.

At this point, although BIOT had indicated that it wished to continue with its appeal and was keen to pay the outstanding VAT or make a hardship application, it had not done so.

Judge Rankin refused to reinstate the appeal, largely on the basis that, despite knowing since at least 16 March 2020 that it needed to pay the outstanding VAT or make a hardship application, it had not done so and that it had taken insufficient steps to follow up with HMRC and/or the Tribunal between 17 March 2020 and the date it got back in touch with the Tribunal in September 2021 (despite the Judge accepting that there may have been various phone calls between BIOT and HMRC in this period). Judge Rankin refused to accept that BIOT had not received any of the emails of 14 January 2020, 3 February 2020, 24 February 2020, 23 June 2020 or 2 November 2020 given that they were sent to the correct address and that Dr Farmer clearly had received the email from 16 March 2020 sent to the same address by HMRC.

BIOT’s response to this refusal was to make a further claim for a credit for input tax of £587,000 in relation to the same property purchase on its VAT return for the 03/22 VAT period. In support of this claim, BIOT provided to HMRC on 6 December 2023 an invoice dated 13 January 2022 purportedly issued by the seller of the property, BCP City Gate Limited.

HMRC initially made a VAT repayment as a result of the input tax credit which had been claimed. However, they subsequently rejected the claim on the basis that the property had been purchased by Dr Farmer and not by BIOT and that no further sale of the property had taken place in January 2022. HMRC considered the January 2022 invoice to be false as their information was that BCP had been dissolved in 2016.

In rejecting the claim, HMRC also asserted that, by this time, BIOT was out of time to make a claim for VAT incurred in 2014 as the relevant time limit under regulation 29 of the VAT Regulations 1995 (“VATR”) is four years from the due date for the return for the accounting period in which the entitlement to make the claim to deduct the input tax arose.

To reflect this decision, HMRC issued a VAT assessment for £587,000 on 14 November 2024.

HMRC’s decision to deny the input tax and to issue the assessment was upheld on review on 15 January 2025 on the basis that the property was purchased in 2014 by Dr Farmer (and not BIOT) and that there was no purchase of the property by BIOT in 2022.

HMRC issued a penalty assessment of £322,850 on 29 January 2025 on the basis of deliberate and concealed inaccuracies in the VAT return for the 03/22 VAT period (being 55% of the £587,000 which was the subject of the input tax claim).

BIOT notified its appeal to the Tribunal against both the VAT assessment and the penalty assessment on 5 February 2025. A successful hardship application relating to this appeal has been made to HMRC.

HMRC made an application to strike out the proceedings on 11 August 2025 on the basis that the appeal was simply an attempt to re-litigate the matter which had been the subject of the previous proceedings which had been struck out in 2020 and which the Tribunal had refused to reinstate in 2022.

Although HMRC relied in their strike out application on both issue estoppel and abuse of process, as I have said, they now accept that, as there was no hearing on the merits, there cannot be any issue estoppel.

The application to strike out the proceedings in relation to the VAT appeal is therefore based on abuse of process (the abuse being the attempt to re-litigate a matter which has previously been struck out) and also on the basis that HMRC say that there is no reasonable prospect of the appeal succeeding. This is said to be primarily on the facts of the case (pointing to Dr Farmer being the purchaser of the property). However, at the hearing, HMRC also relied on the statutory time limit for claiming credit for input VAT in regulation 29 VATR.

HMRC accept that there is no abuse of process in appealing against the penalty assessment (there not having been any previous penalty appeal) but say that there is also no reasonable prospect of that appeal succeeding given that BIOT’s grounds of appeal simply say that it considers that the penalty is “not applicable”.

In both of these cases (abuse of process and no reasonable prospect of success), the Tribunal’s power to strike out the proceedings is contained in rule 8(3)(c) of the Tribunal Rules. In relation to abuse of process this was confirmed by the Court of Appeal in Shiner v HMRC [2018] EWCA Civ 31 at [19].

Abuse of process is generally thought of as a principle which applies where a claimant seeks to litigate an issue which could have been raised in previous proceedings (Henderson v Henderson (1843) 3 Hare 100 at [115]).

In Hunter v Chief Constable of the West Midlands Police [1982] AC 529, Lord Diplock explained at [536] that the purpose of the Court’s power to strike out proceedings on the basis of abuse of process was:

Lord Diplock went on to note at [536D] that “the circumstances in which abuse of process can arise are very varied” and that they should not be limited to fixed categories.

In relation to this category of abuse of process, Lord Bingham explained in Johnson v Gore Wood & Co [2001] 1 All ER 481 at [498-499] that the “underlying public interest” is that:

Lord Bingham confirmed at [499] that in determining whether there had been an abuse of process, the Court should approach this by making:

It is worth noting that, in the same case, Lord Millett observed at [525] that:

It is for the party alleging abuse of process (in this case, HMRC) to establish that it is oppressive or an abuse of process for them to be subject to the second action (Johnson at [526]).

It has however been recognised that the approach should be different where the issue was in fact raised in previous proceedings but those proceedings were struck out on procedural grounds. This was made clear following a review of a significant number of authorities, by Morris J in Davies v Carrillion Energy Services Limited [2017] EWHC 3206 (QB). As to the approach to be applied in this sort of situation, Morris J summarised his conclusions at [52] as follows:

Morris J provided some further guidance at [55] as follows:

As can be seen, the key point is to look at the reasons why the first set of proceedings were struck out. In Davies, the failure was to serve a compliant Particulars of Claim following an Unless Order. The claimant (who was a litigant in person) had tried to comply by filing a 39 page document. However, this was held not to be sufficient as a result of which the proceedings were struck out in accordance with the Unless Order which had previously been made. Applying the tests set out above, Morris J concluded at [74(1)] that the failures in the first proceedings were neither an abuse of process nor inexcusable and that the second claim should not therefore be struck out as an abuse of process.

The approach to situations where a previous claim has been struck out on procedural grounds was considered in the tax context by the Court of Appeal in HMRC v Kishore [2021] EWCA Civ 1565. Having considered the same authorities as Morris J in Davies and the conclusions reached by Morris J in Davies, Newey LJ summarised the position at [27] as follows:

The position in Kishore was however somewhat different to that in Davies. The previous proceedings related to a denial by HMRC of claims for input VAT. Having failed to provide a list of issues in accordance with directions made by the Tribunal, the Tribunal made an order that the proceedings would be struck out if Mr Kishore failed to confirm whether he intended to pursue the appeals and to comply with the previous directions within 21 days. He did not do so and so the proceedings were struck out.

Some six months later, Mr Kishore applied for his appeals to be reinstated but this application was refused. Permission to appeal against the refusal to reinstate was also refused.

In the meantime, HMRC had imposed penalties on Mr Kishore who made an appeal to the Tribunal against those penalties. One of his main grounds of appeal was that the original VAT input tax claim was valid. HMRC applied to strike out Mr Kishore’s grounds of appeal to the extent that they related to issues which would have been determined had the previous appeal against HMRC’s refusal of the input tax claim proceeded to a hearing.

In the circumstances, Newey LJ considered that it was appropriate to apply the “broad, merits-based” approach explained in Johnson rather than what he described as the “stricter” approach to strike out cases explained in Davies (which Newey LJ referred to as the “Arbuthnot approach” following the case of Arbuthnot Latham Bank Limited v Trafalgar Holdings Limited [1998] 1 WLR 1426, one of the earliest cases dealing with a situation where previous proceedings had been struck out on procedural grounds). He explained at [30] that the reason for this was that the second proceedings related to the penalty and not to the tax liability. Mr Kishore was not therefore bringing a second appeal in respect of the same matter as the first appeal.

In coming to this conclusion, Newey LJ considered whether, if the first appeal had reached a final hearing and the Tribunal had decided against Mr Kishore, he would have been prevented by the doctoring of issue estoppel in raising the same point in the penalty appeals. His conclusion was that he would not be so prevented.

It is clear from Newey LJ’s previous discussion of issue estoppel (at [14-19]) that the reason for this is what is commonly referred to as the “Caffoor principle” following the decision of the Privy Council in Caffoor v Income Tax Commissioner [1961] AC 584 which concluded that, in the context of an annual tax (in that case, income tax but also applicable to VAT – see Littlewoods Retail Limited v Revenue & Customs Commissioners [2014] EWHC 868 (Ch)):

As the authorities referred to by Newey LJ at [16] show, the Caffoor principle is applicable to an appeal against a penalty where the grounds of appeal against the penalty raise the same issues as had previously been determined against the taxpayer in an appeal against a tax assessment. This, of course, explains why Newey LJ concluded that, had the first appeal against the refusal of the input tax claim reached a hearing, there would have been no issue estoppel preventing Mr Kishore from raising the same legal or factual issues in the penalty appeal.

It is clear based on this that the Johnson approach should be applied where the first appeal has been struck out on procedural grounds if the second appeal, although raising similar issues, is an appeal against a different liability such as liability to tax for a different period of assessment (see Littlewoods at [175], referenced at [15] in Kishore) or an appeal against a penalty where the first appeal had been against the underlying tax liability.

Mr Nyoni, on behalf of HMRC, however submits that the Davies approach should be applied in this case as, although the present appeal is an appeal against a different VAT assessment (relating to the 03/22 VAT period) than the assessment which was the subject of the first appeal (which related to an assessment concerning the 06/14 VAT period), it is, in substance, an attempt to re-litigate the claim which was the subject of the first appeal – i.e. to allow the claim for input tax of £587,000 said to result from the 2014 property purchase.

As Mr Nyoni observes, it is clear from BIOT’s skeleton argument and from the comments made by Dr Farmer during his submissions that the purpose of this appeal is to recover the same VAT in respect of the same transaction as was the subject of the first appeal.

In the light of this, Mr Nyoni submits that the current appeal is plainly an attempt to go behind the striking out of, and refusal to reinstate, the first appeal.

Whilst I accept that the underlying issue relates to the same underlying transaction (the purchase of the property in 2014), the fact remains that BIOT has made a separate claim for credit for the input VAT incurred in relation to that transaction in relation to a separate VAT period and potentially based on a different VAT invoice.

In the circumstances, the effect of the Caffoor principle is that, had the first appeal proceeded to a hearing, there would be no issue estoppel preventing the same issues being raised in relation to the second appeal given the requirement, as Henderson J put it in Littlewoods at [175]) to determine “the correct amount of tax payable for the relevant year or period of assessment” and his acceptance at [190] that the Caffoor principle applies “…to assessments (whether VAT, interest, penalties or surcharges) made for particular periods”.

It does not seem to me that the fact that the input tax credit claimed in the 03/22 period relates to the same transaction as the input tax claimed in respect of the 06/14 period has any bearing on this. The question which this appeal seeks to determine is the amount of the VAT liability (or right to repayment) in respect of the 03/22 period.

This does not of course mean that the second proceedings cannot be struck out on the basis of abuse of process. What it does mean however is that the “broad, merits-based” approach explained in Johnson should be applied when considering this question as that is the approach which would be applied had the first appeal reached a final hearing. As explained by Newey LJ at [30], it would not be appropriate to apply the Davies/Arbuthnot approach in circumstances where the Johnson approach would be applied had the first appeal proceeded to a final hearing.

I will therefore adopt the Johnson approach rather than the Arbuthnot/Davies approach in considering whether this appeal should be struck out on the basis of abuse of process. However, in case I am wrong, I will also consider the position applying the Arbuthnot/Davies approach. As will be seen, on both approaches, I do not consider that this appeal should be struck out as an abuse of process.

Whichever approach is adopted, HMRC rely on the same factors in support of their argument that the present appeal against the VAT assessment should be struck out as an abuse of process.

Their overriding point is that, if the appeal is not struck out, this will allow BIOT a second bite of the cherry in circumstances where the first appeal was struck out as a result of the relevant procedural failures, its failure to persuade the Tribunal to reinstate that appeal and its failure to appeal against the reinstatement refusal.

As far as the procedural failures themselves are concerned, Mr Nyoni notes that BIOT had numerous opportunities during the course of the first appeal either to pay the VAT in dispute of £6,856.31 or to make a hardship application, starting with the Tribunal’s original letter of 14 January 2020 up to the time of the reinstatement refusal in February 2022, but failed to do so. Mr Nyoni draws attention to the fact that, in his reinstatement decision, Judge Rankin observes, at [28] that this failure:

In the light of this, Mr Nyoni submits that BIOT’s failures constitute “intentional and contumelious conduct, want of prosecution, or wholesale disregard of the Tribunal’s rules” so that the first appeal can be said to have been struck out on the basis of abuse of process.

Mr Nyoni notes that BIOT denies having received most of the correspondence sent to it by the Tribunal, but observes that Judge Rankin, in his re-instatement decision at [30] refused to accept that none of those communications were received.

Dr Farmer’s position on behalf of BIOT is that it will be unfair if its appeal cannot be heard given that there has not yet been a hearing and, in his view, BIOT has a reasonable prospect of success. As far as the failures relating to the previous appeal are concerned, BIOT continues to assert that it did not receive the relevant communications.

Whilst the fact that BIOT is attempting to obtain credit for input VAT which has been the subject of a previous appeal which was struck out for procedural reasons is a significant factor in determining whether the current appeal is an abuse of process there are, in my view, countervailing factors which must be taken into account as part of the broad, merits-based approach advocated in Johnson.

As I have explained, the principles underpinning abuse of process relate to abuse (or misuse) of the processes of the Tribunal and protecting the other party (in this case HMRC) from oppression.

In these circumstances, it is relevant that the first appeal was struck out at a very early stage. No substantive steps had been taken in the litigation as it could not proceed unless the VAT was paid or a successful hardship application made. Although HMRC would be “vexed twice” with what is, in substance, an attempt to obtain credit for the same input VAT, it is difficult to say that, in such circumstances, it is oppressive or manifestly unfair to HMRC to have to deal with these substantive issues which have not yet been explored.

It is relevant in this context to recall the words of Lord Millet in Johnson at [525] drawing a distinction between a situation where a party is trying to re-litigate a question which has already been decided and a situation where a party may be denied the opportunity of litigating for the first time a question which has not previously been adjudicated upon. Clearly this case falls into the second category.

The importance of this is reinforced by the fact that this appeal is against a completely separate VAT assessment for a different VAT period and is based on a different invoice even though it concerns input VAT relating to the same transaction. As highlighted by the Court of Appeal in Kishore [15], given the existence of the Caffoor principle, this makes a difference in the context of appeals against tax assessments as far as issue estoppel is concerned. I can see no principled reason why it should not also make a difference to the question as to whether the second appeal is an abuse of process in circumstances where there has been no determination of the first appeal.

I accept that it is also relevant that the first appeal was struck out for procedural failures and that the Tribunal did not consider it appropriate to reinstate the original appeal. However, the principles to be applied in determining whether an appeal should be reinstated are different to the principles to be applied in determining whether a subsequent appeal is an abuse of process.

In addition, reinstatement of the first appeal was refused principally on the basis that BIOT had still not made an application for hardship (or paid the VAT in dispute). However, this is a new appeal against a different assessment/decision where HMRC are now trying to recover the full £587,000 of input VAT which they for some reason decided to repay and where hardship has been granted.

Clearly, BIOT can be criticised for failing to pursue the first appeal and the delay in applying for reinstatement. This is relevant to issues such as finality in litigation and the public interest in efficiency and economy in the conduct of litigation and the impact on public resources (both HMRC and the Tribunal). In some circumstances, this could result in a conclusion that the second appeal is an abuse of the processes of the Tribunal in seeking to re-litigate what is, in substance, the same issue as was raised by the first appeal.

However, bearing in mind the comments I have already made about the fact that the previous appeal was struck out at a very early stage, that there was no hearing on the merits, that the current appeal is in fact against a different assessment, that HMRC repaid the VAT before issuing the assessment and that BIOT has made a successful application for hardship in relation to this appeal, BIOT’s failure to prosecute its original appeal more diligently does not persuade me that the current appeal should be struck out as an abuse of process.

As I have explained, I only address the approach to cases where a previous action has been struck out on procedural grounds advocated by Morris J in Davies in case I am wrong in applying the Johnson broad, merits-based approach in this particular case.

Mr Nyoni accepts, on behalf of HMRC, that the principles to be applied are those which I have already mentioned and which are set out at [52] and [55] in Davies and at [27(ii)] in Kishore. This involves examining the reasons why the previous action was struck out.

If the strike out resulted from intentional and contumelious conduct, want of prosecution or wholesale disregard of the rules of the Tribunal so that the first appeal was, in effect, struck out as being an abuse of process, a second appeal should be struck out as an abuse of process unless some special reason is shown as to why this should not be the case. The same approach may be appropriate if the procedural failures leading to the strike out are “inexcusable”.

The first point to note is that the authorities all focus on the reason why the first claim was struck out. There is no comment on any action or inaction following the strike out. There must therefore be a question as to whether such subsequent conduct is relevant in determining whether a second claim is an abuse of process. Neither party has made any submissions in relation to this point.

As I have mentioned, in Kishore, there was a delay of approximately six months between the original proceedings being struck out and Mr Kishore’s unsuccessful application for reinstatement. Newey LJ took the view at [31] that the unsuccessful attempt to have the appeal reinstated did not assist HMRC in their argument that the second appeal should be struck out as an abuse of process. However, he does not say whether the reason for this is because it is irrelevant or because the delay was for some reason excusable.

In principle, it might be said that, in determining whether a second appeal should be struck out as an abuse of process, it should not make any difference whether an unsuccessful application has been made to reinstate the first appeal. It is difficult to see why a taxpayer who makes no attempt to reinstate the first appeal but instead makes a second appeal should be in any better position than a taxpayer who (belatedly) does try to reinstate the first appeal and only makes a second appeal when the attempt to reinstate is unsuccessful.

Against this, it might be said that, if part of the underlying purpose of the abuse of process principle is to prevent the processes of the Tribunal from being misused, any subsequent actions in relation to the first appeal which use the Tribunal’s processes (including any reinstatement application) should be taken into account.

In the absence of any submissions in relation to this aspect, based on the principles set out in the authorities referenced by Morris J in Davies and Newey LJ in Kishore (including the principles set out in those cases themselves), all of which focus on the reasons for the strike out itself, my preliminary view is that, what is more important, is the conduct which led to the strike out and not what happened subsequently. However, in deference to the submissions made by Mr Nyoni, I will consider both aspects.

As far as the conduct leading to the strike out is concerned, this is relatively straightforward. Bearing in mind that the onus is on HMRC to establish abuse of process, there is no basis on which it can be said that BIOT’s conduct resulting in the strike out of its original appeal on 13 March 2020 comes anywhere near reaching the threshold which would justify a strike out of the second appeal on the basis of abuse of process.

BIOT failed to comply with the direction made on 14 January 2020 requiring it to pay the VAT in dispute or make a hardship application within 14 days. Despite a reminder, it failed to take any action, the result of which was that the Tribunal issued an Unless Order on 24 February 2020 directing that the proceedings would be struck out if BIOT did not confirm in writing that it intended to proceed with the appeal.

Whilst it is clear that BIOT became aware of the Unless Order on 16 March 2020, there is no evidence and no finding in the reinstatement decision that BIOT was aware of the Unless Order before that date even taking account of Judge Rankin’s unwillingness to accept that BIOT did not receive any of the communications made by the Tribunal. I do not read this as a finding that BIOT had in fact received all such communications and there are no findings in relation to individual items of correspondence.

Even if BIOT had been aware of the Unless Order, as noted in Davies at [55(3)] “a single failure to comply with an Unless Order is not, of itself, sufficient to conclude that the second action is an abuse of process.”.

Given that an Unless Order is very unlikely to be made except where there has been some previous failure to comply with directions or some other requirement of the Tribunal, it must follow that, whilst those failures must be taken into account, even taken together they may well not reach the hurdle of amounting to an abuse of process or inexcusable failure. The position might be different if, for example, there is a history of non-compliance throughout the course of the proceedings (as was the case in Henry v HMRC [2024] UKFTT 00237 (TC) to which I was referred by Mr Nyoni).

In my view, it cannot be said that the failure to pay the VAT or apply for hardship over the two month period between 14 January 2020 and 13 March 2020 or the failure to confirm that BIOT intended to proceed with the appeal prior to 13 March 2020 constituted intentional and contumelious conduct, want of prosecution or wholesale disregard of the rules of the Tribunal, particularly in circumstances where BIOT did confirm that it wished to proceed with its appeal as soon as it was notified by HMRC of the Unless Order on 16 March 2020. The conduct is also not otherwise inexcusable given that it has not been shown whether BIOT did or did not receive the Unless Order on 24 February 2020.

HMRC criticise BIOT for failing to pay the VAT or make a hardship application after the Tribunal’s directions made on 23 June 2020 confirming that the appeal had been struck out automatically on 13 March 2020 and warning that the Tribunal would only consider reinstatement if BIOT either paid the VAT or made a hardship application within 14 days.

Mr Nyoni makes the point that it was crystal clear what BIOT needed to do, that the requirement was straightforward and yet BIOT failed to take any action in relation to this by the time the reinstatement application was eventually decided in February 2022. He submits that this constitutes intentional and contumelious conduct, want of prosecution or wholesale disregard of the Tribunal’s rules or, even if it does not, is clearly “inexcusable”.

Dr Farmer maintains that BIOT did not receive the relevant correspondence although offers no explanation as to why the VAT was not paid or hardship applied for prior to the determination of the reinstatement application. In his submissions at the hearing, Dr Farmer suggested that he found the hardship process complicated and noted that he had contacted HMRC by telephone (as recorded in the reinstatement decision).

The reinstatement decision also records at [19] that BIOT “was keen to pay/deposit £6,856.31 or make a hardship application” and that Dr Farmer had spoken to HMRC on 12 January 2022 and was told that there was an outstanding amount of £200 which was immediately paid (as evidenced by a payment confirmation).

Bearing in mind the unresolved question as to what correspondence BIOT did or did not receive from the Tribunal (which I cannot determine on the evidence available to me), the statements made in January 2022 by BIOT in relation to its willingness to make a hardship application or to pay the disputed VAT and the evidence of an actual payment of tax at that time, I am not satisfied that BIOT’s failures after the first appeal had been struck out amounted to intentional and contumelious conduct, want of prosecution or wholesale disregard of the Tribunal’s rules.

Without any finding as to whether or not BIOT received the Tribunal’s correspondence in June 2020 and November 2020, it cannot in my view be said that its conduct was inexcusable given that there does not appear to be any criticism of the action which it took to pursue the reinstatement application after September 2021.

I accept that BIOT did not in fact pay the full amount of the VAT in dispute nor make a hardship application between September 2021 and February 2022 but it is clear from the comments in the reinstatement decision that, in January 2022, it was keen to do so and that it did in fact make a payment, although not of the amount which was originally in dispute. Without more detailed evidence in relation to this, it is hard to say that this amounts to inexcusable conduct.

In any event, BIOT has successfully applied for hardship in the context of the current appeal which, to the extent that the failure to apply for hardship in relation to the first appeal could be said to be inexcusable in my view provides a special (or sufficient) reason why it would not in any event be appropriate to strike out the current appeal as an abuse of process.

Mr Nyoni refers to the decision of this Tribunal in Henry in support of his submission that there is no special reason not to strike out this appeal if it is found that BIOT’s conduct in relation to the first appeal was inexcusable. He notes that in that case, the failures were attributable to Mr Henry’s representative but that this was not accepted by the Tribunal as a special reason for deciding not to strike out the second appeal on the basis that it was an abuse of process.

It is however difficult to see how that decision is relevant. Inevitably any assessment as to whether or not a taxpayer’s conduct in relation to a first appeal is sufficient to justify striking out a second appeal as an abuse of process will be highly fact specific and so the application of the relevant principles to the facts of one case is unlikely to be of assistance in another case.

In any event, the facts in Henry were entirely different to the facts in this case including the fact that the failure to comply with the Unless Order which led to the strike out was “the last in a long line of failures to comply with the Tribunal’s directions” which were found by the Tribunal to constitute both want of prosecution and inexcusable procedural failures.

The particular submission in which the decision in Henry is said by Mr Nyoni to support is a suggestion that, even if BIOT was unaware of the February 2022 Unless Order, this would not constitute a special reason for refusing to strike out the subsequent appeal as an abuse of process. However, as I have said, the fact that BIOT may not have been aware of the Unless Order means that BIOT’s failure to comply with it does not reach the threshold for conduct justifying the strike out of a second appeal as an abuse of process in the first place.

Taking all of this into account, it would not, therefore, in my view, be appropriate to strike out this second appeal as an abuse of process based on the Arbuthnot/Davies approach. In principle, it is the conduct leading to the strike out which must be examined and, for the reasons I have explained, this clearly does not justify striking out a second appeal as an abuse of process.

If that is wrong and it is necessary to look at the attempt to reinstate the first appeal and the continuing failure to pay the disputed VAT or apply for hardship prior to the reinstatement application being decided, the position is more finely balanced. However, in my view, it is appropriate to give BIOT the benefit of the doubt, bearing in mind that the onus is on HMRC to show that there is an abuse of process and also taking account of the fact that, as Morris J noted in Davies at [55(2)]:

which, as Lord Millett pointed out at [525] in Johnson is a particular concern where the point at issue has not previously been adjudicated upon.

As I have decided that the appeal against the VAT assessment should not be struck out as an abuse of process, I now need to go on and consider whether it has a reasonable prospect of success.

The test for determining whether an appeal has a reasonable prospect of success is not controversial. Mr Nyoni refers to the formulation set out in HMRC v FairfordGroup PLC(in liquidation) [2014] UKUT0329 (TCC) at [41]. In summary, the appeal must have a realistic as opposed to fanciful prospect of succeeding at a full hearing. This means that the arguments must carry some degree of conviction and that the points are more than merely arguable. The Tribunal should not conduct a mini trial.

HMRC in their strike out application and their skeleton argument do not put forward any reasons why BIOT has no reasonable prospect of succeeding in its appeal against the VAT assessment. This is not a promising starting point.

At the hearing, Mr Nyoni submitted that BIOT had no reasonable prospect of establishing that the true purchaser of the property was BIOT rather than Dr Farmer. He also relied on an argument that, in accordance with regulation 29 VATR, any claim for the input tax credit in the VAT return for the 03/22 VAT period was out of time.

Dr Farmer did not object to these arguments being put forward on behalf of HMRC at such a late stage. Indeed, it might have been difficult for him to do so given that both points were mentioned in his own skeleton argument on behalf of BIOT.

As to the first point, BIOT has provided a number of documents which form part of the bundle of evidence on which it relies in support of its argument that it was the original purchaser of the property.

These include a contract for the purchase of the property in the name of BIOT (although the contract is dated 21 June 2010 and not 2014 when it is said that the purchase actually took place), a land transaction return issued in July 2017 but with an effective date of the transaction of 8 December 2014 showing the purchaser as BIOT, a transfer document dated 8 December 2014 showing the purchaser as BIOT and an extract from the Land Registry showing that BIOT was registered as the owner of the property in July 2017 but with the purchase price stated to have been paid on 8 December 2014. There is also a copy of the original invoice issued by BCP City Gate Limited dated 8 December 2014 which is addressed to “Muhammad Farmer British Institute of Technology and E-Commerce” (the former name of BIOT).

Based on this evidence, I have no doubt that (subject to the time limit point discussed below), BIOT has a reasonable and not merely fanciful prospect of showing that BIOT was the purchaser of the property. For the avoidance of doubt, I am not making any factual findings in relation to this, nor making any comment on whether BIOT is ultimately likely to be successful. That will depend on what other evidence is provided by the parties and what is revealed by any witness evidence and cross-examination.

Mr Nyoni did not come to the hearing prepared to make submissions in relation to the effect of regulation 29 VATR. Indeed, there was not even a copy of that regulation in the bundle containing what was purported to be the relevant legislation and authorities, despite the fact that Dr Farmer had referred to regulation 29 VATR in his skeleton argument. A copy was however produced part of the way through the hearing.

To the extent relevant, regulation 29 provides as follows:

The document mentioned in regulation 29(2)(a) is a valid VAT invoice.

Mr Nyoni submitted that the effect of regulation 29 is that a claim for credit for input tax must be made within four years of the end of the accounting period in which the transaction took place. As that was the 06/14 VAT period, a claim made in the return for the 03/22 VAT period would be well outside the four year time limit.

However, on the face of it, this is not what regulation 29(1A) says. The time limit is “four years after the date by which the return for the first prescribed accounting period in which [the taxpayer] was entitled to claim the input tax in accordance with paragraph (1) … is required to be made”.

Regulation 29(1) requires a claim for input tax to be made for the accounting period in which the VAT became chargeable but if, at that time, the taxpayer does not hold a valid VAT invoice, the claim must be made on the return for the first prescribed accounting period in which they hold that invoice.

It is not clear whether, if it was shown that BIOT was the true purchaser, HMRC would accept that the invoice produced in 2014 (which, as mentioned above, bears the names both of Dr Farmer and BIOT) is a valid invoice for the purposes of regulation 29(1) VATR. If not, it is equally unclear whether the invoice dated 13 January 2022, provided by BIOT to HMRC in December 2023 might be a valid VAT invoice. If it is, it is possible that BIOT would be entitled to make a claim for the input tax credit in the 03/22 VAT period without this being out of time. When I put this to Mr Nyoni, he was unable to make any response other than to say that HMRC in any event relied on BIOT not being the purchaser.

In these circumstances I am not prepared to accept that there is no realistic prospect of BIOT’s appeal succeeding. It is perfectly possible that, had HMRC been properly prepared to make submissions in relation to the time limit in regulation 29 VATR and had included the relevant evidence in the bundle (for example a copy of the 13 January 2022 invoice) they would have had a better chance of success in relation to this point.

Should, on reflection, HMRC feel this point has merit, there is of course nothing to stop them making a further application to strike out the appeal against the VAT assessment on the basis that it has no reasonable prospect of success. However, based on the submissions and the evidence before me, I am not prepared to do so.

In respect of the penalty assessment, HMRC explain in their strike out application and skeleton argument why the penalty assessment has been properly made and why their calculation of the amount of the penalty is reasonable. Based on this, they say that BIOT has no reasonable prospect of succeeding in any appeal against the assessment given that its only ground of appeal in relation to the penalty assessment is that it is “not applicable”.

However, this overlooks the fact that the penalty has been charged on the basis that BIOT’s conduct was deliberate and concealed in that it had knowingly provided a false invoice in support of the input tax credit in circumstances where BIOT strenuously denies any intention of misleading HMRC. Dr Farmer is categoric that the invoice did not suggest that the transaction had taken place in January 2022, as alleged by HMRC in the 14 November 2024 VAT assessment and in the subsequent review letter.

As I have explained, HMRC did not include a copy of the January 2022 invoice in the bundle. Nor did they include the evidence which they subsequently sought to introduce purporting to show that BCP City Gate Limited had been liquidated in 2016.

However, even if this evidence had been produced at the correct time, it would not in my view be appropriate, save in the clearest of cases, to make a finding of dishonesty without a full hearing at which all of the evidence would be available as to circumstances in which the invoice was produced and BIOT’s thinking when it was provided to HMRC, including any relevant witness evidence which could then be tested by cross-examination.

In the light of this, it is impossible for me to say that there is no realistic prospect of BIOT successfully arguing that its conduct was neither deliberate nor concealed. I am not therefore able to strike out BIOT’s appeal against the penalty assessment.

The strike out application is dismissed. The appeal against the VAT assessment is not an abuse of process. The appeals against both the VAT assessment and the penalty assessment have a reasonable (and not merely fanciful) prospect of success.

As these appeals are now to proceed to a hearing, I hereby direct that HMRC must, within 60 days of the date this decision is issued provide their statement of case to BIOT and to the tribunal.

Each party will then have 42 days to provide to each other and to the tribunal a list of documents upon which they intend to rely at the hearing.

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.