Mercy Global Consult Limited (in liquidation) v Abayomi Adegbuyi-Jackson & Ors
[2023] EWCA Civ 1073
Mercy Global Consult Ltd (In Liquidation) v Abayomi Adegbuyi-Jackson & Ors
31 March 2023
[2023] EWHC 749 (Ch)
High Court
A company sued for unpaid taxes tried to argue they didn't owe the money because of a technicality in tax law. The judge said that argument was unlikely to succeed based on a previous court case and that even if it did, there's still a lot left to argue about, so they can't just skip the main trial.
Key Facts
- •Mercy Global Consult Ltd (in liquidation) claimed £21 million in under-declared VAT against its former shareholder and others.
- •Defendants sought to amend their defenses to argue that Mercy's supplies were exempt from VAT under the Value Added Tax Act 1994.
- •The court considered whether to allow the amendment and whether to try the VAT exemption as a preliminary issue.
- •Mercy's business involved seconding healthcare professionals to recruitment agencies, who then sub-seconded them to end users (often NHS Trusts).
- •The defendants argued that the supplies were exempt under Items 1 and/or 4 of Group 7 of Schedule 9 to VATA.
- •The court considered the Court of Appeal's decision in *Mainpay Ltd v HMRC* [2023] STC 30.
Legal Principles
Permission to amend pleadings is granted under CPR 17.1(b), considering the overriding objective and prospects of success.
CPR 17.1(b)
The test for prospects of success on an amendment application is analogous to the summary judgment test.
*Kawasaki Kisen Kaisha Ltd v James Kemball Ltd* [2021] EWCA Civ 33
VAT is chargeable on taxable supplies, excluding exempt supplies as specified in VATA s.4 and s.31 and Schedule 9.
VATA s.4, s.31, Schedule 9
Schedule 11 of VATA deals with VAT administration, collection and enforcement, including self-billing arrangements.
VATA Schedule 11
Court's case management powers (CPR 3.1(2)(i)) allow for preliminary issues to be tried separately, considering factors like decisiveness, efficiency, and potential for appeal.
CPR 3.1(2)(i), *McLoughlin v Jones* [2001] EWCA Civ 1743, *Steele v Steele* [2001] CP Rep 106
Outcomes
The Amendment Application was refused.
The proposed VAT Defence was deemed a new defence with no realistic prospect of success, given the Court of Appeal's judgment in *Mainpay*.
The Preliminary Issue Application was refused.
Even if the VAT Defence succeeded, a trial would likely still be necessary to determine the alleged fraud due to the complexities of Schedule 11 regarding self-billing invoices and potential Crown debts.
Similar Cases
Ataf Iqbal Butt v The Commissioners for HMRC
[2024] UKFTT 893 (TC)
Scenic International Group Limited v Richard Adenaike & Ors
[2024] EWHC 2791 (Ch)
Vistry Homes Ltd & Anor v The Commissioners for HMRC
[2023] UKFTT 906 (TC)
Realreed Limited, R (on the application of) v Commissioners for HMRC
[2023] EWHC 1572 (Admin)