Tribunal Grants Stay in HMRC Appeals on 'Transactions in Securities' Pending Related Decision

Citation: [2024] UKFTT 78 (TC)
Judgment on

Introduction

The case of Paul Hunt & Ors v The Commissioners for HM Revenue and Customs ([2024] UKFTT 78 (TC)) pertains to an application by HMRC for a stay of appeals related to the anti-avoidance legislation in Chapter 1, Part 13 of the Income Tax Act 2007, particularly the ‘transactions in securities’ provisions. The First-tier Tribunal (Tax Chamber) decided on the relevance and expediency of staying proceedings pending the outcome of a related appeal involving similar legal issues.

Key Facts

  • The appellants (Paul Hunt, James Hunt, and Robert Davis) opposed HMRC’s application for a stay, citing various grounds.
  • The Tribunal considered previous tribunal decisions and guidance, particularly the decision in Newport City Council ([2023] UKFTT 00914) and HMRC v RBS Deutschland Holdings GmbH [2007] STC 814, to frame the appropriate approach in granting a stay.
  • Central to both the current case and the related, earlier appeal (due to be heard in March 2024) is the interpretation of ‘relevant consideration’ under section 685(4) of the ITA 2007 and the ‘safe harbour’ provision in section 685(6).
  • The case involved the application of anti-avoidance provisions following capital reductions by a company (GHL), with HMRC contending these were subject to income tax as ‘relevant consideration’.

The Tribunal’s decision focused on these legal principles:

  1. The Tribunal’s power, under Rule 5(3)(j) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, to direct a stay of proceedings.
  2. Whether a decision in another appeal would materially assist in resolving the issues of the current case, and if it is expedient to direct a stay, as considered in HMRC v RBS Deutschland Holdings GmbH.
  3. Assessing whether the decision in the related appeal would provide such material assistance in line with the overriding objective of dealing with cases “fairly and justly” as per the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.

The Tribunal adopted the guidance from Newport City Council, which emphasized the need to avoid conflicting decisions on the same legal issue and the proportionality of case management decisions in alignment with the importance and complexity of the issues at stake.

Outcomes

  • The Tribunal granted HMRC’s application for a stay of these appeals, compelling the appellants to wait until the ‘relevant consideration’ issue is finally resolved in the earlier appeal, as it would provide material assistance in the present case.
  • HMRC’s assertions regarding the similarities between the ‘relevant consideration’ issue in both appeals were accepted by the Tribunal.
  • The Tribunal rejected the appellants’ objections, including arguments about the propriety of HMRC’s case management strategies and the differences in the detail of the grounds of appeal between the two cases.
  • The Tribunal’s Judge Nigel Popplewell, who presided over the decision, will also be the presiding judge in the earlier appeal.

Conclusion

Judge Popplewell’s analysis indicated a determination that the earlier appeal would materially assist in resolving the issues of ‘relevant consideration’ under section 685(4) and the application of section 685(6) ITA 2007. The Tribunal’s approach followed established precedent, which seeks to handle cases fairly and justly, including ensuring efficiency and avoiding conflicting decisions across similar cases. The outcome highlights the significance of strategic case management to the administration of justice and offers an insightful commentary on applying the transactions in securities legislation under ITA 2007.

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