Jurisdictional Limitations of the First-tier Tribunal (Tax)

The ongoing development of the First-tier tax Tribunal and the limitations of its jurisdiction have been unclear for those wishing to appeal against their tax assessments and in particular appeals against VAT assessments. The First-tier Tribunal, which was created in 2008 under the auspices of the Tribunal, Courts and Enforcement Act 2007 is still considered to be in it’s infant stages and therefore, unsurprisingly the parameters/effects of its jurisdiction are yet to be completely determined.

The First-tier Tribunal’s limitations

A prime example of the limitations of the First-tier Tribunal’s jurisdiction is set out in the recent case of HMRC v Abdul Noor [2013] UKUT 071 . In this case the Upper Tribunal decided that the First-tier Tribunal does not have jurisdiction to consider a claim based on legitimate expectation. This case was an appeal in relation to a legitimate expectation to deduct input tax for VAT purposes.

The Upper-tier Tribunal’s decision was based on the following:

1. The Upper Tribunal confirmed that the First-tier Tribunal does not have any general supervisory jurisdiction (This had already been explored in the case of HMRC v Hok Ltd [2012] UKUT 363)

2. The Upper Tribunal stated that Parliament to not intend to allow the First-tier Tribunal to consider legitimate expectation cases due to the fact that it would extend the function of the  purpose of the tribunal

3. That the First-tier Tribunal has jurisdiction over contract claims (i.e that a claim was in accordance with the VAT legislation and an agreement made by HMRC under is statutory powers) which then followed that it cannot also have jurisdiction over legitimate expectation claim which is a public law principle by its nature.

Confusion in relation to legitimate expectation

Since 2009 there had been confusion in relation to claims based on legitimate expectation in VAT appeals. The confusion was caused by the High Court ruling in Oxfam v HMRC [2010] where Sales J explained that a claim for legitimate expectation could be brought at the tribunal. However, Sales J followed that up by stating that it would be advisable for taxpayers to issue a claim for Judicial Review as well as appeal to the tribunal to protect themselves.

Although the decision in Noor has clarified matters, many claims lodged at the tribunal had to be stayed pending the decision of the Noor case. Those who were not prudent enough to  lodge a protective claim in the High Court may lose their right of challenge altogether due to the time limits to lodge Judicial Review claims.

Establishing the jurisdiction of the First-tier Tribunal

It should be noted that a point was made that as a matter of principle the First-tier Tribunal is not barred from considering public law principles, and this is supported by provisions in the Value Added Tax Act 1994. However, the extent of its consideration and the circumstances in which it can consider public law matters are limited.

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