Tax Tribunal Denies HMRC’s Application to Dismiss Appeal

HMRC sought to strike out and dismiss the taxpayer’s appeal in Phu Hung Ltd v HMRC [2023] UKFTT 00224 (TC) however the First-tier Tribunal (“FTT“) has ruled against HMRC. The FTT concluded that HMRC was unable to prove that the taxpayer’s appeal over a VAT registration date lacked a reasonable chances of success.

Our tax barristers and solicitors provide the very best representation in negotiations, throughout the HMRC internal review process and in front of the Tax Tribunal. Our team specialises in successfully challenging HMRC decisions and will assist you in every aspect including developing a strategy. Our ex-HMRC team provide advice in relation to:

  • Appealing against a tax assessment;
  • Appealing against a tax penalty;
  • Negotiating with HMRC;
  • Navigating the HMRC internal review process; and
  • Advising on statutory tax appeals within the Tax Tribunal.

If you want to challenge a decision made by HMRC, we can help you understand the issues raised, gather necessary information, and ensure a comprehensive and accurate response to HMRC. Just book an initial conference with our leading tax counsel (former HMRC in-house tax barrister and Head of Indirect Tax Litigation at Deloitte and National Tax Litigation Director at PWC) and our Senior Partner who worked at KMPG, Goldman Sachs and ING Barings and is dual-qualified as a Barrister and Solicitor-Advocate. Both lawyers will be available to you at the outset in your first advice conference.

Our taxation practice is the foundation of the firm. Have a conflict with HMRC? Our tax team is composed of knowledgeable tax lawyers who can help you handle your tax issues. For the best outcome, our ex-HMRC lawyers will advise you on intricate tax laws. We have years of expertise in dealing with complex tax problems, including negotiating with HMRC and handling tax appeals before Tax Tribunals and in the High Court.

HMRC’s Decision and PHL’s Appeal

The dispute between Phu Hung Ltd (“PHL“) and HMRC arose when HMRC issued a review decision in August 2021, affirming a previous decision to change the effective date of registration for Value Added Tax (VAT) for PHL. The reviewing officer, in the review decision, took into account the relevant background information, including the discussions between the original officer and PHL’s representative. Initially, PHL registered for VAT in July 2019, with an effective date of 1 May 2019. However, the reviewing officer upheld the decision to modify the effective date of registration to 1 July 2017, based on PHL’s turnover figures that displayed a consistent increase until June 2019, followed by a more significant increase thereafter.

Displeased with HMRC’s decision, PHL chose to file an appeal. In their grounds of appeal, PHL acknowledged that their record-keeping had been insufficient in the past but contested HMRC’s calculation methodology. They proposed an alternative approach that would yield an effective date of registration of 1 August 2018.

HMRC’s Attempt to Strike Out the Appeal

Initially, HMRC applied to the FTT to strike out PHL’s appeal, arguing that PHL had not paid the disputed VAT amount and had not applied for hardship relief. However, HMRC later withdrew the hardship relief issue. They caused a delay in the Tribunal proceedings by taking such action which is a growing and unfair tactic deployed by HMRC Solicitor’s Office litigators.

Subsequently, HMRC claimed that PHL’s grounds of appeal were insufficient and requested directions from the FTT to compel PHL to provide better grounds of appeal. Additionally, HMRC sought an extension of time to file its formal statement of case pleading (perhaps the real reason for the delaying applications?). The FTT rejected HMRC’s application, finding it unnecessary and unwarranted.

Dismissal of HMRC’s Application

The FTT dismissed HMRC’s application to strike out PHL’s appeal. The tribunal concluded that HMRC had failed to demonstrate, on the balance of probabilities, that PHL had no prospects of success in their appeal. Moreover, the FTT highlighted that if PHL could provide evidence supporting their turnover figures, their appeal could potentially succeed. Additionally, as the appeal was still in its early stages and no directions had been issued for the parties to present evidence, HMRC’s application was premature. Alongside dismissing the application, the FTT directed HMRC to promptly file and serve its statement of case.

FTT’s Approach to Strike Out Applications

This decision serves as a reminder of the FTT’s approach when considering strike out applications. The FTT does not conduct a “mini-trial” and places the burden on the applicant to demonstrate that the opposing party has no reasonable prospects of success. In cases where factual determinations and examination of documentary and/or witness evidence are necessary, a strike out application is unlikely to succeed if the proceedings have not advanced sufficiently to allow the parties to present such evidence or at least confirm that no such evidence will be presented.

What does the case highlight?

In the Phu Hung Ltd v HMRC case, HMRC’s attempt to strike out PHL’s appeal failed. The FTT rejected HMRC’s application, emphasising that HMRC had not shown that PHL had no reasonable prospects of success. This decision highlights the importance of evidence and the progression of proceedings in strike out applications. It serves as a valuable precedent for future cases and reminds parties involved in tax disputes to present their evidence adequately to support their claims.

Download the Phu Hung v HMRC Judgment:

Commencing Proceedings at the First Tier Tax Tribunal

To commence proceedings, the Appellant must notify the appeal to the Tax Tribunal. An appellant or their legal representative can appeal to the Tax Tribunal online or fill in a T240 notice of appeal form. Proceedings will commence once the Appellant has sent a notice of appeal to the tribunal within the specific time limits as set out by the particular Act. The First Tier Tribunal Rules 2009 sets out that the notice of appeal must include:

“(a) the name and address of the appellant;
(b) the name and address of the appellant’s representative (if any);
(c) an address where documents for the appellant may be sent or delivered;
(d) details of the decision appealed against;
(e) the result the appellant is seeking; and
(f) the grounds for making the appeal.”

[Rule 20(2), FTR 2009]


“The appellant must provide with the notice of appeal a copy of any written record of any decision appealed against, and any statement of reasons for that decision, that the appellant has or can reasonably obtain.”

[Rule 20(3), FTR 2009]

Following this step, the First Tier Tax Tribunal will give notice of the proceedings to HMRC (rule 20(5), FTR 2009). If the notice of appeal is served out of time, a request for an extension of time must be included with the notice (rule 20(4), FTR 2009). The Tax Tribunal has discretion whether to admit late appeal notices by generally considering:

  • the purpose of the time limit;
  • the length of the delay;
  • whether there was a good explanation for the delay; and
  • the consequences for the parties of an extension or non-extension of time.

In any event, it is recommended that legal advice is sought as soon as you become involved in a HMRC dispute to prevent a situation where a potential claim becomes time-barred.

Expert Tax Investigation Lawyers

If you need HMRC Tax Investigation advice, we are available to aid you at every stage of the HMRC investigation process. Members of our legal team have first-hand experience and knowledge of the internal workings of HMRC. We can provide you with the very best representation in negotiations with HMRC and defending all forms of HMRC fraud, tax inquiry, tax fraud investigation, criminal tax evasion and HMRC enquiries and investigations. Our team specialises in successfully challenging HMRC decisions and will assist you in every aspect of the investigation.

Our specialist Tax Solicitors and Barristers deliver expert technical knowledge, strong negotiation skills and respected advice, which can make a pronounced difference to eventual tax penalties, charges and liability.

We provide urgent advice and representation to clients from our unique expert team of established Tax and Duties specialist solicitors and barristers with a proven track record of delivering authoritative results. Just call us on 0207 1830 529, or email [email protected].

Want legal advice from Tax Solicitors on your case?

Our simple enquiry form goes immediately to our tax litigators in Middle Temple, London. Call us on +442071830529 from 9am-6pm.

Call Now Button search previous next tag category expand menu location phone mail time cart zoom edit close