The special commissioner decided that it was not appropriate to dismiss a second appeal against the refusal of a subcontractor's CIS certificate as an abuse of process. The taxpayer was estopped from denying the defaults which were admitted before the general commissioners. However the taxpayer was not estopped from raising a human rights issue by reference to the facts relevant to the second appeal. Finally, the taxpayer was not estopped from arguing that the 29 defaults relating to the second refusal were minor and technical.

Facts

On 30 September 2005 the taxpayer applied for a CIS5 certificate under ICTA 1988, s. 561. The Revenue refused the certificate. The taxpayer appealed to the general commissioners. Before the general commissioners the taxpayer admitted 35 defaults relating to the delay in payment of PAYE and NICs and in submitting the end-of-year PAYE and NIC returns in the three-year qualifying period which commenced on 1 October 2002. However, it argued that the failures were 'minor and technical' for the purposes of the defence under ICTA 1988, s. 565(4).

It also pointed out that an unconnected company with similar failures had been granted a certificate and therefore the refusal of its application constituted discrimination under the Human Rights Act 1998.

The commissioners dismissed the appeal on the grounds that there had been 35 admitted defaults; they were 'not satisfied that the … failures … were minor and technical'; and there had been no discrimination. The taxpayer did not appeal against that decision but made a fresh application for a CIS5 certificate which was again refused. The taxpayer appealed against that decision electing for the appeal to be heard before the special commissioners. At a preliminary hearing an issue arose whether issues determined by the general commissioners could be raised again by the taxpayer in a second appeal.

The Revenue argued that the taxpayer was estopped from raising certain issues on the grounds that: (1) the doctrine of estoppel applied: in relation to CIS appeals, there was a need for finality and to avoid multiple vexation and the application of res judicata was necessary both for the protection of the taxpayer and the Revenue; (2) it would be an abuse of process to re-litigate the issues; or (3) the matters determined by the general commissioners were, by virtue of TMA 1970, s. 46(2), conclusively so determined and not open to re-examination in a second appeal.

Issue

Whether issue estoppel was applicable in a tax appeal; whether issue estoppel prevented the taxpayer asserting that its defaults were minor and technical; and whether the second appeal should be stayed as an abuse of process.

Decision

The special commissioner (Charles Hellier) (determining the preliminary issue) said that, in relation to the minor and technical defence in ICTA 1988, s. 565(4), the range of facts which could be relevant to the question of whether a default was minor and technical was limited to those which bore directly on, or which had a direct connection with, the default.

Issue estoppel could apply to an appeal under ICTA 1988, s. 561(9). It was not in the public interest or in the interests of the finality of litigation that the exact same issue should be capable of being litigated afresh, with potentially different answers, in more than one appeal. If the Revenue refused a certificate on the grounds that one default was not minor and technical and the tribunal decided that it was minor and technical, it could not be right that the next day the Revenue should be able to revoke the certificate on the same ground, and in the subsequent litigation argue that that very default was not minor and technical. Clearly there might be issues which were not the same in relation to each appeal: the question whether there was reason to doubt the future compliance of the company would depend upon the facts available at the time.

The taxpayer was estopped from denying the failures which were admitted before the general commissioners in the first appeal. However, it could argue that the 29 defaults in the second appeal were minor and technical. There were no details of the general commissioners' reasoning. To require the second tribunal to speculate on the reasoning of the first where it could not be said that the facts really were substantially the same was neither sensible nor practical even if it were possible. Had the basis of the general commissioners' decision been spelt out more fully, the position could have been different. Furthermore, later events could not cast a backward (and rosy) light on earlier failures. Later compliance might reduce the number of relevant defaults and affect the question of whether such faults, taken together, were minor and technical, but evidence of compliance could not otherwise relate to the default which had happened.

The taxpayer could not be estopped from raising the human rights argument in the second appeal. In relation to abuse of process issue, the wide power to make directions under the Special Commissioners (Jurisdiction and Procedure) Regulations 1994 (SI 1994/1811), reg. 9(3) which were necessary or desirable to dispose of the proceedings effectively and fairly might extend to a direction to stay an appeal as an abuse of process. In this case although there was a substantial overlap between the facts relating to the taxpayer's first and second appeals, it was not sufficient to say that the second appeal was clearly frivolous or vexatious or related to the ‘same old charge’. Accordingly it was not appropriate to exercise any jurisdiction to dismiss or stay or strike out the second appeal on those grounds. Lastly, TMA 1970, s. 46(2) neither treated the appeal against the first refusal as conclusive of an appeal against the second refusal, nor provided that issues decided which were necessary for the determination of the first appeal were to be treated as decided in relation to different proceedings. It was clear that the section proscribed any re-litigation of the actual appeal. There was no doubt that the decision of the general commissioners in relation to the first application could not be re-opened, but that was different from treating each issue which they described as finally determined in relation to other appeals.

(2006) Sp C 603.
Decision released 10 October 2006.