Background
Alesen Direct Solutions Limited sought permission to appeal a First-tier Tribunal decision refusing its application under section 84(3B) of the Value Added Tax Act 1994. That provision can relieve an appellant from the usual requirement to pay or deposit disputed VAT before its substantive appeal proceeds, where payment would cause hardship.
The First-tier Tribunal accepted that the company lacked sufficient funds at the hearing. But it found that this position resulted from the company’s own deliberate payments to a customer and to PPBeer, a company controlled by the director’s father, after it knew that payment of the disputed VAT would be required unless hardship relief was obtained. It concluded that the company had created an appearance of impecuniosity to avoid paying the VAT upfront.
The Court’s Holding
Judge Rupert Jones refused the renewed application for permission to appeal following an oral hearing. The Upper Tribunal held that the proposed ground—alleging that the First-tier Tribunal had assessed hardship at the wrong time—had no realistic prospect of success and disclosed no arguable error of law.
The First-tier Tribunal had correctly applied the hardship test at the date of the hearing. It was nevertheless entitled to consider earlier events when deciding causation, including whether the appellant’s own actions were the real cause of its inability to pay. Its factual finding that the payments were intended to create relative impecuniosity was open to it on the evidence, was neither perverse nor inadequately reasoned, and could not be challenged on an appeal limited to points of law.
Key Takeaways
- VAT hardship is assessed at the hearing date, using the appellant’s immediately or readily available resources.
- The tribunal may examine prior transactions where they may be the real cause of the appellant’s claimed hardship.
- An Upper Tribunal appeal requires an arguable, material error of law; disagreement with sustainable factual findings is insufficient.
Why It Matters
The decision confirms that the hardship exception is not available simply because an appellant has no funds when the application is heard. Where the tribunal finds that the appellant deliberately disposed of funds that could have met the disputed VAT, it may conclude that the payment requirement did not cause the hardship.
It also illustrates the narrow scope of permission-to-appeal challenges in tax cases: the Upper Tribunal will not revisit factual findings that were rationally available to the First-tier Tribunal and supported by adequate reasons.