HMRC fail to delay hearing in Degorce to align proceedings with another year’s appeal

HMRC fail to delay hearing in Degorce to align proceedings with another year’s appeal

Thu 14 Jul 2016

Patrick Degorce has invested in film schemes in 2006/07 and 2007/08. His appeal against HMRC’s refusal of relief for 2006/07 was turned down by the Upper Tribunal ([2015]UKUT447) in September 2015 but he has appealed against that decision and the case is now due to be heard by the Court of Appeal (CA) in spring 2017.

In the meantime HMRC have also issued a closure notice denying him relief for 2007/08 on similar grounds, i.e. that he was not genuinely participating in a trade and so, following the same reasoning as in the Eclipse case is not entitled to loss relief. The case concerning 2007/08 was listed for hearing before the First-tier Tribunal (FtT) in November 2015 and HMRC were required to provide their Statement of Case by 26 January 2016. However, they failed to do so. Instead HMRC applied for hearing to be stayed until the CA had decided the 2006/07 appeal, on the basis that the CA decision would have a strong bearing on the later case.

Mr. Degorce’s counsel argued that as:

  • the FtT’s first function is to decide the facts and whether a trade is being carried on is a question mainly of fact, there was no reason; and
  • the two cases are not identical on their facts

there was good reason for not delaying the FtT hearing.

HMRC argued that Degorce’s 2006/07 and 2007/08 cases are materially identical because he bought into the film schemes covering both years as a “package” but counsel for Degorce argued that because the two years involved different partnerships which operated differently and with different results, the two years were materially different.

There was no question that waiting for the 2006/07 appeal to be settled would be likely to provide material assistance in deciding the 2007/08 appeal but the Judge had to consider whether that assistance was likely to be so great as to justify delaying the hearing. In reaching his decision he took account of the fact that the CA is due to hear the 2006/07 case in June 2017 and the 2007/08 case may take until then to reach a hearing in the FtT. He also took account of the benefit of establishing the factual basis of the case sooner, rather than later.

Therefore HMRC’s application to stay the FtT hearing of the 2007/08 appeal was dismissed.

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