In Hampton George Hewitt v HMRC [2021] UKUT 231 (TCC), the Upper Tribunal (UT) dismissed the appeal of Mr Hewitt against the decision of the First-tier Tribunal (FTT) refusing Mr Hewitt's application for permission to make a late appeal against HMRC's decision to cancel his certificate as a flat-rate farmer for VAT purposes, under the agricultural flat-rate scheme (AFRS).

HMRC wrote to Mr Hewitt in October 2012, to advise him that it was cancelling his certification under the AFRS, on the ground that it considered it necessary for the protection of the revenue, under regulation 206(1)(i), Value Added Tax Regulations 1995 (SI 1995/2518) (VAT Regulations). HMRC took this view because the compensation Mr Hewitt derived from the receipt of the 4% flat-rate addition, which he was allowed to charge and retain under the AFRS, substantially exceeded the input tax which Mr Hewitt would have been able to recover if he had been registered for VAT. This approach was consistent with the provisions of HMRC's VAT Notice 744/46 (paragraph 7.2) in the form in which it was published at the time.

In December 2017, following a referral to the Court of Justice of the European Union (CJEU), the UT, in the case of Shields & Sons Partnership v HMRC [2017] UKUT 504 (TCC), allowed the appeal of a different taxpayer against the revocation of their certification under the AFRS where HMRC had relied on the same ground as that relied upon in the case of Mr Hewitt. In March 2018, on the basis of the CJEU's decision in Shields, Mr Hewitt asked HMRC to reinstate him in the AFRS and to pay him a refund. HMRC refused on the basis that Mr Hewitt had not put forward a reasonable excuse for failing to ask for a review within 30 days of its original decision and there was no reason for the statutory time limit to be extended in his case. Mr Hewitt appealed to the FTT.

The FTT refused Mr Hewitt's application, applying the principles set out by the UT in Martland v HMRC [2018] UKUT 178 (TCC), referring to the approach of the Court of Appeal in Denton and others v TH White Ltd and others [2014] EWCA Civ 906. On appeal to the UT, Mr Hewitt did not challenge the adoption of those principles by the FTT. The only issue raised on appeal was whether the FTT erred in law by failing to give full effect to the EU law principle of effectiveness, which required that Mr Hewitt be given an effective remedy to enforce his EU law rights.

The UT proceeded on the basis (which the UT said HMRC "did not seem seriously to challenge") that, at the time, the cancellation of Mr Hewitt’s certificate was a breach of a directly effective right under EU law, namely, his right to participate in the AFRS. The UT explained that the relevant question was whether the relevant time limit made the enforcement of Mr Hewitt’s rights impossible or excessively difficult. The UT decided that the regime that applies to appeals against the cancellation of an AFRS certificate is a reasonable one, which provided Mr Hewitt with an effective remedy which he chose not to exercise. In reaching this conclusion, the UT applied the principles identified in Claimants listed in Class 8 of the Group Register of the CFC and Dividend GLO v HMRC [2019] EWHC 338 (Ch), Leeds City Council v HMRC [2015] EWCA Civ 1293, Test Claimants in the FII Group Litigation v HMRC [2012] UKSC 19 and Caterpillar Financial Services sp.z.o.o. v Dyrektor Izby Skarbowej w Warszawie (Case C-500/16). The UT therefore dismissed Mr Hewitt's appeal.

Why it matters: This decision will be of wider significance, as it provides a helpful elucidation of the EU law principle of effectiveness in the context of tax appeals. The decision can be viewed here.