Premier Care Direct Ltd v The Commissioners for HMRC

Introduction

1. This appeal is against a section 73 assessment to which section 84 of the Value Added Tax Act 1994 applies.

2. The appeal "shall not be entertained" unless the assessed amount is paid or deposited ( section 84 (3A)) unless HMRC are satisfied on application that payment would cause hardship, or the Tribunal so decides ( section 84 (3B)).

3. The assessed amount has been neither paid nor deposited, and no hardship application has been made.

4. HMRC contends that, in the absence of a hardship application, the Tribunal must strike-out the appeal forthwith on the basis that the Tribunal thereby "lacks jurisdiction": Rule 8(2).

5. The Appellant argues that hardship is moot. It has explicitly declined to make a hardship application. It argues that it is exempt from the requirement to make a hardship application because HMRC had caused it to believe that HMRC would not assess VAT until the matter of an outstanding Error Correction Notice ('ECN') has been resolved, which includes a claim for a repayment of a substantial amount of VAT, overtopping the assessment. That matter has not presently been resolved. The Appellant asks that the appeal be stayed until the matter of its ECN is resolved. It also argues that the fact that the assessment potentially be reduced to zero by a netting-off of output VAT less associated input VAT in any given VAT period means that no hardship application is needed.

6. HMRC says nothing about whether, if a hardship application were made, it would consent to this appeal proceeding. Discussion

7. On the face of it, section 84 imposes a hard gateway condition: either the assessed tax is paid or deposited, or HMRC allow a hardship application, or the Tribunal does. None of those things have happened.

8. However, in my view, section 84 does not prevent proceedings from coming into existence at all ; rather, it limits the circumstances in which the Tribunal may go on to determine them.

9. In HMRC v Elbrook (Cash and Carry) Ltd [2017] UKUT 181 (TCC) , the Upper Tribunal drew a clear line between merits arguments and the hardship gateway. The hardship gateway looks only to the present ability to pay, and not to future contingencies: see (especially) Paragraphs [19] and onwards. In particular: (1) There is a policy behind section 84 , which is intended to strike a balance between HMRC and taxpayers; (2) Nothing in section 84 requires the merits of an appeal to be considered.

10. In my view, a potential repayment of VAT by HMRC under an as-yet-unresolved ECN is a future contingency.

11. I have considered HMRC's letters, upon which the Appellant places heavy reliance: (1) The Notice of Assessment dated 31 October 2024 said: "This assessment is enforceable now; however, I have chosen not to seek recovery of this debt until a later date. The reason for not enforcing payment of the debt now is that my enquiries into the claims for overpaid output tax are ongoing"; (2) The review conclusion letter of 5 February 2025 says that [the assessing officer] "advised in the decision letter that this assessment is enforceable, and they will not seek recovery of this debt until a later date as enquiries into the claims for overpaid income tax are still ongoing."

12. As I read them, those representations, such as they are, deal with recovery; and not with payability. "Recovery" is part of HMRC's "collection" discretion, which is not justiciable in this Tribunal.

13. I have carefully considered whether what HMRC said in its letters means that there is, in reality, no current requirement to pay or deposit the tax, or make a hardship application. Not without some hesitation, I have decided that this argument does not overcome the clear statutory language, nor the general tenor of the discussion in Elbrook.

14. The Appellant also argues that VAT should be calculated on a net basis; and says that here the resolution of the ECN will result in the reduction - and perhaps even extinction - of the sum due and payable to HMRC. This is an argument taken at a high level of generality. I gave the Appellant time to identify the law which it asserted supported its position. Eventually, it invited me to consider (but did not provide me with) Feudi (2024, ECJ), Hotel la Tour (said to be 2024, but in fact 2025, Supreme Court) and Birmingham Hippodrome [2013] UKUT 57.

15. Those cases do not assist me. They articulate the relationship, in certain circumstances, between input tax and output tax; and the availability of set-off leading, in certain circumstances, to repayment. But, as I read them, none of them prohibits an assessment of the kind here (indeed, it could be said that the provisions for set-off explicitly contemplate assessments of sums which later fall to be adjusted, and repaid).

16. The Appellant refers me to HMRC's own guidance, which says that "the VAT system treats the payment of Output Tax and deduction of Input Tax in the same period as an inseparable whole". This is correct as far as it goes; but in my view it only deals with the end position or outcome for any particular VAT period. Here, the end position, as it stands, is and can only be the assessed sum because the ECN has not been dealt with.

17. There are other difficulties with this argument in this case. In reality, as I understand it, the Appellant is saying that HMRC should not have assessed him at all pending the resolution of the ECN. But that is what HMRC have actually done. On the face of it, with an extant VAT assessment, the VAT is due and payable, or subject to hardship; and none of those things have happened. The Appellant is trying to contend that the VAT is not due and payable because of what it anticipates the consequences of the ECN will be; but, in my view, it can only succeed in getting to make that argument before the Tribunal if it pays or deposits the tax, or is granted hardship. To allow it to make that argument now circumvents, impermissibly, section 84 . Disposal

18. However, having arrived at the conclusion that a hardship application is required, I am nonetheless not prepared to accede to HMRC's application that I strike-out this appeal forthwith.

19. It seems to me fair, proportionate, and in accordance with the overriding objection in Rule 2 that the Appellant be given a time-limited opportunity within which to decide whether, contrary to its present stance, it does propose to make a hardship application (which would have to be to the Tribunal).

20. In my view, this is a route which it is permissible to take although it does not accept HMRC's position that section 84 bites here and now (and hence Rule 8(2) bites here and now), and hence also does not accept HMRC's strict jurisdictional argument that, absent hardship, there is no appeal to manage, and hence no room for an unless order.

21. It seems to me that the true position is this: (1) An appeal has been validly lodged (in an administrative sense); (2) As it stands, the Tribunal is not yet entitled to entertain it on its merits; (3) The bar to such entertainment is a defect, in the sense that a required application is absent; and, therefore: (4) I can lawfully give procedural directions (including an unless order) to seek to cure or regularise the position.

22. I find support for this approach in Rule 22, in the sense that lack of an extant hardship decision does not automatically extinguish proceedings on receipt by the Tribunal (ie, does not stop them coming into being, but puts limits on when they might be entertained); and Rule 7, in the sense that a failure to comply with any requirement of the Rules does not of itself render void the proceedings or any step taken in them.

23. The Appellant seeks a stay under Rule 5 pending HMRC's decision on the output tax element of the ECN. I am not presently prepared to do this. In short, it seems to me that the difficulty with this application is that a stay pre-supposes that there is (for want of a better word) an "entertained" appeal which the Tribunal is entitled to go on and manage. An immediate stay be wrong because it would preserve an appeal whose continuation (and whether or not it is "entertained") depends on the occurrence or non-occurrence of future events. The present direction is designed solely to determine whether the section 84 gateway will in fact be engaged. Right to apply for permission to appeal

24. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. DIRECTIONS Direction 1 : Unless, by no later than 4pm 10 April 2026 , the Appellant pays or deposits the tax, or makes an application for hardship to the Tribunal, then its appeal shall stand as automatically struck-out, without further order, pursuant to Rule 8(2). Direction 2 : The Appellant's application for a stay is stayed pending compliance with the above direction. If the above direction is not complied with, the application to stay will also stand as automatically struck-out with further order. If the above direction is not complied with, then the application for a stay may be restored. DR CHRISTOPHER MCNALL Release date: 25 March 2026