Akhtar & Ors v Revenue And Customs (PROCEDURE - HMRC application for consolidation) [2025] UKFTT 347 (TC) (17 March 2025)

DECISION

Introduction

1. This decision deals with an application made by HMRC on 2 August 2024 ("the application") that five separate appeals should be joined and consolidated into a single appeal and so heard together. The application is made under Rule 5(3)(b) of the Tribunal Procedure (First-Tier Tribunal) (Tax Chamber) Rules 2009 (as amended) ("the Rules").

2. There are currently five appeals on foot ("the appeals"). Appeals TC/2023/10239 and TC/2024/01553 have been brought by Mr Mohammed Imran. Appeal TC/2023/10238 has been brought by Mr Adeel Akhtar. I shall refer to these individuals as "the individuals" and their appeals as "the individual appeals". Appeals TC/2023/08867 and TC/2023/08869 have been brought by Raavi Foods Ltd, and PAK Foods Ltd. I shall refer to these companies as "the companies" and their appeals as "the company appeals".

3. Simply stated, it is HMRC's position that there is commonality of appellants and commonality of witnesses, along with a degree of overlap of the evidence, between the individual appeals and the company appeals. Any risk of prejudice to the appellants of joining the individual appeals with the company appeals is outweighed by the interests of justice. The appeals should therefore be joined and heard at the same time.

4. It is the appellants' position that the company appeals should be heard separately from the individual appeals (which should also be heard separately from each other and not joined with each other) on the basis that there is no commonality of appellants, nor are there overlapping issues. Furthermore, it would not be fair and just for the appeals to be heard together as it would mean that there is a real risk that the individual appeals would not get a proper hearing as they would get lost in the broader company appeals.

5. For the reasons given later in this decision, I have decided to reject the application. In my view it is fair and just that the appeals should be heard separately.

THE LAW

The Rules

6. Under Rule 2 (1), "The overriding objective of these Rules is to enable the Tribunal to deal with cases fairly and justly".

7. Under Rule 5 (1), "Subject to the provisions of the 2007 Act and any other enactment, the Tribunal may regulate its own procedure..."

8. Under Rule 5 (3) "In particular and without restricting the general powers in paragraphs (1) and (2), the Tribunal may by direction...(b) consolidate or hear together two or more sets of proceedings or parts of proceedings raising common issues...".

Case law

9. The parties are agreed that when considering how I should exercise my case management powers under Rule 5, the factors that I should consider were set out by the Upper Tribunal in First Class Communications Ltd v HMRC [2014] UKUT 244, namely:

"[20] In Maharani Restaurant, Turner J referred to a number of factors that should properly be considered in deciding whether to exercise the power to consolidate separate proceedings. These include

(1) Commonality of appellants;

(2) Commonality of witnesses;

(3) Degree of overlap of evidence;

(4) Risk of prejudice to the appellants in relation to the presentation of similar fact evidence;

(5) Avoiding the need for witnesses to give evidence more than once (and the risk that their evidence on the same point might be accepted in one appeal but not in another);

(6) Cost of holding more than one appeal or single consolidated appeal;

(7) Length of hearing required for separate appeals and for single consolidated appeal; and

(8) Listing and delay".

10. Mr Firth also submitted that Judge Mosedale had identified further factors in Manhattan Systems Limited v HMRC [2017] UKFTT 862 (TC) and that I should take these into account as well:

"[27] By ruling that the Tribunal had not taken into account any irrelevant matter, the High Court also impliedly approved the fact that the Tribunal had considered:

(e) Whether overall costs will be saved by consolidation;

(f) Whether consolidation will increase complexity;

(g) Risk of prejudice to parties to only some but not all of the consolidated appeals.

[28] However, it seems to me that the above list is not necessarily an exhaustive list of what would be relevant and in this case, it was also relevant to consider:

(h) Whether consolidation would make it difficult to expedite the de-registration appeal in the limited fashion which I have found justified in this case".

SUBMISSIONS

11. In summary Mr Kider submitted as follows:

Commonality

(1) There is commonality of appellants as the individuals are directors of the companies. It is HMRC's case against the companies that the individuals (inter alia) received income from the companies which has not been disclosed to HMRC. Evidence of this comprises unexplained deposits, and lifestyles which cannot be explained on the basis of the income declared to HMRC.

(2) Paragraph 168 of the statement of case in the company appeals clearly identifies the case against the companies as well as the individuals within the company appeals. Mr Firth mis-characterises the company appeals when he says that they are concerned only with the failure to keep records

(3) The overlap and common theme between the individual appeals and the company appeals is how the individuals funded their lifestyle. It is true that the issue in Mr Akhtar's appeal is non disclosure of rental income. And the issue in Mr Imran's appeal is failure to declare rental income as well as disallowance of mortgage interest. However, these both feed into HMRC's broader case that the individuals had undisclosed sources of income.

(4) There is, therefore, commonality of evidence in Mr Imran's appeal as regards how he funded both his lifestyle, generally, and the property acquisition in particular. There is commonality of evidence in Mr Akhtar's appeal in that he failed to disclose rental income and this reflects a more general non disclosure of income.

(5) It is HMRC's case, too, that both the companies (through the agency of their directors) and the individuals have been guilty of deliberate behaviour. This is reflected in the penalties and in HMRC's assertion that their discovery assessments can benefit from the extended time limit of 20 years. This behaviour links the individual appeals with the company appeals.

(6) The individuals are witnesses in their own appeals as well as being witnesses in the company appeals. This is the case even if the other directors of the companies provide evidence.

(7) The HMRC officer who is responsible for the individual enquiries is Officer Mitchell. The HMRC officer responsible for the enquiries into the companies is Officer Robb. In fact, both officers worked on both cases, and would attend the hearings of both the individual appeals and the company appeals.

(8) If the appeals are consolidated, the trial judge will get a complete picture of the individuals' behaviour.

Prejudice

(9) There is no legal basis for the assertion that the individuals are entitled to separate hearings.

(10) There is no risk of the allegations made against the individuals being "lost" in the broader hearing which would deal with both the individual appeals and the company appeals. Judges are often faced with cases dealing with multiple issues and are perfectly capable of giving them appropriate judicial attention.

(11) If these appeals are not consolidated there will be prejudice to HMRC in the additional time spent preparing for them and the cost of separate hearings which is likely, in total, to be greater than the time spent in a single consolidated hearing. Furthermore, HMRC's witnesses would have to travel to attend three hearings rather than one.

(12) HMRC consider that the company appeal should take seven days whilst the individual appeals should take 1.5 days each. The consolidated appeal is likely to take eight or nine days. There is therefore a benefit of consolidation.

(13) Consolidation will not cause any delay given that statements of case have been served in both the individual appeals and company appeals.

(14) It is important that there are no inconsistent findings of fact which is unlikely in a consolidated hearing but a real possibility if the hearings are held separately. Separate hearings may result in an absurd situation where witness evidence is accepted in one hearing but not in another.

12. In summary Mr Firth submitted:

Commonality

(1) The parties are not the same. The company is not the same as the individuals. Even though the individuals might have been directors of the companies at certain times, the company tax assessments and closure notices are different from those relating to the individuals.

(2) Furthermore, the issues are not the same. In the company appeals, the issue is largely the level of corporation tax profits of the supermarket businesses and depend upon HMRC allegations that the corporate records are incomplete or unreliable. Mr Akhtar's appeal depends on the factual question of whether a property was occupied and rent received. Mr Imran's appeal depends upon the factual issue of whether when rent was received, and the technical issue whether mortgage interest was deductible.

(3) Simply alleging deliberate behaviour by both the companies and the individuals does not supply the requisite commonality. Allegations of deliberate behaviour against Mr Akhtar (that he would have been aware of individuals occupying his property) are irrelevant to allegations of deliberate behaviour against the company. The same is true of Mr Imran. In simple terms, HMRC are looking to prejudice the individual appeals by asking the Tribunal to make findings of deliberate behaviour against the companies and their directors and then carry those findings across into unwarranted findings of deliberate behaviour against individuals.

(4) As regards witness evidence, Mr Akhtar will say that he was unaware of his property being occupied, as will Mr Imran. This evidence is irrelevant to the company appeals. Given that the evidence, therefore, in the appeals is different, there is no danger of inconsistent findings of fact if the appeals are heard separately.

(5) Similarly, evidence given as regards improper use of company funds is irrelevant to the issues in the individual appeals.

(6) HMRC have not identified any relevant common features between the individual appeals and the company appeals.

Prejudice

(7) If there is a consolidated hearing, the individual appeals in which small amounts are at stake (in the case of Mr Akhtar it is approximately £25,000) are likely to get lost in the larger company appeals and thus risk not receiving proper judicial attention (both during the hearing and in judicial consideration and subsequent decision writing). The individuals feel very strongly about this, and it is important that justice is not only done but is seen to be done.

(8) Given that HMRC are making what is tantamount to allegations of criminal behaviour against the individuals, those individuals are entitled to a fair hearing and this can only be achieved by separate hearings.

(9) There will be no saving in time or cost if the hearings are consolidated. The individual appeals will take no longer than a day each and the company appeals will take seven or eight days. If there is a consolidated hearing, then the time of the hearing is likely to be around 10 days.

(10) There is no need for HMRC's witnesses who are not involved in the specific appeals to attend the others. There is no need, for example, for Officer Robb to give evidence in the individual appeals or for Officer Mitchell to give evidence in the company appeals. Furthermore, evidence can be given remotely by video link so there is no need for the witnesses to spend time and cost in travelling.

(11) In summary, HMRC have not made out the relevant factors. There is no overlap of issues or evidence. The individuals are entitled to separate hearings. There is no prejudice to HMRC. A consolidated hearing will prejudice the individuals given the significant risk that serious allegations of deliberate behaviour against them might become lost in the shadow of the bigger and more complex company appeals.

My view

13. I am grateful to Mr Kider and Mr Firth for these comprehensive submissions and the way in which they have been structured to take account of the relevant factors set out in the cases cited above.

14. I have considered these in light of the overriding objective to deal with cases fairly and justly set out in Rule 2.

15. Whilst I accept that there is a certain amount of overlap in the issues in the individual appeals and the company appeals, namely that in both HMRC are asserting deliberate behaviour and suppression of a sources of income, and there is evidence of that suppression by unexplained lifestyle expenditure and unexplained bank deposits, I do not think this is sufficient commonality to justify consolidation.

16. The legal and factual issues in the individual appeals are very different from the legal and factual issues in the company appeals. In the former they are simply that the individuals have failed to declare rental income. In the case of Mr Imran's appeal, there is also the technical issue whether mortgage interest is deductible. These are wholly separate from the legal and factual issues in the company appeals which are essentially that individuals received undisclosed and untaxed income and other benefits from the companies.

17. Evidence in the individual appeals will be given by the individuals who, according to Mr Firth, will effectively assert that the properties were not rented and HMRC's assessments, to the contrary, are incorrect.

18. This evidence is unrelated to the evidence that is relevant to the company appeals regarding undisclosed sources of income and benefits from the companies. It might involve suppression of income from individually owned properties, but that is a separate issue.

19. Evidence in support of HMRC's case will be given by separate officers even though, I accept that both Officers Mitchell and Robb have been involved in the investigations into both the individuals and companies. But whilst it might be nice for them to attend the hearings at which the other is an essential witness, that attendance is nice to have rather than crucial. And as regards prejudice in terms of their time and cost of attendance, that can be readily mitigated by attendance by way of a video link.

20. Their witness statements will reflect the work they have done in respect of the relevant enquiries. I can see no prejudice to HMRC if these witness statements are compiled in respect of separate appeals rather than a consolidated appeal.

21. The issue which really concerns me with a consolidated appeal focuses on HMRC's assertions of deliberate behaviour. Mr Kider says that this is a theme which is common to both the company appeals and the individual appeals. As pleaded, that is certainly true.

22. My concern is, as suggested by Mr Firth, that in a consolidated appeal the trial judge might be subconsciously influenced by evidence of deliberate behaviour in relation to the companies, which would taint the judges view of the individuals' evidence in relation to the individual appeals within that consolidated appeal.

23. I entirely accept Mr Kider's submission that trial judges are commonly called upon to adjudicate on different and complex issues within the umbrella of a single appeal. They are perfectly capable of separating these issues out and giving each appropriate judicial attention. I can see that this will be the case if the appeals were joined.

24. But it is the possibility that the reliability and credibility of the individuals' evidence in respect of the issues in the individual appeals might be tainted by the evidence given by them in the company appeals which creates the risk of consolidation preventing those individuals being treated fairly and justly in respect of the individual appeals.

25. I do not necessarily accept Mr Firth's assertion that the individuals are "entitled" to have their appeals heard separately from those of the companies. Nor that there is an issue regarding justice being seen to be done. As I say, judges are commonly called upon to deal with a number of issues within a broader appeal and I do not accept that simply because the amounts in the individual appeals are much smaller than those in the company appeals, they will receive insufficient judicial attention both during the hearing and in the decision.

26. But I think there is a risk that allegations of deliberate behaviour in the company appeals might taint the approach of the trial judge in relation to allegations of deliberate behaviour in the individual appeals.

27. It is of course open to HMRC, should there be a finding of deliberate behaviour in the individual appeals (which I imagine will be heard first given that it is more likely that it will be easier to find court time for two one hearings, than a single 10 day hearing) to use that finding to impugn the evidence of the individuals in the company appeals. And a finding of fact, for example, in Mr Akhtar's appeal that there was, notwithstanding his assertions to the contrary, a tenant who paid rental income which was not declared, is not going to help his credibility or reliability as a witness in the company appeals.

28. The same is true of Mr Imran as regards his evidence of non-receipt of rental income.

29. However, if Mr Akhtar's and/or Mr Imran's evidence of non-receipt of rental income is accepted, it is still open to HMRC to assert deliberate behaviour in respect of their behaviour in relation to the companies.

30. So, they are not prejudiced in alleging deliberate behaviour if there are separate hearings.

31. But if there is a single consolidated hearing at which the judge hears evidence of deliberate behaviour in respect of both suppression of income from the company as well as suppression of rental income, then, as I have said, there is a risk that the former taints the latter, and risks the possibility (I put it no higher than that) that the individuals would not get a fair hearing in respect of the individual appeals.

32. This possibility outweighs the other factors. I can see little time or cost advantage in a consolidated appeal compared with separate appeals. Given the different issues involved, I can see little risk of inconsistent evidence and finding of facts if there are separate hearings. Evidence of inconsistent lifestyles can be adduced by HMRC in both hearings. That evidence can be the same in both hearings.

33. HMRC might wish to have a consolidated hearing so they can suggest that failing to disclose a source of income is a common behaviour of the individuals whether in their capacity as directors or as property owners. But it is in the interests of justice that the issues in the individual appeals should be dealt with on their own facts, something which is important when allegations of what is effectively dishonesty are being made.

DECISION

34. For the foregoing reasons I reject the application.

RIGHT TO APPLY FOR PERMISSION TO APPEAL

35. 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.

NIGEL POPPLEWELL

TRIBUNAL JUDGE

Release date: 17^th MARCH 2025

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You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> Akhtar & Ors v Revenue And Customs (PROCEDURE - HMRC application for consolidation) [2025] UKFTT 347 (TC) (17 March 2025) URL: https://www.bailii.org/uk/cases/UKFTT/TC/2025/TC09462.html Cite as: [2025] UKFTT 347 (TC)

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