The recent decision of the Upper Tribunal (UT) in Ritchie v HMRC  UKUT 71 (TCC) concerned discovery assessments raised in 2013 in respect of a taxable disposal of land in 2007. No chargeable gain was reported in the taxpayers' self-assessment returns, which had been prepared by their accountant. The First-tier Tribunal (FTT) upheld the assessments on the basis that the accountant had been careless in preparing the returns. The UT held that this was a decision that was not open to the FTT to reach, on the grounds of fairness. This was because:
- the carelessness of the accountant had not been adequately pleaded in HMRC's statement of case and had not been put to the accountant or any other witness in cross-examination;
- the issue was first raised by the FTT after the witnesses had been released; and
- the FTT gave no consideration to whether it should recall the witnesses or any of them in order to adduce further evidence.
The UT decided that it would not remit the appeal to the FTT for a fresh decision on the basis of new evidence. The UT explained that whilst there is a public interest in the correct tax being collected, there is a competing interest in litigation being brought to a conclusion. Since the matter in question went back many years and HMRC were given adequate opportunity to call their evidence and put their case before the FTT, on balance it was too late for the question of the accountant's carelessness to be revived.
The decision in Ritchie is a useful reminder that whilst the tribunal affords litigants a degree of flexibility in adducing evidence and pleading their case, this is subject to a duty of fairness which the tribunal will enforce in appropriate circumstances. Not only may the tribunal set aside the original decision but it may also refuse to remake the decision on the basis of new evidence. A litigant's best defence is, of course, to ensure that their case is fully pleaded and all relevant factual issues are put to witnesses at the first attempt.
These sources make clear that in determining what arguments the tribunal may permit to affect its decision the guiding principle must be fairness in the circumstances of the case. Fairness does not require formality, and Rule 2(2)(b) expressly requires formality to be avoided. Fairness does not require, for example, that to advance an argument not present in its statement of case or the notice of appeal a party must always formally apply to amend its earlier pleading. On the other hand it does require that the other party is given adequate opportunity in the circumstances to meet the point, whether by argument or with evidence.