TC09531 - [2025] UKFTT 00567 (TC)

Mr Kaney argued that being able to defend the Penalty/PLN appeals was a very serious matter for the appellants. Further, there was a heavy burden on HMRC to show the appellants were liable, in particular showing deliberate behaviour by the appellants. Not being able to require HMRC to show that was the case would be extremely prejudicial to the appellants.

Mr Kaney also argued that the current circumstances were very unusual. The VAT Appeals were made in time and the appeals are proceeding. The issues in the Penalty/PLN appeals are intrinsically connected with the complex issues in the VAT Appeals such that any consideration of the penalty position would be a marginal additional effort on the parties’ part. Therefore,the Tribunal, in circumstances, where the substantive assessments are subject to in time appeals, should consider the stage 3 test in Martland with less rigidity that would be the case for a late appeal against a substantive matter. We take Mr Kaney to mean by this argument that, for example, under HMRC’s alternative view, the Tribunal would need to consider whether the invoices were false and the bank statements had been altered. That is substantially the same issue as in the PLN appeal as to whether NNN deliberately underpaid its VAT and whether Ms Adeosun was responsible for that underpayment. There can therefore, according to Mr Kaney, be little if any prejudice to HMRC if the Penalty/PLN appeals proceeded.

HMRC argued that from Martland it is clear that time limits need to be respected. HMRC should be entitled to treat the matter as closed and not divert resources to manage this appeal. The appellants were clearly notified of its appeal rights and the time limit to do so. The notices were sent to the right addresses and not returned, Mr Pervez, their accountant, was aware that HMRC were considering issuing penalties and a PLN. The delay of 9 and 11 months is clearly substantial. There was no established principle that where a late appeal is “intrinsically connected” with in-time appeals, the Tribunal should take a more relaxed attitude to compliance with time limits.

In evaluating all the circumstances, we accept on the limited information before us that, given the burden of proof, the appellant may have grounds in the Penalty/PLN appeals. As to whether being denied the opportunity to appeal would cause real prejudice, we note the seriousness of the issue for the appellants and the risk of prejudice. However, we note in accordance with Mr Kaney’s “intrinsically connected” argument, that there is a substantial overlap of issues in the VAT Appeals and the Penalty/PLN Appeals, for example on deliberate behaviour. On that basis, some of the issues that the appellants would want to argue in the Penalty/PLN Appeals will be argued before the Tribunal in the VAT Appeals anyway. For example, we would expect the issue as to whether the invoices and/or bank statements were falsified would encompass Ms Adeosun’s behaviour. Necessarily if NNN wins the VAT Appeals, then as accepted by HMRC, the penalties and PLN fall away. In making these observations we do not deny that there would be prejudice to the appellants in not being able to proceed with the Penalty/PLN Appeals but we find the overlap of issues reduces that prejudice.

In conclusion, the appellants have not provided good reasons why there was the very long delay of 9 and 11 months. The starting point in these matters must be that time limits should be complied with. We are not persuaded that, given there has been a very long delay of 9 and 11 months, any of the circumstances we have been shown justifies a departure from that position.