TC09568 - [2025] UKFTT 00820 (TC)

Under section 29 TMA, where an HMRC officer discovers (inter alia) that an assessment to tax is or has become insufficient, that officer may make an assessment to make good that loss of tax. Where a taxpayer has submitted a tax return for the relevant tax year, then the assessment can only be issued if one of two conditions are satisfied. The relevant condition in this case is that the insufficiency of the self-assessment was brought about carelessly by the appellants.

Once the officer has discovered an insufficiency, they must go on to issue the assessment. The time limit for issuing the assessment is four years after the end of the year of assessment to which it relates, but if HMRC can demonstrate carelessness, that four year period is extended to 6 years.

A taxpayer who has been issued with a discovery assessment has 30 days within which to appeal against that assessment to HMRC. If they miss that deadline, then HMRC can permit a late appeal. If they do not so permit it, then a taxpayer can only bring an appeal with the permission of this tribunal.

Under schedule 36, HMRC may give a notice to a taxpayer requiring that person to provide information or documents if those are reasonably required by HMRC for checking the taxpayer’s tax position (“aninformation notice”).

Penalties can be visited on a taxpayer who fails to comply with an information notice. Any such penalties must be assessed by HMRC and that assessment served on the taxpayer. The taxpayer then has 30 days within which to appeal to HMRC against that assessment. Again, if the taxpayer brings a late appeal, HMRC have a discretion as to whether to accept it. If they do not do so, then the taxpayer can only bring an appeal to the tribunal if the tribunal gives permission.

A taxpayer is relieved from liability for a penalty if they can establish that they have a reasonable excuse for the failure to comply with the provisions of an information notice.

Under Rule 2 of the First-tier Tribunal (Tax Chamber) Rules 2009 (as amended):

“Overriding objective and parties’ obligation to co-operate with the Tribunal

(1)

The overriding objective of these Rules is to enable the Tribunal to deal with cases fairly and justly.

(2)

Dealing with a case fairly and justly includes—

(a)

dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties;

(b)

avoiding unnecessary formality and seeking flexibility in the proceedings;

(c)

ensuring, so far as practicable, that the parties are able to participate fully in the proceedings;

(d)

using any special expertise of the Tribunal effectively; and

(e)

avoiding delay, so far as compatible with proper consideration of the issues.

(3)

The Tribunal must seek to give effect to the overriding objective when it—

(a)

exercises any power under these Rules; or

(b)

interprets any rule or practice direction.

(4)

Parties must—

(a)

help the Tribunal to further the overriding objective; and

(b)

co-operate with the Tribunal generally”.

When deciding whether to give permission, the tribunal is exercising judicial discretion, and the principles which we should follow when considering that discretion are set out in Martland v HMRC [2018] UKUT 178 (TCC), (“Martland”) in which the Upper Tribunal considered an appellant’s appeal against the FTT’s decision to refuse his application to bring a late appeal against an assessment of excise duty and a penalty. The Upper Tribunal said:

“44.

When the FTT is considering applications for permission to appeal out of time, therefore, it must be remembered that the starting point is that permission should not be granted unless the FTT is satisfied on balance that it should be. In considering that question, we consider the FTT can usefully follow the three-stage process set out in Denton:

(1)

Establish the length of the delay. If it was very short (which would, in the absence of unusual circumstances, equate to the breach being "neither serious nor significant"), then the FTT "is unlikely to need to spend much time on the second and third stages" - though this should not be taken to mean that applications can be granted for very short delays without even moving on to a consideration of those stages.

(2)

The reason (or reasons) why the default occurred should be established.

(3)

The FTT can then move onto its evaluation of "all the circumstances of the case". This will involve a balancing exercise which will essentially assess the merits of the reason(s) given for the delay and the prejudice which would be caused to both parties by granting or refusing permission.

45.

That balancing exercise should take into account the particular importance of the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected. By approaching matters in this way, it can readily be seen that, to the extent they are relevant in the circumstances of the particular case, all the factors raised in Aberdeen and Data Select will be covered, without the need to refer back explicitly to those cases and attempt to structure the FTT's deliberations artificially by reference to those factors. The FTT's role is to exercise judicial discretion taking account of all relevant factors, not to follow a checklist.

46.

In doing so, the FTT can have regard to any obvious strength or weakness of the applicant's case; this goes to the question of prejudice - there is obviously much greater prejudice for an applicant to lose the opportunity of putting forward a really strong case than a very weak one. It is important however that this should not descend into a detailed analysis of the underlying merits of the appeal...

47.

Shortage of funds (and consequent inability to instruct a professional adviser) should not, of itself, generally carry any weight in the FTT’s consideration of the reasonableness of the applicant’s explanation of the delay: see the comments of Moore- Bick LJ in Hysaj referred to at [15(2)] above. Nor should the fact that the applicant is self-represented – Moore-Bick LJ went on to say (at [44]) that “being a litigant in person with no previous experience of legal proceedings is not a good reason for failing to comply with the rules”; HMRC’s appealable decisions generally include a statement of the relevant appeal rights in reasonably plain English and it is not a complicated process to notify an appeal to the FTT, even for a litigant in person”.

In addition, the Upper Tribunal in HMRC v Katib [2019] UKUT 0189 (TCC) (“Katib”), which concerned an appeal by HMRC against a decision of the tribunal to give permission for the taxpayer to make late appeals, emphasised the importance of adhering to statutory time limits at [17]:

“We have, however, concluded that the FTT did make an error of law in failing to acknowledge or give proper force to the position that, as a matter of principle, the need for statutory time limits to be respected was a matter of particular importance to the exercise of its discretion. We accept Mr Magee’s point that the FTT referred to both BPP Holdings and McCarthy & Stone in the Decision. Paragraph 27 (1) of the decision (cited above) shows that the FTT seemed to have the point in mind. However, instead of acknowledging the position, the tribunal went on to distinguish the BPP Holdings case on its facts. Differences in fact do not negate the principle, and it is not possible to detect that the tribunal thereafter gave proper weight to it in parts of the decision which followed”.