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law
law
Under paragraph 9 of Schedule 16 to the Finance Act 2020 (“FA 2020”) HMRC may issue an assessment to recover an overpayment of the payments made to taxpayers under the Eat Out to Help Out Scheme (“EOTHOS”).
Where a taxpayer has failed to notify HMRC of their liability to income tax arising as a result of overpayments of EOTHOS and the person knew, at the time the income tax first became chargeable, that the person was not entitled to the amount of the coronavirus support payment in relation to which the tax is chargeable, HMRC may raise a penalty for that failure under Schedule 41 FA 2008 as applied by paragraph 13 of Schedule 16 to FA 2020.
Under paragraph 17 of Schedule 41 to FA 2008, a person may appeal against a decision that a penalty is payable by that person or as to the amount of that penalty.
Under paragraph 18 of Schedule 41 to FA 2008, such an appeal is treated in the same way as an appeal against an assessment of tax, which means that the relevant sections of the Taxes Management Act 1970 are relevant for determining how the appeal must be brought and when.
Section 31A of TMA 1970 specifies that appeals must be made in writing within 30 days after the specified date to the relevant HMRC officer. Sub-paragraph (4) of that section states that, where the appeal is against an assessment other than a self-assessment (which an appeal against a penalty is deemed to be in accordance with the provision in paragraph 10 above), the specified date is the date on which the notice of assessment was issued and the relevant officer is the officer by whom the notice was given.
Under section 49(2), a person that may bring an appeal to HMRC but has not done so within the relevant time limit may bring a late appeal if they obtain the permission of either HMRC or this Tribunal.
Rule 20 of the FTT Rules provides:
A person making or notifying an appeal to the Tribunal under any enactment must start proceedings by sending or delivering a notice of appeal to the Tribunal.
…
If the notice of appeal is provided after the end of any period specified in an enactment referred to in paragraph (1) but the enactment provides that an appeal may be made or notified after that period with the permission of the Tribunal
the notice of appeal must include a request for such permission and the reason why the notice of appeal was not provided in time; and
unless the Tribunal gives such permission, the Tribunal must not admit the appeal.
In summary therefore, we have a discretion to allow an application for a late appeal against a penalty for failure to notify liability to income tax arising as a result of an overclaim under the EOTHOS.
In exercising that discretion, we must follow the principles and guidelines set out by the higher Courts and Tribunals, summarised by the Upper Tribunal in Martland v HMRC [2018] UKUT 178 (TCC). I set out the section from paragraph 44 in full:
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:
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.
The reason (or reasons) why the default occurred should be established.
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.
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.
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. In Hysaj, Moore-Bick LJ said this at [46]:
“If applications for extensions of time are allowed to develop into disputes about the merits of the substantive appeal, they will occupy a great deal of time and lead to the parties' incurring substantial costs. In most cases the merits of the appeal will have little to do with whether it is appropriate to grant an extension of time. Only in those cases where the court can see without much investigation that the grounds of appeal are either very strong or very weak will the merits have a significant part to play when it comes to balancing the various factors that have to be considered at stage three of the process. In most cases the court should decline to embark on an investigation of the merits and firmly discourage argument directed to them.”
Hysaj was in fact three cases, all concerned with compliance with time limits laid down by rules of the court in the context of existing proceedings. It was therefore different in an important respect from the present appeal, which concerns an application for permission to notify an appeal out of time – permission which, if granted, founds the very jurisdiction of the FTT to consider the appeal (see [18] above). It is clear that if an applicant's appeal is hopeless in any event, then it would not be in the interests of justice for permission to be granted so that the FTT's time is then wasted on an appeal which is doomed to fail. However, that is rarely the case. More often, the appeal will have some merit. Where that is the case, it is important that the FTT at least considers in outline the arguments which the applicant wishes to put forward and the respondents' reply to them. This is not so that it can carry out a detailed evaluation of the case, but so that it can form a general impression of its strength or weakness to weigh in the balance. To that limited extent, an applicant should be afforded the opportunity to persuade the FTT that the merits of the appeal are on the face of it overwhelmingly in his/her favour and the respondents the corresponding opportunity to point out the weakness of the applicant's case. In considering this point, the FTT should be very wary of taking into account evidence which is in dispute and should not do so unless there are exceptional circumstances.
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.
We note that there has recently been a decision of the Upper Tribunal (Medpro Healthcare v HMRC [2025] UKUT 255) in which it is stated that, in as far as the guidance in Martland requires this Tribunal to give particular weight to the need to enforce compliance with time limits and the need for litigation to be conducted efficiently and at proportionate cost, the decision was wrong. These two factors are of course still relevant to the balancing exercise but they are not to be given heavier weight than any other factor by definition.