TC09656 - [2025] UKFTT 01207 (TC)

VATA 1994 governs appeals against HMRC decisions and references to sections in this decision are to sections in that Act unless otherwise stated

Section 83(1)(c) provides that an appeal shall lie to the Tribunal with respect to a decision by HMRC about the amount of any input tax which may be credited to a person.

Section 83A provides that HMRC must offer a person a review of such a decision at the same time as the decision is notified to that person and section 83C(1)(b) provides that HMRC must review a decision where the offer is accepted within 30 days of the date of the offer, and HMRC may extend the time allowed to accept the offer of a review (or make an appeal to the Tribunal) within the original time allowed or any previously extended time allowed (section 83D).

However section 83E(2) provides that where a request is made for a review outside the time allowed, HMRC must review the decision if the request is in writing and HMRC are satisfied that the person had a reasonable excuse for not accepting the offer of a review within the time allowed and made the request without unreasonable delay after the excuse had ceased to apply.

Section 83G(4)(c) provides that where HMRC have notified P that they will not carry out a late review, P may only appeal to the Tribunal if the Tribunal gives permission. The wording is:

“(4)

In a case where HMRC are requested to undertake a review in accordance with section 83E

Section 83G(6) provides an appeal may be made after the end of the periods specified in other provisions of VATA 1994 if the Tribunal gives permission to do so. The wording is very similar to that of 83(4)(c) as follows:

“An appeal may be made after the end of the period specified in subsection (1), (3)(b), (4)(b) or (5) if the tribunal gives permission to do so.”

Although nothing turns on the point, we consider that the application is properly analysed under 83G(4)(c) and not 83G(6), although they are in material terms identical. We say this because 83G(4)(c) provides that, where HMRC is requested to carry out a section 83E review (review out of time), which Mr Feng did by email dated 3 October 2024, and HMRC notifies the Appellant that the review will not be undertaken, which they did by letter dated 10 October 2024, an appeal may only be made if the Tribunal gives permission. 83G(6) on the other hand applies where permission is sought to make a late appeal after the end of the periods specified in 83G(1), (3)(b), (4)(b) or (5), none of which apply in this case.

The Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009 (SI 2009/273) (the Tax Tribunal Rules) make provision for the overriding objective. Rule 2 is headed “Overriding objective and parties' obligation to co-operate with the Tribunal”. It provides:

“(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”.

There is no equivalent in the Tax Tribunal Rules to rule 3.9 of the Civil Procedure Rules, a point which becomes relevant because of the dispute that arose in Medpro.

In BPP Holdings Limited v HMRC (BPP Holdings) [2016] EWCA Civ 121; [2016] 1 WLR 1915 Ryder LJ gave a judgment with which Richards and Moore-Bick LJJ agreed. There had been conflicting decisions in the Upper Tribunal about the approach to be taken to procedural defaults and failings. At [16] Ryder LJ stated that:

“The key question underlying the two decisions can be characterised in the following way: whether the stricter approach to compliance with rules and directions made under the CPR as set out in Mitchell v News Group Newspapers Ltd (Practice Note) [2014] 1 WLR 795 and Denton v TH White Ltd (De Laval Ltd, Part 20 defendant) (Practice Note) [2014] 1 WLR 3926applies to cases in the tax tribunals. The two conflicting decisions of the UT on the point came to different conclusions. For the reasons I shall explain, I am of the firm view that the stricter approach is the right approach”.

Ryder LJ referred to the fact that the difference between the two decisions was based on the fact that CPR 3.9 had not been incorporated into the Tax Tribunal Rules. One judge held that the approach in Mitchell v News Group and Denton v White should be followed notwithstanding the absence of CPR 3.9 in the Tax Tribunal Rules. The other judge had considered that unless and until the equivalent of CPR 3.9 was enacted in the Tax Tribunal Rules, the FTT Tax should not adopt the stricter approach in Mitchell v News Group and Denton v White. At [37] Ryder LJ stated:

“There is nothing in the wording of the overriding objective of the tax tribunal rules that is inconsistent with the general legal policy described in Mitchell and Denton . As to that policy, I can detect no justification for a more relaxed approach to compliance with rules and directions in the tribunals and while I might commend the Civil Procedure Rule Committee for setting out the policy in such clear terms, it need hardly be said that the terms of the overriding objective in the tribunal rules likewise incorporate proportionality, cost and timeliness. It should not need to be said that a tribunal's orders, rules and practice directions are to be complied with in like manner to a court's. If it needs to be said, I have now said it.”

There was an appeal in BPP Holdings to the Supreme Court [2017] UKSC 55; [2017] 1 WLR 2945. The appeal was dismissed. The Supreme Court held that, although the CPR were not directly applicable to Tribunals, the Upper Tribunal's guidance, that the Tribunals should generally follow a similar approach to time limits and sanctions to that applied under those Rules, was appropriate, see [26] of the judgment. It was also confirmed that no different rule applied to public law cases, and public bodies such as HMRC were to be encouraged to live up to high standards in litigation

Following the judgment in BPP Holdings, the Upper Tribunal in Martland set out how the FTT Tax should exercise its discretion in deciding whether to grant permission to submit a late appeal. In [34] of Martland it was said:

“…the purpose of the time limit is to bring finality, and that is a matter of public interest, both from the point of view of the taxpayer in question and that of the wider body of taxpayers.”

The main guidance given in Martland was set out in [44]. In broad terms the Upper Tribunal adopted and followed the approach of the Court of Appeal in Denton v White. As is well known the focus of the decision in Denton v White was on relief from sanctions. In the light of the subsequent decision in Medpro it is necessary to note that there was a specific provision in rule 3.9 of the Civil Procedure Rules which was headed “Relief from sanctions”. That provided:

“(1)

On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need—

(a)

for litigation to be conducted efficiently and at proportionate cost; and

(b)

to enforce compliance with rules, practice directions and orders”.

[44] of Martland is in the following terms:

“When the [FTT Tax] 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 Tax] is satisfied on balance that it should be. In considering that question, we consider the [FTT Tax] 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 Tax] "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 Tax] 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.”

Martland stated that when evaluating all the circumstances of a case it is necessary for the Tribunal to consider the prejudice to both parties of granting or refusing the permission. The paragraph in Martland which prompted controversy in the subsequent decision of Medpro was [45]. This provided:

“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.” (underlining added)

[46] of Martland went on to provide:

“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 HMRC v Hafeez Katib [2019] 0189 UKUT (TCC), the Upper Tribunal held at [17], that the FTT Tax had made an error of law:

“in failing to...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.”

In Medpro the appellants argued that the Upper Tribunal’s previous decisions in the line of authority following Martland, to the effect that in determining applications to appeal to the FTT Tax beyond the statutory time limit, the FTT Tax should, as in the civil courts, give particular importance to the two factors highlighted in CPR r.3.9: namely the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected, was impermissible because it amounted to imposing a fetter on the broad statutory discretion afforded by, in that instance, section 83G(6).

In Medpro there was a dispute between the two judges sitting in the Upper Tribunal, Marcus Smith J and Upper Tribunal Judge Jonathan Cannan, about whether Martland should be followed. Marcus Smith J was the more senior judge, and so his view prevailed. Marcus Smith J held that the requirement to give particular importance to statutory time limits was wrong.

It was, however, common ground between the judges in Medpro that the three stage test set out in Martland was correct. The Upper Tribunal in Medpro stated at [88]:

“we consider the three stage structure of the discretion at [44] of Martland … to represent an unimpeachable approach.”

At [94] it was said

“…At [44] of Martland, the Upper Tribunal set out the three-stage test. That paragraph says nothing about the ex-ante weight to be attached to the factors being weighed and is unimpeachable.”

At [95] of Medpro Marcus Smith J stated:

“The question is whether [45] of Martland … goes further and in referring to the “particular importance of the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected” was doing what the Court of Appeal did in Denton, and according these factors particular weight. Read on its own, it must be doubted whether Martland was doing this. Martland at [45] is not unequivocally clear, and can be read as merely stressing that these factors matter, as indeed they do. But there can be no doubt that the Upper Tribunal has subsequently followed the Denton approach not merely as to the structure of the discretion (ie the three-stage test) but also as to the (additional, extra) weight to be accorded to the CPR 3.9(a) and (b) factors (ie the “top table” point).”

Marcus Smith J said that he did not consider this to be a permissible approach in the case of extensions of time under section 83G(6). This was because the rule change to CPR 3.9 enabled the Court of Appeal to take the approach it did in Denton v White. The wording in section 83G(6) has not been changed (nor has it in 83G(4)(c)) and did not, when construed, permit this aspect of the approach in Denton v White. Although there was reference to the decision in BPP Holdings this was only in the context of permitting the Upper Tribunal to give guidance to the FTT Tax. There did not appear to be any assessment of Ryder LJ’s approach to CPR 3.9 or his endorsement of the stricter approach set out in Mitchell v News Group and Denton v White. It also might be noted that the Upper Tribunal in Medpro had already agreed to allow the appeal on other grounds, but it does appear that there was a considered decision to allow the appeal on this point.