UT/2024/000022 - [2025] UKUT 00309 (TCC)

It will be apparent from what we have said that we would not have held that the FTT decision in this case involved an error of law on any of the grounds advanced at the hearing. But we were invited by Mr Bedenham to have regard to the forthcoming decision in Medpro UT because of the possibility that it would overturn the “general rule” in Katib that “failures by a litigant’s adviser should generally be treated as failures by the litigant”. On 30 July 2025 the Upper Tribunal (Marcus Smith J and Upper Tribunal Judge Cannan) issued their decision in Medpro UT which,like this appeal, concerned the questions of the tribunal’s discretion to admit a late appeal under s83G(6) VATA 1994.

One of the issues was whether the FTT had been wrong to follow the Martland approach (which had applied the approach under CPR 3.9 to relief from sanctions) to such discretion. The UT in Medpro UT (UTJ Cannan dissenting) approved the three stage approach set out in paragraph [44] of Martland but disapproved of the first sentence of paragraph [45] of the decision, concluding that in construing s83G(6) VATA 1994 no “ex ante weight” should be given to the factors set out in CPR 3.9(1(a) and (b) (regarding the “particular importance of the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected”). The UT did not criticise the “general rule” in Katib, and Mr Bedenham’s submissions on Medpro UT accept that the decision has affirmed the rule.

The Appellant having drawn our attention to the decision, we directed the parties be given the opportunity to make written submissions on its relevance to the appeal before us. Written submissions were accordingly received from the Appellant on 13 August 2025 and from HMRC on 19 August 2025.

The Appellant suggests that its appeal, with its focus on Stage 3 is wide enough to encompass the complaint that the FTT wrongly placed undue weight on the need to “comply with statutory time limits” (and if it was not wide enough now seeks permission to include such complaint).

The Appellant also suggests that Medpro UT makes clear that in each case where the general rule in Katib is applied it should nonetheless be explained why it is appropriate not to disapply the rule. It is submitted the FTT failed to properly consider whether the general rule in Katib ought to be disapplied and that that was a justiciable error of law.

HMRC’s submissions argue the point regarding time limits is a new ground and resist permission being granted. They indicate that HMRC are considering whether to apply for permission to appeal in Medpro UT and argue that in any case the FTT was entitled to consider the need to respect statutory time limits as part of the balancing exercise even if it was not to give that factor particular weight, and that it might be thought, given the other reasons it mentioned, that the FTT might have reached the same decision even if had not given the point particular weight. In relation to the point made regarding the failure to consider the disapplication of Katib HMRC submit that this is in effect the same point that has already been made under Ground 3 that the FTT did not recognise exceptions to the general rule in Katib. HMRC reiterate their response that the FTT did not in fact find it necessary to rely on the general rule.

In our view the point the Appellant now makes regarding it being legally wrong to give the factor of the need to comply with statutory time limits ex ante weight is clearly a new ground of appeal. Permission to appeal was not granted in general terms in respect of the FTT’s Stage 3 analysis but in relation to the detailed and specific points covered under Grounds 1 to 3 above. As to whether permission should be granted to argue it now, we consider it should. The point was not one that became reasonably apparent until the Upper Tribunal in Medpro UT had issued its decision. It is also a pure point of law concerning whether a generic factor (not dependent on any particular evidence) should be included in the balancing exercise.

As to the ground’s merits, the position is that there are now two conflicting Upper Tribunal decisions on whether “compliance with time limits” is properly afactor that must be given “ex ante weight” in the balancing exercise at Stage 3 of Martland. In summary, Marcus Smith J concluded that paragraph [45] of Martland was clearly wrong in glossing section 83G of VATA 1994 so as to include the factors contained in the current version of CPR 3.9, which are absent from the statutory test in section 83G. Judge Cannan did not consider Martland to be clearly wrong in this respect, concluding that Parliament had envisaged that the Upper Tribunal would give guidance on the exercise of the discretion in section 83G, which could extend to drawing an analogy with the CPR and giving guidance on the weight to be attributed to particular factors.

The Appellant submits that as a matter of judicial comity we should follow the decision in Medpro UT unless we consider it to be clearly wrong. The difficulty for us here is the existence of two previous decisions of the Upper Tribunal, one of which holds the other to be clearly wrong.

We find ourselves unable to conclude that either decision is clearly wrong or, conversely, clearly right. We note that HMRC are contemplating an appeal so it is possible the conflict may be resolved at a higher level, but we cannot delay this decision on that account. In the circumstances, we consider that we should follow Medpro UT on the grounds that it is the more recent decision and expressly considers the correctness of the earlier decision.

Taking that approach, the FTT (which obviously did not have the benefit of the analysis in Medpro UT) erred in so far as it referred at [79] to the particular importance of the need for statutory time limits to be respected. We have sympathy with Ms Goldring’s suggestion that the FTT would have reached the same decision even if it had not given particular importance to that factor, but we do not consider that we should simply dismiss the error as not material. The error was in our view material because it might have made a difference to the outcome.

We therefore set aside the FTT Decision. We consider, given we have before us a detailed chronology of facts as found by the FTT and the benefit of the witness statement that was before the FTT, that we should remake the decision on the Appellant’s late appeal application rather than remit it to the FTT for a further hearing. In remaking the decision we shall follow the three stage approach in Martland save that when we perform the balancing exercise at paragraph 44 of Martland we shall do so without giving special weight 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”.

It is agreed between the parties that the Appellant’s delay amounts to nearly 3¼ years. Like the FTT, we have very little by way of evidence from the Appellant as to the reasons for the delay. His witness statement contained in the papers was given for other purposes; all that it says about his failure to appeal against the decision of 19 November 2018 is:

“I was never informed by my advisors at Tiberius that I needed to appeal the decision within 30 days or that this was the best course of action. It appears that my advisors were of the opinion that Mrs. Jones would make first contact following the review response. In line with this Tiberius contacted Mrs. Jones by e-mail dated 1 May 2019 asking for an update and next steps. I have been unable to find any response from Mrs. Jones to this e-mail.”

In a later paragraph he says:

“I relied on advice from my advisors Tiberius Solutions who did not advise me of this at the time.”

As the FTT observed, the Appellant has told us nothing about what he did upon receiving the review decision. We do not know whether he consulted Tiberius Solutions or anyone else. The review conclusion letter states that a copy was being sent to Tiberius Solutions so we infer that Mr Mann also received one. That raises a question as to what if anything Mr Mann did as a result, but the Appellant has not told us the answer. His witness statement merely speculates as to Mr Mann’s state of mind on the basis of the email of 1 May 2019. All that he has stated is the negative fact that Mr Mann did not advise him to enter an appeal. Like the FTT, we are prepared to accept that this statement is true, but the Appellant has not told us whether he asked Mr Mann for any advice, or indeed told us anything about whether he had any communications with Mr Mann after the review decision reached him. As the FTT pointed out at [44] and [45], the review conclusion letter asserted that HMRC were defending the VAT assessments upon the Company in the tribunal and were satisfied that the assessments were sound, justified and defendable; it also gave the Appellant notice of his right to appeal and the deadline for doing so. In the absence of any evidence about advice from Mr Mann to the contrary, we consider that it should have been clear to the Appellant that an appeal against the PLN was the only appropriate course if he wished to avoid liability for the penalty.

We have taken note of the FTT’s findings at [47] to [49] about an attempt by the Appellant in 2019 to become involved, through solicitors, in the Company’s appeal against the assessments, and about some communications between the Appellant and HMRC between 2019 and 2020, as well as an offer by HMRC to “discuss the outstanding matter’, to which there is no evidence of the Appellant replying. Again, we have no more evidence than the FTT had.

On the evidence we are unable to differ from the FTT’s conclusion that the reason for the delay is either that the Appellant ignored the review conclusion letter in the hope that the matter would go away, that he did not pay proper attention to it or that he assumed that the issue would be sorted out without his involvement. If that was the Appellant’s assumption, we do not consider that it was justified given the terms of the review conclusion letter; even if it had initially been justified, it ceased to be once the Appellant received the email from HMRC of May 2021 referred to by the FTT at [49]. This said that the writer was now the officer dealing with the Appellant’s case and would like to discuss the matter with him at his earliest convenience. The writer asked the Appellant to e-mail or telephone her within the next 7 days but there is no evidence that the Appellant did anything. It seems that it was only the subsequent service upon him of the statutory demand prompted him to seek permission for a late appeal.

As regards Mr Mann’s failure to advise the Appellant to enter an appeal, it seems to us (as it did to the FTT) that the issue is not so much whether that failure is to be “attributed to” the Appellant as whether it alone (in the absence of any information as to the wider circumstances) gave him a good reason for not appealing. We do not consider that it gave him a good reason for doing nothing, and we have no evidence that he did anything. Even if his knowledge that the review conclusion letter had been copied to Mr Mann justified him in leaving matters to Mr Mann initially, he could reasonably have been expected to contact Mr Mann within a short period to enquire about progress.

Turning to Stage 3 of Martland, we have to balance an unjustified delay of more than three years with the prejudice caused the Appellant by refusing permission as well as any prejudice caused to HMRC by granting permission. In this connection we have to consider whether we can “see without much investigation that the grounds of appeal are either very strong or very weak” (per Martland at [46]).

All of the submissions in support of the strength of the appeal relate to the input tax claimed by the Company on the basis of invoices addressed to the Appellant. Mr Bedenham told us in his closing submissions that 43% of the penalty amount related to that input tax, which is broadly consistent with the FTT’s findings at [21]-[22]. We have no intimation of any grounds of appeal in relation to the remainder of the penalty. Our conclusions as to the 43% are as follows.

As to the “deliberateness” issue, we accept that the implication contained in paragraphs 7 to 9 of the Appellant’s witness statement in the insolvency proceedings is that he was acting in good faith in claiming on behalf of the Company input tax that was in fact his own, but a detailed investigation (which we are not equipped to carry out) would be required to establish whether or not he knew that the assertion that the Company was entitled to reclaim the input tax was inaccurate.

As to the issues of “no loss of tax” and “corrective action”, the corrective action (to which we accept that HMRC had agreed in principle) needed to be taken within four years of the VAT periods in question, the last of which was period 02/13. Without the corrective action, the argument that HMRC had suffered no loss of tax (in that the input VAT wrongly claimed by the Company was balanced by input VAT not claimed by the Appellant personally) would not amount to a defence: see paragraphs 6(5) and 11(2)(b) of Schedule 24 Finance Act 2007.

Even without according particular importance to the need for statutory time limits to be respected, we find that the prejudice to the Appellant of not being allowed to pursue an appeal as at the date of his application (22 February 2022) is not sufficiently great as to outweigh more than three years’ unjustified delay in making the application. We take into account the risk that enforcement of the PLN may drive the Appellant into bankruptcy. We do not have any information as to the Appellant’s financial situation, but the issue here is whether being allowed to pursue the appeal would ultimately enable him to avoid bankruptcy. Our view on that is that the Appellant’s prospects of substantially reducing the PLN on appeal are not obviously strong.

The prejudice to HMRC of allowing the late appeal was accurately described by the FTT as “that they would have to devote resources to re-examining matters that they had long considered closed, in a situation where the Appellant had not availed himself for a period of several years of the opportunities that had been offered to him to make good his claims as to the massively exaggerated size of the penalties”. We would not have accorded much weight to that if we had thought that the appeal had strong chances of success, but on the facts as we assess them we find it to be a factor supporting our refusal of permission.

Mr Bedenham pointed out to the FTT that HMRC would have to go over much the same ground in resisting the Appellant’s appeal against the corporation tax penalty. That is no longer the case since HMRC have in effect conceded the corporation tax penalty appeal. The reasons for the withdrawal are unknown to us; Mr Bedenham invoked it as a recognition by HMRC that they were in difficulties upholding their assertion of deliberate inaccuracy.

HMRC's stance in relation to the CT penalty appeal seems to us to have been somewhat unsatisfactory; HMRC initially sought to strike out that appeal and, when they were unsuccessful, conceded it. But we do not feel able to draw the inference that Mr Bedenham suggests. There could have been any number of reasons why HMRC did not find it worth their while defending the appeal.

Even if the withdrawal amounted to a concession on the issue concerning the invoices that were addressed to Mr Pawar’s sole proprietorship rather than the Company, then that was not the entirety of the case and does not obviously explain the withdrawal. Moreover, to the extent the withdrawal from the corporation tax PLN could be taken to indicate that HMRC considered its case on that to be not worth fighting, that in and of itself does not necessarily indicate what the actual merits of the case were.

The relevance of HMRC’s stance taken in the corporation tax PLN appeal to the merits of the VAT PLN is thus plainly a matter of dispute. As an issue that would not be capable of being resolved without further detailed investigation (which for the reasons already mentioned is discouraged), the mere fact of HMRC’s withdrawal could not be taken to indicate the Appellant’s VAT PLN appeal had obvious strength

Our evaluation of all the circumstances of the case leads us to conclude that permission for the late appeal to be admitted should be refused.