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

It was agreed before the FTT that s83G(6) Value Added Tax Act 1994 gave the FTT the discretion to give permission for the appeal to be made outside the 30 day time limit, and that in exercising that discretion the FTT should apply the three-stage test set out in Martland v HMRC [2018] UKUT 178 (TCC). That required the FTT, in summary, to 1) establish the length of the delay and whether it was serious and significant, 2) establish the reasons for the default, and 3) evaluate all the circumstances of the case, which involved balancing the merits of the reason given for the delay, and any prejudice in granting or refusing the application, taking 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.

In relation to Stage 1, the FTT found the delay was approximately 38 months ([65]).

In relation to Stage 2, the FTT recorded the Appellant’s argument that he had relied on his advisers, particularly Mr Mann, and had not been advised of the need to appeal the review conclusion. He believed an agreement in principle had been reached in March 2015 and only needed implementation ([54]).

The FTT recorded (at [61]) HMRC’s response, citing the Upper Tribunal’s comment in HMRC v Katib [2019] 0189 UKUT (TCC) at [54] of that decision that:

“…failures by a litigant’s adviser should generally be treated as failures by a litigant.”

The FTT accepted that the Appellant had not been specifically advised by Mr Mann of the need to notify the appeal to the FTT, stating (at [67]):

“No doubt, if he had been advised of the crucial need for this, an appeal would have been duly notified.”

The FTT also accepted that the Appellant believed a settlement had been agreed in principle. However, it rejected the argument that the need to appeal was unclear or that HMRC was at fault. The tribunal found that while HMRC may have contributed to a “muddle,” this ceased to be relevant once the review conclusion letter was issued in November 2018, which “brought clarity to HMRC’s position.” ([68]).

The FTT went on to conclude in that paragraph that the main reason for the delay was the Appellant’s:

“…wilful disregard (in the hope that the matter would simply “go away” if it were ignored), inattention, or an assumption that it would all be sorted out satisfactorily without further involvement on his part.”

In relation to Stage 3, the FTT set out its evaluation all the circumstances in the section of its decision at [69] through to [79].

It did so having earlier recorded the Appellant’s submissions that HMRC had recognised the PLN was excessive, that the amount would likely force him into bankruptcy, and that since the corporation tax PLN was still in time to be appealed and arose from the same facts, there was no prejudice to HMRC in addressing the VAT PLN appeal (at [55]).

Given the focus of the Appellant’s challenge to the FTT Decision on the FTT’s analysis at Stage 3, and it is a matter of dispute exactly what the FTT’s reasoning covered, it is helpful to see this part of the FTT Decision in full. Under the heading “Stage 3 – overall evaluation” the FTT explained:

“69.

I turn now to my overall evaluation of the circumstances of the case, balancing the merits of the reasons for the delay with the overall prejudice caused to the parties by granting or refusing permission. In doing so, I 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.

70.

I do not find any of the reasons for the delay set out above to have any significant merit, for the following reasons.

71.

Having been issued personally with a review conclusion letter which clearly stated HMRC’s position after the lengthy history and which specifically advised the Appellant of the need to appeal to the Tribunal within 30 days if he disagreed, there would need to be a good reason why it was appropriate for the Appellant effectively to ignore this deadline.

72.

There was no evidence before us as to any interaction between the Appellant and his then adviser in relation to HMRC’s review conclusion letter. It is not known whether he even spoke to his adviser about it. The review conclusion letter contained a clear statement of the Appellant’s appeal rights if he disagreed with the conclusion. I do not consider that the Appellant can fairly claim that his adviser’s failure to tell him he should appeal can be relied on as giving him a good reason for not doing so, even without regard to the Upper Tribunal’s statements in Katib set out at [61] above.

73.

I reject any suggestion that wilful disregard or inattention good [sic] be regarded as good reasons for delay on the Appellant’s part.

74.

That leaves the question of whether an assumption on the part of the Appellant that matters would all be sorted out satisfactorily without his further involvement can be regarded as constituting a good reason for the delay on his part in notifying his appeal.

75.

This reason must be considered against the background of what steps the Appellant actually took in response to the review conclusion letter of November 2018. On the evidence before me, there was precisely no action taken by him or on his behalf until 1 May 2019, at which point there was one very short email from his adviser which sought to put the ball back in HMRC’s court in terms of progressing matters, when in fact it was squarely in the Appellant’s court (having been there since at least December 2015, as confirmed by HMRC as recently as June 2018). Nor did the Appellant or his adviser follow up that email when no substantive reply was received (whether or not, as HMRC denied, the email ever reached officer Jones).

76.

Obviously an evaluation of the overall circumstances of the case requires consideration of the prejudice potentially suffered by both parties as a result of the granting or denying of permission.

77.

Mr McNall argued that the prejudice to the Appellant if permission were denied would be extreme. He would likely be made bankrupt, and he would lose the chance to dispute a penalty liability of nearly £875,000 when there were strong indications in the history of the matter that this would be significantly more than the amount that might be justified after proper investigation. He would also lose the opportunity to argue that the “reduced” PLN was technically invalid.

78.

So far as HMRC are concerned, the prejudice if permission were granted for a late appeal would be 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. It is said that HMRC will be required to examine effectively the same matters in any event in connection with a corporation tax penalty PLN which is also outstanding against the Appellant, in relation to which it is said he can still notify an “in time” appeal to the Tribunal. Whether or not that is the case, the material before me in relation to the corporation tax position was sketchy in the extreme, and in the circumstances I do not feel this factor can carry significant weight in my overall evaluation.

79.

It is clear that the prejudice to the Appellant if permission is refused will potentially be very great. But this is common to all such cases. Given (a) that permission should not be granted unless the Appellant discharges the burden of satisfying the Tribunal that it should be, (b) the particular importance of the need for statutory time limits to be respected, and (c) what I consider to be the lack of any good reason for the delay, the balancing exercise I am required to carry out clearly militates against granting permission.”

Following the oral hearing of the late appeal in relation to the VAT PLN, Mr Pawar’s appeal against the corporation tax PLN was filed on 17 February 2023. On 4 June 2024, HMRC gave notice to the First-tier Tribunal that they were withdrawing from the corporation tax PLN appeal (in other words that they were no longer resisting the appeal).