[2011] UKFTT 374 (TC)

TC01229

Appeal number: TC/2010/06998

APPEALS – application for permission to bring appeal outside the time limit for doing so – permission granted

FIRST-TIER TRIBUNAL

TAX

MR DAVID MOND Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: DR CHRISTOPHER STAKER (TRIBUNAL JUDGE) MR HENRY RUSSELL (TRIBUNAL MEMBER)

The Tribunal determined the appeal on 11 May 2011 without a hearing under the provisions of Rule 26 of the Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009 (default paper cases) having first read the Notice of Appeal dated 6 September 2010, HMRC’s Statement of Case dated on 18 March 2011, and other papers in the case.

DECISION

Introduction

1. By a letter to HMRC dated 29 July 2010, the Appellant indicated that he wished to appeal against late payment surcharge notices dated 13 May 2010 (in respect of the 2007/08 tax year) and 3 April 2010 (in respect of the 2008/09 tax year).

2. By a letter to the Appellant dated 3 August 2010, HMRC responded that the Appellant did not have a valid appeal as it was made outside the time limits, and the Appellant did not have a “reasonable excuse” for the late appeal. That letter however also addressed the substance of the Appellant’s case, stating also that he did not have a “reasonable excuse” for not paying the tax liabilities.

3. By a further letter of 12 August 2010, in response to a letter from the Appellant dated 10 August 2010, HMRC repeated its view that the Appellant did not have a “reasonable excuse” for the late appeal. However, it also addressed the substance of the matter, and found that the Appellant did not have a “reasonable excuse” for failure to pay the tax liability on time.

4. The Appellant subsequently commenced these proceedings before the Tribunal. The notice of appeal states that the Appellant is seeking to appeal against the HMRC decisions of 3 August 2010 and 12 August 2010.

5. The Tribunal issued directions on 2 December 2010 concluding that the only matter for it to consider in these proceedings is whether to grant an application under s.49(2)(b) of the Taxes Management Act 1970 (“TMA”) permitting the Appellant to bring this appeal outside the time limit for doing so. The Tribunal directed the parties to file further submissions and any evidence directed to this particular issue. A further direction was subsequently issued granting the Appellant an extension of time for filing his submissions.

6. The Appellant filed submissions in relation to this issue dated 14 January 2011.

7. HMRC filed submissions in response on 14 February 2011. On 18 March 2011, HMRC notified the Tribunal that one of the surcharge notices which was the subject of the late appeal, relating to the 2008/09 tax return, has been cancelled, so that the only remaining question was whether to allow a late appeal in relation to the surcharge in respect of the year 2007/08. HMRC provided an updated statement of case dated 18 March 2011.

8. No reply was received from the Appellant to the HMRC submissions and neither party requested a hearing.

The relevant legislation

9. Section 49 of the TMA states as follows:

(1) This section applies in a case where—

(a) notice of appeal may be given to HMRC, but

(b) no notice is given before the relevant time limit.

(2) Notice may be given after the relevant time limit if—

(a) HMRC agree, or

(b) where HMRC do not agree, the tribunal gives permission.

(3) If the following conditions are met, HMRC shall agree to notice being given after the relevant time limit.

(4) Condition A is that the appellant has made a request in writing to HMRC to agree to the notice being given.

(5) Condition B is that HMRC are satisfied that there was reasonable excuse for not giving the notice before the relevant time limit.

(6) Condition C is that HMRC are satisfied that request under subsection (4) was made without unreasonable delay after the reasonable excuse ceased.

(7) If a request of the kind referred to in subsection (4) is made, HMRC must notify the appellant whether or not HMRC agree to the appellant giving notice of appeal after the relevant time limit.

(8) In this section “relevant time limit”, in relation to notice of appeal, means the time before which the notice is to be given (but for this section).

The arguments of the parties

10. The Appellant submits that:

(1) The 30 day time limit for appealing against the 13 May 2010 surcharge notice was missed by only 47 days, which is not excessive.

(2) The surcharge notice was sent to the Appellant's business address rather than his home address which is where HMRC normally corresponds with him.

(3) The surcharge notice that was sent to his business address contained an incorrect town address of “Altrincham”, the correct town being “Timperley”.

(4) The surcharge notice was received at the office on 17 May 2010 and was incorrectly placed in a basket of an employee who was on maternity leave.

(5) The appellant has been paying tax for over 50 years and is a conscientious business person who accepts the need to comply with all legal requirements and as a chartered accountant has attempted to ensure over the years that this has been instilled by him to his former audit clients.

(6) The delay in submitting the appeal was also due to the continuous exchange of correspondence with various offices of HMRC regarding payment proposals, which diverted the Appellant's mind as to the need to submit an appeal at the appropriate time.

(6) The Appellant is totally responsible for running a small business and the Appellant was left with a considerable amount of additional work following is partner's untimely death.

(7) The Appellant suffers health-wise and has lapses of memory.

11. HMRC submits that:

(1) A person wishing to have an appeal admitted outside the statutory time limit set by Parliament must have a good reason for doing so. The Appellant has failed to act in a timely manner without good reason.

(2) Allowing a late notice of appeal will unfairly prejudice HMRC. In carrying out its public administration of the tax system in a fair and just manner and resourcing its business accordingly, HMRC is entitled to expect that time limits prescribed in law are given due weight. To allow a late appeal without good reason undermines the power and intent of the Parliament and the ability of HMRC to carry out its business in the administration of its appeals process.

(3) Whether the period of lateness is unduly excessive depends on what the reasons were for the appeal being made late in the first place, and whether the appellant acted in a timely and appropriate manner once the obstacle that prevented the appeal being made in time was removed. It can be argued that any length of time beyond the statutory time limit is excessive if there is no good reason.

(4) Communications from HMRC prior to and after the issue of the surcharge notice were sent to the same address and were received by the Appellant. The Appellant could have asked HMRC to cease sending mail to that address if he had so wished.

(5) The Appellant acknowledges that the surcharge notice was received in the office on 17 May 2010. Presumably, as with earlier correspondence, the surcharge notice was opened and stamped with the date of receipt. It is reasonable to believe that someone would have read the notice and this time and recognised its significance. If it was not brought to the Appellant's notice, the Appellant has to take responsibility for the consequences.

(6) Earlier correspondence foreshadowed that a surcharge would be charged, and the notice should therefore not have come as a surprise.

(7) The Appellant has not stated exactly when the surcharge notice was brought to his attention.

(8) HMRC concedes that it has no reason to challenge the Appellant's statement referred to in paragraph 10(5) above.

(9) Contrary to what the Appellant suggests, the fact that the Appellant had ongoing correspondence with HMRC on the matter of payment of the underlying tax could not have “diverted” his mind from the need to appeal on time unless he had notice of the surcharge notice within the time limit for appealing, in which case his only argument is that he forgot.

(10) The Appellant's partner died in February 2008, over two years before the issue of the surcharge notice.

(11) No evidence has been provided of the medical issues referred to by the Appellant, which were not raised previously and which if true would suggest that it would have been prudent for the Appellant to have someone else take control of matters on his behalf.

(12) In his initial appeal to HMRC in July 2010, and his initial appeal to the Tribunal in September 2010, the Appellant claimed not to have received the surcharge notice because he was living outside the UK when the notice was sent. The Appellant claimed that he does not live in the UK from May to September in any year. If so, he should make arrangements in respect of post in his absence.

The Tribunal’s view

12. The Tribunal has considered all of the evidence and arguments before it.

13. Section 49(2)(b) of the TMA does not contain a “reasonable excuse” test. It would seem to follow from the wording of that provision, and from the cases of R (Browallia Cal Limited) v GCIT [2003] EWHC 2779 (Admin) at [12]-[14] and R (Cook) v GCIT [2009] EWHC 590 (Admin) [2003] EWHC 2779 (Admin), that the discretion of the Tribunal under s.49(2)(b) of the TMA is at large, and involves a weighing of all relevant considerations.

14. The Tribunal takes into account the public interest in the finality of tax matters and in the finality of litigation, and that time limits for bringing appeals exist for a good reason. Indeed, that can be considered the starting point of any consideration of an application under s.49(2)(b). It is for the applicant to show reasons why an application to appeal out of time should be granted. The burden is not on HMRC to establish reasons why the extension should not be granted.

15. The Tribunal finds that each application to appeal out of time turns on its own particular facts and circumstances. Given that the Tribunal is not limited to a consideration of whether the Appellant has a “reasonable excuse” for the lateness, it will consider the circumstances as a whole, and not merely the soundness of the reasons for the lateness of the appeal.

16. While the burden is on the Appellant to show reasons why permission should be granted to appeal out of time, the strength of the considerations that must be established by the Appellant to justify permission being granted will depend on the strength of the countervailing considerations militating against the grant of permission.

17. In the present case, the Tribunal takes into account the shortness of the period of delay (47 days), the relatively substantial amount at stake (£9,783.71 at the time that the application for permission was made, and now £5,302.02 following cancellation of one of the surcharge notices), the Appellant's prior good record as a taxpayer which has been conceded by HMRC, and the absence of any specific prejudice to HMRC.

18. The Tribunal is unimpressed by suggestions that the Appellant had difficulties receiving mail. The claim that the surcharge notice was received in an office while the Appellant was abroad, and then erroneously put in the basket of a person on leave, carries scant weight in the absence of detailed evidence about exactly when the surcharge notice was brought to the Appellant's attention, and about what arrangements the Appellant had made for receiving mail while abroad, and what went wrong. The Tribunal considers that if the Appellant is absent from his normal mailing address for a period, the responsibility must be on him to make arrangements to ensure that he receives mail sent to him by HMRC in his absence. The Tribunal notes that in relation to the present application, the Appellant applied for and was granted an extension of time for filing his submissions on the basis that he had been absent from the UK during the winter months. Although the Tribunal granted the requested extension, it noted in so doing that the Appellant should take steps to ensure that in future he will receive promptly any document that is sent to him by whatever means are specified by him under rule 13 of the Tribunal's Rules.

19. The Tribunal does not accept the explanation that the Appellants mind was "diverted" by his ongoing exchanges with the HMRC. If anything, the ongoing exchanges with HMRC might have been expected to focus his mind on the need to appeal.

20. The Tribunal is not persuaded that sufficient information or evidence has been provided to establish that the death of the Appellant’s partner had any particular impact on his failure to appeal in time.

21. In the absence of any medical evidence or further particulars as to how health issues caused the Appellant's failure to appeal on time, the Tribunal does not accept this argument.

22. The Tribunal considers this matter to be very finely balanced. Ultimately, the Tribunal decides that the considerations referred to in paragraph 17 above are sufficient to justify a granted permission in this particular case, but only just.

Conclusion

23. Permission is granted to the Appellant under s.49(2)(b) of the Taxes Management Act 1970 to give notice to HMRC, after the expiry of the relevant time limit, of an appeal against the late payment surcharge notice dated 13 May 2010 in respect of the 2007/08 tax year.

24. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

First-tier Tribunal (Tax)