First-tier Tribunal (Tax)

Neutral Citation: [2025] UKFTT 523 (TC)

Case Number: TC09513

FIRST-TIER TRIBUNAL

TAX CHAMBER

In public by remote video hearing

 

Appeal reference: TC/2024/01872

VAT - application for permission to bring a late appeal - application allowed - permission granted

 

Heard on: 25 April 2025

Judgment date: 8 May 2025

 

 

Before

 

TRIBUNAL JUDGE NIGEL POPPLEWELL

MISS PATRICIA GORDON

 

 

Between

 

DUAL HOMES AND LAND LIMITED

Appellant

and

 

THE COMMISSIONERS FOR HIS MAJESTY'S REVENUE AND CUSTOMS

Respondents

 

Representation:

 

For the Appellant:         Mr Tore Helle Director of the Appellant

 

For the Respondents:    Mr Stuart Redpath litigator of HM Revenue and Customs' Solicitor's Office

 

DECISION

INTRODUCTION

1.             This decision deals with an application, by the appellant (or "the company") for permission to bring appeals against three decisions made by HMRC in September and October 2023 ("the application"). The appeals were not made until March 2024. These were therefore made late. HMRC opposes the application.

2.             The underlying Value Added Tax ("VAT") issue appears to be that the appellant has failed to provide satisfactory evidence to support VAT repayment or credit claims made in two VAT periods in 2022.

3.             For the reasons given later in this decision, we have decided to grant the application and thus we give permission for the appellant to bring its appeals out of time.

THE LAW

4.             There was no dispute about the relevant law relating to the time limits within which the appellant should have made its appeal. Following notification of an appealable decision to a taxpayer, the taxpayer then has 30 days within which either to appeal that decision to the tribunal or to ask for a statutory review. A request for a statutory review stops time running. Once that statutory review has been concluded and notified to the taxpayer, the taxpayer then has 30 days within which to make an appeal to the tribunal.

5.             The tribunal has power to permit an appeal to be made after the end of the foregoing period.

6.             Under Rule 2 of the First-tier Tribunal (Tax Chamber) Rules 2009 (as amended) ("the Rules"):

Overriding objective and parties' obligation to co-operate with the Tribunal

(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.

7.             When deciding whether to give permission, the tribunal is exercising judicial discretion, and the principles which we should follow when considering that discretion are set out in Martland v HMRC [2018] UKUT 178 (TCC), ("Martland") in which the Upper Tribunal considered an appellant's appeal against the FTT's decision to refuse his application to bring a late appeal against an assessment of excise duty and a penalty. The Upper Tribunal said:

"44.      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:

(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 "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 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.

45.     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.

46.     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".

8.             In HMRC v BMW Shipping Agents [2021] UKUT 91, the Upper Tribunal relevantly said this:

"52.   We will approach the third Martland stage by performing, as Martland requires, a balancing exercise. In that balancing exercise, the need for litigation to be conducted efficiently and at proportionate cost and for directions to be complied with must be given particular weight. However, it remains a balancing exercise which invites, among other considerations, a consideration of the nature of the reasons for the breach of direction and the results that would follow if the appeal is, or is not, reinstated".

THE EVIDENCE AND THE FACTS

9.             We were provided with a substantial bundle of documents. Mr Helle, who presented the case for the appellant, also gave oral evidence. Mrs Helle, who was also present at the hearing, chipped in from time to time. From this evidence we find as follows:

(1)          In 2022 the appellant's business was constructing new residential properties. It seems, therefore, that the supplies made by the company during this period were predominantly zero rated.

(2)          For the VAT period 04/22, the appellant claimed input tax credit of £88,107.91 in its VAT return for that period.

(3)          In November 2022, HMRC opened an enquiry into this return. In an email dated 24 November 2022, HMRC sought information and records concerning the appellant's business. Following a visit to the appellant's premises on 9 December 2022, further information was sought by HMRC.

(4)          There was further correspondence between the parties between December 2022 and February 2023 during which time the appellant provided certain information, but this was, in HMRC's view, inadequate to verify the VAT recovery claim made in the appellant's return.

(5)          A second meeting between the parties took place in February 2023 following which there was further correspondence concerning the evidence which HMRC required to verify the recovery claim in the return.

(6)          On 15 March 2023, having been sent screenshots from the appellant's accounting software showing that the returns for the VAT periods 04/22 and 07/22 had been submitted by the appellant, HMRC responded stating that the input tax credits for those periods would be reduced to nil as no evidence had been provided to substantiate the claims.

(7)          On 12 April 2023, HMRC issued two of the three appealable decisions. Firstly, in respect of the VAT period 04/22, they issued a letter adjusting the amount of input tax claimed in the return to 0, thus denying the appellant input tax credit of £88,170.91. Secondly, they issued a VAT assessment for £14,000 for the VAT period 07/22.

(8)          On 14 May 2023 the company requested an independent statutory review of these decisions.

(9)          HMRC's review conclusion letter is dated 17 August 2023. It recorded that the appellant had been registered for VAT since 23 November 2014. It also recorded the history of the requests made by HMRC for information concerning the two VAT returns, and the information that had been supplied by the appellant. It concluded that the appellant had failed to provide the documents which were necessary to validate the appellant's input tax recovery claims. Nor had it established (contrary to assertions made by the appellant) that it had been incorrectly charged VAT by its suppliers (or that VAT had been incorrectly collected from those suppliers). The reviewing officer therefore upheld the original decisions.

(10)      On 8 September 2023, HMRC issued their third appealable decision, namely an assessment for the output tax due for the period 04/22 arising as a consequence of the reduction of the input tax for that period, having been reduced to 0. That assessment is in the amount of £2,265.28. The appellant did not seek a statutory review of this assessment.

(11)      On 15 September 2023, in an email to HMRC, the appellant stated that it "will issue an appeal as recommended by you..." However, no such appeal was actually submitted until 11 March 2024.

(12)      Between September 2023 and March 2024, there was correspondence between the appellant and HMRC. In particular, on 20 February 2024, the appellant sent an email to the investigating officer, in response to a letter from HMRC indicating that they intended to destroy material that they had procured during the investigation, indicating that the appellant was "preparing clear evidence that we will present to the High Court-asking them to quash your decision...".

(13)      A further email of 5 March 2024 sets out, once again, the appellant's view of the strength of its position, and justification for the VAT recovery claimed in the relevant periods. In response to this letter, the investigating officer indicated that to take the matter further, the appellant needed to appeal to the tribunal requesting a late appeal.

(14)      Mr Helle's evidence as to why he had taken so long to make the appeals was as follows. There was a difference between asking HMRC to review the April 2023 decisions and bringing an appeal against all three decisions. In order to bring his appeal, he wanted to be sure of his legal position (or rather, the legal position of the company). To do this he needed to review over 350 pages of documentation. He also wanted to clarify the position with HMRC. He had telephoned HMRC  between 8 and 10 occasions. Sometimes HMRC answered whilst on other occasions they did not. When he spoke to HMRC personnel, they couldn't advise him as to the correct VAT position. However, in the final telephone conversation which he held with an HMRC officer on 11 March 2024, and which precipitated the appeal, that officer told him that he was "VAT exempt".

(15)      He further stated, and this was supported by Mrs Helle, that they had insufficient funds to take independent legal or accounting advice.

DISCUSSION

Submissions

10.         In summary Mr Redpath submitted as follows:

(1)          The appeal against the appealable decisions has been made more than five months late which is serious and significant.

(2)          No good reasons have been put forward by the appellant for this delay. No corroborating evidence has been provided to support Mr Helle's testimony that he attempted to clarify the position with HMRC, on the telephone, between September 2023 and March 2024.

(3)          In any event, it was made expressly clear to the appellant in the appeal decisions themselves and in the statutory review conclusion letter, that the appellant had 30 days within which to bring its appeal. No technical knowledge was needed to interpret this information. It is set out as a matter of plain English.

(4)          The appellant's underlying case is weak. It has had the opportunity to provide evidence to justify its input tax recovery claims but has failed to provide it. It is not clear whether the appellant is saying that it makes exempt supplies or zero-rated supplies. Presumably the latter as it is seeking to recover input VAT. If the appellant has been erroneously charged VAT on supplies to it, it must seek redress from its suppliers.

(5)          HMRC are entitled to rely on the statutory time limits set out in the legislation.

11.         In summary Mr Helle submitted as follows:

(1)          The company had submitted nine VAT returns which had not been questioned by HMRC and in which HMRC had given the company the credit for input VAT which it had sought on those returns.

(2)          Following receipt of the review conclusion letter and the 8 September 2023 assessment for output tax, he wanted to make sure that his legal position was correct before he made an appeal. He therefore went through a very large volume of documentation and sought to clarify the legal position direct with HMRC over the telephone.

(3)          It was only on 11 March 2024 following a telephone conversation with an HMRC officer who confirmed the VAT status of the appellant, that he made the appeal on behalf of the company.

(4)          The company's position is a strong one in that it is entitled to recover its input VAT.

Our view

12.         The first stage of the Martland analysis is to establish the length of the delay. We agree with Mr Redpath that the delay is in excess of five months and that this is serious and significant. We therefore need to proceed to the next stage of the analysis, namely to establish the reasons why this delay occurred.

13.         It was Mr Helle's evidence that it was because he wanted to be certain of his legal position and to do this he needed to analyse a large file of documents and to speak to HMRC. This was in light of the fact that he had submitted nine VAT returns without having any difficulty in recovering the input VAT. He attempted to obtain clarity from HMRC but without success until 11 March 2024 when he was told that the company's VAT status was "exempt" (we do not think he means this in the technical VAT sense, just that the company was entitled to reimbursement or credit for the input VAT in question).

14.         Mr Redpath, although he did not seriously cross-examine Mr Helle on this, did question the reliability of this evidence and pointed out that there was little corroboration. However, we accept the reliability of Mr Helle's testimony on this point. There was corroboration from comments made by Mrs Helle. Mr Helle presented as a credible witness. Furthermore, on behalf of the company he had requested a statutory review within the statutory time limit. Therefore, there must have been a reason why he did not appeal within the 30 day period, and we accept that that reason was that given by Mr Helle.

15.         It is also clear from the correspondence that the appellant had told HMRC that it intended to appeal, and indeed, from the email of 20 February 2024, that it was collecting the evidence it needed to do this.

16.         We now need to carry out an evaluation of all the circumstances, assessing the merits of the reasons given above and the prejudice which would arise to the parties by granting or refusing permission. We take into account the particular importance of the need for litigation to be conducted efficiently and at proportionate cost, and that statutory time limits should be respected. We do not attribute much weight to the fact that the appellant took no professional advice, but we can have regard to any obvious strengths or weaknesses of its case.

17.         This is very finely balanced. We cannot see how HMRC will be genuinely prejudiced if this application is granted. It is not as though they have shut their file, and the resources needed to proceed with this appeal will simply be deployed now rather than at an earlier period which would have been the case had the appellant appealed in time. Furthermore, HMRC were on notice that the appellant intended to bring an appeal. Mr Helle had specifically told HMRC this in correspondence.

18.         As regards the appellant's attitude towards the tribunal's rules and procedure, we do not consider that the actions taken by Mr Helle in seeking to secure the company's legal position for bringing appeal, demonstrate any disrespect. It is true that he could have put in a protective appeal and then considered the merits thereafter. But we can understand why he did what he did.

19.         Indeed, it is to Mr Helle's credit that he sought to clarify the position by engaging with HMRC, something which HMRC often criticise taxpayers for failing to do in other cases.

20.         And we accept the evidence that as soon as Mr Helle received clarity from HMRC which he interpreted as indicating that he could obtain recovery of the input tax in dispute, he immediately submitted an appeal. This demonstrates to us a commendable engagement with the appeal process.

21.         The primary substantial argument, by the appellant, as to why it should benefit from the input tax it has paid to its suppliers, is that it has evidence of the supplies made by those suppliers. To date it does not appear that the appellant has provided evidence satisfactory of this, to HMRC. But that is just HMRC's view. The evidence which the appellant may be able to provide to a tribunal may be wholly adequate to justify a deduction or credit for that input tax.

22.         Furthermore, although this was not submitted in such technical terms, it seems that one of the arguments which has been made by the appellant concerns recovering from HMRC, VAT it has wrongly paid to its suppliers. HMRC have dismissed this argument, but this sort of Reemtsa claim is currently the subject of litigation (see the FTT decision in Chris Poulton [2025] UKFTT 240) which concerns the legitimacy of such a claim following the UK's withdrawal from the EU.

23.         Although the appellant's primary ground of appeal is that it does have evidence that it paid input VAT to its suppliers, it is our view that the appellant should have the opportunity to run this alternative Reemtsa type argument.

24.         Mr Helle said at the hearing that the reason he did not take professional advice was because they did not have the money. We would refer him to paragraph 34 of the Chris Poulton decision where details are given of the Revenue Bar Association and the possibility of seeking representation, on a pro bono basis, from a member of that Association.

25.         It is our view that the balance of prejudice weighs in favour of granting the appellant's application and giving it permission to appeal out of time.

DECISION

26.         We grant the application and give the appellant permission to appeal out of time.

RIGHT TO APPLY FOR PERMISSION TO APPEAL

27.         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.

 

 

Release date: 08^th MAY 2025