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What is the procedure for trying to get HMRC to agree to a late appeal? Keith Gordon, author of Tax Chamber Hearings: A User’s Guide, reviews the law and practice relating to late tax appeals.

Basic Time Limit for Tax Appeals

The general rule governing the timing of tax appeals is that taxpayers should do one of the following within 30 days:

• give a written appeal against the decision to HMRC; or
• (in indirect tax cases) either accept the offer of an internal review or notify the appeal direct to the Tribunal.

In Income Tax, Capital Gains Tax, Corporation Tax, Stamp Duty, Stamp Duty Land Tax, Stamp Duty Reserve Tax and Inheritance Tax cases, however, HMRC have the express permission to accept appeals against their assessments, determinations and amendments more than 30 days after such a decision is made (TMA 1970 s 49(2) and other references).

HMRC Discretion

Although HMRC have a general discretion to accept appeals made late in such cases, they are obliged to accept late notices of appeal in cases where all of the following conditions are met:

• the taxpayer has given written notice requesting the appeal to be accepted;
• HMRC are satisfied that there was a reasonable excuse for not giving the notice before the relevant time limit; and
• HMRC are satisfied that the request was made without unreasonable delay after the reasonable excuse ceased.

In the case of N A Dudley Electrical Contractors Ltd [2011] UKFTT 260 (TC), concerning a wholly different situation but turning on a similar test, HMRC tried to argue that “reasonable excuse” was limited to exceptional circumstances. The Tribunal disagreed with that argument and held that the phrase should be given its normal meaning.

Reference to the Tribunal for Late Appeals

Strictly, there is no formal procedure for asking the Tribunal to require HMRC to accept a late appeal. A letter would suffice explaining the dates on which the appealable decision and the attempted appeal were made and the date on which HMRC refused to accept the appeal.

However, it is always helpful for taxpayers to provide a brief outline of the arguments it would wish to make to assist the Tribunal with the handling of the case.

Tribunal Discretion

It was held in Browallia Cal Limited [2003] EWHC 2779 (Admin) and Cook [2007] EWHC 167 (Admin) that the Tribunal’s discretion is not limited to ascertaining whether or not there was a reasonable excuse for the lateness of the appeal. Instead, the Tribunal should consider the overall fairness to the respective parties and the risk of injustice being caused by the right of appeal being denied.

Factors to Consider

In Hugh Love [2005] CSOH 135, the Court of Session noted the importance of taxpayers adhering to statutory time limits that, in Parliament, had been considered to give sufficient time for compliance. Thus, late appeals should be accepted only in exceptional cases. The Court’s comments could support an argument that, contrary to the view expressed in Dudley, taxpayers would have to show the existence of exceptional circumstances if a late appeal is to be accepted.

However, the main value of the Hugh Love case is a non-exhaustive list of factors that a Tribunal ought to consider when applying a balancing exercise as to whether or not it would be right for a late appeal to be accepted:

• whether or not there was a reasonable excuse for the delay (any delay caused in part by HMRC would be a significant factor);
• the promptness of the taxpayer’s action as soon as the excuse ceased;
• the balance of prejudice to each party by accepting or refusing the late appeal;
• the balance of public interest – i.e., the need to ensure general compliance with statutory time limits; and
• the impact upon one party’s case caused by the delay because of the loss of evidence.

Sometimes, the Tribunal will consider a similar checklist found in the Civil Procedure Rules (“CPR”) (used in the County Court and High Court). Such a list is of marginal assistance as it can prompt the questions to be considered. However, as held in Pledger v HMRC [2010] UKFTT 342 (TC), the CPR guidance should not be followed slavishly as it was designed for a different purpose. Furthermore, as held in St Albans Girls’ School v Neary [2009] EWCA Civ 1190 (an Employment Tribunal case), it would certainly not constitute an error of law if a factor listed in the CPR were not expressly considered by the Tribunal (whereas reference to each of the factors is mandatory in the civil courts).

The Factors in Practice

Although it would be wrong for a Tribunal to condense its balancing exercise in such a way, a rule of thumb that might be used is to ask the following the questions:

• Does the taxpayer have an arguable case? This is a fairly low threshold and asks merely whether or not accepting a late appeal is a waste of everyone’s time.
• If so, is the delay still so long so as to make it inappropriate for a late appeal to be accepted?

NVM Private Equity Limited v HMRC [2010] UKFTT 106 (TC) is an example where the latter point overrode the first. The taxpayer, had the appeal been made on time, would have been guaranteed success because shortly afterwards HMRC publicly changed its approach to the matter under consideration. However, that was a case where the company’s accountants failed to bring an appeal for more than a year after being expressly told of the need to do so. There are nevertheless some concerns with the approach taken by the Tribunal in this case as noted in my article on the case in Taxation (Vol. 166, 4276, 14 October 2010, pp10—13). More importantly, it is merely an example of the approach taken by the Tribunal and it would be wrong for the fifteen-month timescale in that case to be considered a guide for other cases: each must be considered on its own merits.

(Adapted from Tax Chamber Hearings: A User’s Guide, by Keith Gordon.)