First-tier Tribunal (Tax)

[2010] UKFTT 172 (TC)

TC00476

Appeal number: TC/2009/16023

Application for permission to appeal out of time – Whether reasonable excuse – No – Whether any other reasons to allow late appeal – No –Application dismissed – s 49 Taxes Management Act 1970

FIRST-TIER TRIBUNAL

TAX

                                       ALASDAIR MACDONALD                      Appellant

                                                                      - and -

                                 THE COMMISSIONERS FOR HER MAJESTY’S

                                                   REVENUE AND CUSTOMS               Respondents

TRIBUNAL:              John Brooks (Judge)

                                    Chris Perry (Member)                                             

Sitting in public at Vintry House, Bristol on 26 March 2010

The Appellant in person

Ian Compton of HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.       As HM Revenue and Customs (“HMRC”) did not agree to Mr Alasdair MacDonald giving notice of appeal outside the relevant time limit he has applied to the Tribunal for permission to appeal out of time.

Background

2.       Mr MacDonald, in his self assessment tax returns for 2005-06 and 2006-07, made claims to carry forward trading losses against subsequent profits. HMRC commenced an enquiry into the returns which was concluded by the issue of Closure Notices, under s 28A of the Taxes Management Act 1970 (“TMA”), contained in letters dated 27 October 2008. These amended the returns by disallowing the loss relief claims on the basis that the losses were made in a different ‘trade’ to the subsequent profits (s 385 Income and Corporation Tax Act 1988).

3.       Details of how to appeal against the amendment to the return was included in each of the letters of 27 October 2008 which, under the heading ‘Your Right of Appeal’ stated “you have the right of appeal … within 30 days of the date of this notice.” 

4.       Mr MacDonald’s appeal to the Tribunal, which included an application for an extension of time, was made on 10 November 2009 on the grounds that his ‘trade’ is different and difficult to categorise and that the losses and profits “are both elements of this trade and not separate” trades.

Law

5.       Section 31A(1)(b) TMA provides that notice of an appeal must be given within 30 days after the “specified date” which, for the purposes of this appeal, is the date on which the Closure Notices were issued (s 31A(3)(a) TMA).

6.       However, s. 49 TMA provides:

(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.

7.       In Advocate General for Scotland v General Commissioners for Aberdeen City  [2005] CSOH 135, [2006] STC 1218 (“Aberdeen”) Lord Drummond Young said, at [22 – 24]:

“22. Section 49 [TMA] is a provision that is designed to permit appeals out of time. As such, it should in my opinion be viewed in the same context as other provisions designed to allow legal proceedings to be brought even though a time limit has expired. The central feature of such provisions is that they are exceptional in nature; the normal case is covered by the time limit, and particular reasons must be shown for disregarding that limit. The limit must be regarded as the judgment of the legislature as to the appropriate time within which proceedings must be brought in the normal case, and particular reasons must be shown if a claimant or appellant is to raise proceedings, or institute an appeal, beyond the period chosen by Parliament.

23. Certain considerations are typically relevant to the question of whether proceedings should be allowed beyond a time limit. In relation to a late appeal of the sort contemplated by section 49, these include the following; it need hardly be added that the list is not intended to be comprehensive. First, is there a reasonable excuse for not observing the time limit, for example because the appellant was not aware and could not with reasonable diligence have become aware that there were grounds for an appeal? If the delay is in part caused by the actings of the Revenue, that could be a very significant factor in deciding that there is a reasonable excuse. Secondly, once the excuse has ceased to operate, for example because the appellant became aware of the possibility of an appeal, have matters proceeded with reasonable expedition? Thirdly, is there prejudice to one or other party if a late appeal is allowed to proceed, or if it is refused? Fourthly, are there considerations affecting the public interest if the appeal is allowed to proceed, or if permission is refused? The public interest may give rise to a number of issues. One is the policy of finality in litigation and other legal proceedings; matters have to be brought to a conclusion within a reasonable time, without the possibility of being reopened. That may be a reason for refusing leave to appeal where there has been a very long delay. A second issue is the effect that the instant proceedings might have on other legal proceedings that have been concluded in the past; if an appeal is allowed to proceed in one case, it may have implications for other cases that have long since been concluded. This is essentially the policy that underlies the proviso to section 33(2) of the Taxes Management Act. A third issue is the policy that it is to be discerned in other provisions of the Taxes Acts; that policy has been enacted by Parliament, and it should be respected in any decision as to whether an appeal should be allowed to proceed late. Fifthly, has the delay affected the quality of the evidence that is available? In this connection, documents may have been lost, or witnesses may have forgotten the details of what happened many years before. If there is a serious deterioration in the availability of evidence, that has a significant impact on the quality of justice that is possible and may of itself provide a reason for refusing leave to appeal late.

24. Because the granting of leave to bring an appeal or other proceedings late is an exception to the norm, the decision as to whether they should be granted is typically discretionary in nature. Indeed, in view of the range of considerations that are typically relevant to the question, it is difficult to see how an element of discretion can be avoided. Those considerations will often conflict with one another, for example in a case where there is a reasonable excuse for failure to bring proceedings and clear prejudice to the applicant for leave but substantial quantities of documents have been lost with the passage of time. In such a case the person or body charged with the decision as to whether leave should be granted must weigh the conflicting considerations and decide where the balance lies.”

8.       In R (on the application of Cook) v General Commissioners of Income Tax and another (No 2) [2009] STC 1212 (“Cook No 2”) Dyson LJ (as he then was) agreed, at [18], that the analysis in the judgment of Lord Drummond Young provided valuable guidance as to the correct approach to s 49 TMA.

Submissions

9.       Mr MacDonald explained that he had believed, on being told that he could not carry forward the losses as they were made in a different trade to the subsequent profits, that ‘trades’ were clearly defined. He had assumed that there was a table of ‘trades’ in the same way that there are categories of trading for VAT purposes or categories of goods for import/export and as there was not a ‘trade’ that fitted his situation there were not any grounds on which he could appeal.

10.    As he wrote, in his letter of 27 August 2008 to HMRC, Mr MacDonald’s view of this was, “the law is the law”. Unhappy with what he perceived to be the legal position Mr MacDonald took the matter up with his local MP and wrote to the Chancellor of the Exchequer by e-mail, on 6 May 2009, on 6 July 2009, and by fax on 2 September 2009. However, as he did not receive any reply from the Treasury, and after receiving notice of legal proceedings to recover the tax, Mr MacDonald undertook further research and discovered that there was no table of ‘trades’. He then wrote to the local tax office who, after more than a month, informed him that he would have to appeal to the Tribunal whereupon he appealed without delay.

11.    Mr Compton, for HMRC, referred us to Gladders v Prior (HM Inspector of Taxes) [2003] STC 245 in which the Special Commissioner (Dr John Avery Jones) had said, at [7], “a reasonable excuse … is something outside the person’s control … such as illness” and submitted that Mr MacDonald’s failure to appeal for some 13 months after receiving the Closure Notices was not because of something outside his control and therefore did not amount to a reasonable excuse. He contended that as Mr MacDonald had failed to demonstrate that he had a reasonable excuse for the delay in making the appeal the application should be dismissed.

Discussion and Conclusion

12.    Having carefully considered the submissions of the parties we find that the reasons given by Mr MacDonald for the delay in giving notice of appeal; that he believed that he could not appeal because his ‘trade’ was not included in a table describing various trades and that he only became aware of this after undertaking further research following unsuccessful attempts to contact the Chancellor of the Exchequer, do not amount to a reasonable excuse.

13.    Although the Closure Notices, which were dated 27 October 2008, clearly stated that he had “the right to appeal … within 30 days” Mr MacDonald did not write to the Chancellor of the Exchequer until 6 May 2009, over six months later, whereas with reasonable diligence he could have become aware of the grounds for an appeal within the statutory time limit.

14.    We also find that by waiting for over a year after receiving the Closure Notices Mr MacDonald did not give notice of appeal without unreasonable delay after the time limit for appealing had expired.

15.    Although Burton J observed at [27] in R (on the application of Cook) v General Commissioners of Income Tax and another [2007] STC 499, that “the depriving of a party of the opportunity of putting forward an arguably meritorious appeal is itself an obvious prejudice”, neither the issue of prejudice or the merits of his appeal were addressed by Mr MacDonald.

16.    Also, as Dyson LJ said [at 24] in Cook No 2, “there is a public interest in these cases in achieving finality in litigation. There is a public interest in promoting the policy that challenges to assessments by way of appeal should be brought within the short period specified by the statute.”

17.    After taking these various considerations into account we note that even if we were to assume that Mr MacDonald would ultimately succeed in his appeal, it is clear from the comments of Dyson LJ in Cook No 2, where he said [at 24] “the fact that he was assumed to have an appeal which was unanswerable on the merits was clearly a relevant factor. But it could not have been decisive”, that this in itself is insufficient to determine whether his application should succeed.

18.    Although we consider the prejudice to Mr MacDonald by being deprived of an opportunity to appeal to be relevant we find that it is outweighed by the lack of any reasonable excuse for the delay in bringing the appeal, something which could have been avoided by the exercise of reasonable diligence by Mr MacDonald.

19.    In reaching this conclusion we are mindful of the comments of Dyson LJ in Cook No 2 [at 24], that “it is incumbent on the claimant [in this case Mr MacDonald] to identify particular reasons why he should be allowed to appeal many months outside the period specified by Parliament. The burden was all the greater where neither of the two conditions specified in section 49(1) was satisfied.”

20.    Having considered all the circumstances of the case we do not consider that Mr MacDonald has identified why he should be allowed to appeal outside of the statutory time limit and therefore dismiss his application.

21.    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.

JOHN BROOKS

TRIBUNAL JUDGE

RELEASE DATE: 14 April 2010