[2010] UKFTT 229 (TC)

TC00530

Appeal number: TC/2009/16666

INCOME TAX – preliminary point – whether tribunal should exercise its discretion to grant extension of time to allow a late appeal - appeal itself made many year after disputed decision made – application refused

FIRST-TIER TRIBUNAL

TAX

                                           MARIJUS LELIUNGA                          Appellant

                                                                      - and -

                                 THE COMMISSIONERS FOR HER MAJESTY’S

                                                   REVENUE AND CUSTOMS               Respondents

                        TRIBUNAL: NICHOLAS ALEKSANDER (TRIBUNAL JUDGE)                                                         PHILIP GILLETT FCA                                          

Sitting in public in London on 20 April 2010

C Ward, an officer of HM Revenue and Customs, for the Respondents

The Appellant having failed to attend the hearing but the Tribunal being satisfied that reasonable steps had been taken to notify the Appellant of the hearing and that it was in the interests of justice to proceed with the hearing.

© CROWN COPYRIGHT 2010

DECISION

1.     This decision relates to an application made by the Appellant, Mr Marijus Leliunga ("Mr Leliunga") for an extension of time in which to lodge his appeal.  The appeal is against an adjustment to his self assessment for 2003/4 made by a closure notice dated 12 January 2007, and against an assessment for 2004/5 dated 12 January 2007.

2.       Neither Mr Leliunga nor his representative attended the hearing.  Immediately prior to the hearing, the Tribunal's clerk telephoned both Mr Leliunga and his representatives Eurofirma Limited ("Eurofirma").  There was no response from Mr Leliunga's telephone, but the clerk spoke to the individual at Eurofirma responsible for Mr Leliunga's application, who told the clerk that no one would attend the appeal and it should proceed in the absence of the Appellant.  Given all the circumstances, the Tribunal was satisfied that it was in the interests of justice to proceed with the hearing.

3.       HMRC were represented by Mr C Ward.  The Tribunal had a bundle of documents which had also been provided to Mr Leliunga's representatives prior to the hearing.

Background facts

4.       The appeal relates to enquires into Mr Leliunga's tax returns for 2003/4 and 2004/5.  At the time Mr Leliunga's tax return for 2003/4 was prepared, he was represented by RK Chadder & Co.  However, in relation to the enquiries, he was represented by A2A Associates ("A2A").

5.       The enquiry into the 2003/4 return was commenced by notice dated 14 December 2005 which was sent to Mr Leliunga.  The enquiry continued during 2006 with correspondence between HMRC and A2A.  On 12 May 2006, HMRC wrote to A2A giving their views on the information they had received to date, and requesting details about various bank deposits.  They also wrote to Mr Leliunga to give notice of their intention to enquire into his 2004/5 tax return.  A2A replied on 23 June 2006 with information about the persons who had made the deposits.  In the letter, A2A also confirmed to HMRC that they had told Mr Leliunga that he would need to provide evidence that these deposits did not represent taxable income.  On 31 July 2006, HMRC wrote to A2A setting out their views on the 23 June letter and requesting further information.  They also stated that they would review the 2004/5 figures.

6.       HMRC received no substantive response to their letter of 31 July 2006.  Accordingly on 12 January 2007 they issued a closure notice amending the 2003/4 self assessment, and issued a tax assessment in respect of 2005/5.  The closure notice and the assessment were sent to Mr Leliunga.  Both the closure notice and the assessment gave details of Mr Leliunga's right to appeal.

7.       On 24 January 2007 A2A telephoned HMRC and stated that they had no contact with Mr Leliunga for some time and did not know his whereabouts, and that they did not intend to appeal against the closure notice or assessment.

8.       Since January 2007, HMRC and Mr Leliunga have been in periodic contact about the tax payable under the closure notice and the assessment.  We were shown print-outs of logs kept by HMRC of telephone calls and other contacts that HMRC have had with Mr Leliunga.  In particular we note that in May 2007, Mr Leliguna visited HMRC's office in Chadwell Heath with questions about the tax liabilities.  The officer at Chadwell Heath offered Mr Leliguna the opportunity to use the office telephone to call the officer who had dealt with the case.  However Mr Leliguna left stating that he wanted to speak to his agent first. 

9.       On 15 May 2009 HMRC were telephoned by Eurofirma (the firm representing Mr Leliunga in this application).  They made enquires about the closure notice and assessment.  Later that day, HMRC wrote to Eurofirma confirming the matters discussed on the call, stating that the business records of Mr Leliunga would have been returned to A2A, and that the enquiry file had gone into storage and could be difficult to locate.  However HMRC gave summary details of the irregularities identified and the adjustments made based on information available from HMRC's computer system.  Mr Ward told us that Eurofirma had prepared Mr Leliunga's tax return for 2006/7, which was submitted in April 2007.  Eurofirma must therefore have represented Mr Leliunga from some date prior to the submission of that tax return – only a few months after the issue of the closure notice and the assessment.

10.    No subsequent correspondence or enquiry was raised by Mr Leliunga or his representatives until 24 November 2009, when a notice of appeal (including an application for an extension of time) was sent to the Tribunal.

The law

11.    By section 31A, Taxes Management Act 1970, notice of appeal must  be given to HMRC in writing within 30 days.  In this case, no notice of appeal was given to HMRC; notice of appeal was made to this Tribunal.  HMRC are prepared to treat the notice given to the Tribunal as notice to them.  The notice of appeal given to the Tribunal was more than 2 years and 10 months after the dates of the closure notice and the assessment.

12.    Section 49, Taxes Management Act 1970 (as amended) provides that notice may be given after the 30 day time limit if HMRC agree, or – if HMRC do not agree – if the Tribunal gives permission.

13.    Section 49 requires the taxpayer to satisfy HMRC that he had a reasonable excuse for the delay, and that the request to appeal late was made without unreasonable delay after the reasonable excuse ceased (section 49(5) and (6)).  No such conditions attach to the Tribunal's discretion to permit a late appeal.

14.    Rule 5(3)(a) of the Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009 ("the Tribunal Rules") gives the Tribunal discretion to "extend or shorten the time for complying with any rule, practice direction or direction, unless such extension or shortening would conflict with a provision of another enactment setting down a time limit".  Tribunal Rule 20(4) provides for the Tribunal to apply Tribunal Rule 5(3)(a) to allow for an extension of time for the filing of an appeal.  In considering whether to extend a time limit, the Tribunal is required to seek to give effect to the overriding objective set out in Tribunal Rule 2.

15.    We note that the Taxes Management Act 1970 was amended with effect from 1 April 2009 to take account of the creation of this Tribunal.  The Act, prior to its amendment, included similar provisions which gave the general and the special commissioners (the predecessors to this Tribunal) discretion to extend the time limit for filing appeals.  Case law relating to the exercise of discretion by the appeal commissioners to extend time limits is therefore of relevance to the discretion to be exercised in this case.

16.    We also note that the Civil Procedure Rules 1998 ("CPRs") were introduced in 1999 which changed the factors to be taken into consideration by the English courts in exercising their discretion to extend time limits.  In particular CPR 3.9(1) sets out a list of factors to be considered by the court when exercising discretion (amongst other things) to extend any time limit. The overriding objectives set out in Tribunal Rule 2 are modelled on the overriding objectives set out in Rule 1.1 of the CPRs.  We therefore take account of the approach taken by the courts under the CPRs in considering whether and how to exercise our discretion.

17.    CPR Rule 3.9(1) reads as follows:

 (1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order the court will consider all the circumstances including –

(a) the interests of the administration of justice;

(b) whether the application for relief has been made promptly;

(c) whether the failure to comply was intentional;

(d) whether there is a good explanation for the failure;

(e) the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant pre-action protocol;

(f) whether the failure to comply was caused by the party or his legal representative;

(g) whether the trial date or the likely trial date can still be met if relief is granted;

(h) the effect which the failure to comply had on each party; and

(i) the effect which the granting of relief would have on each party.

18.    We were referred to the decision of the Court of Session (Outer House) in  Advocate General for Scotland v General Commissioners for Aberdeen City [2005] TC 391 and a decision of the High Court in R (oao Cook) v General Commissioners of Income Tax [2009] EWHC 590.  We derive from these cases the principle that the Tribunal has to take account of all factors relevant to allowing an extension to a time limit – which would include (but are not limited to) the express statutory conditions in section 49(5) and (6)  that apply to HMRC.  This is consistent with the approach taken in the CPRs.  In particular CPR 3.9(1)(d) addresses whether there was a good explanation for the failure (in other words, was there a reasonable excuse), and CPR 3.9(1)(b) addresses whether the application was made promptly (in other words was there unreasonable delay).

The submissions of the parties

19.    The notice of appeal to the Tribunal gives two grounds for the application for the appeal to be allowed late:

(a)        "Enquiry papers have gone and Inland Revenue cannot to locate them, and they cannot to open an enquiry"; and

(b)        "Lack of information from previous tax adviser to our client"

20.    Theses grounds give no background to the delay and give no explanation for the delay.  In our view, neither of these grounds justifies giving permission for a late appeal.

21.    The first ground is irrelevant to the application.  Whether or not HMRC have lost their files makes no difference to Mr Leliunga's ability to file an appeal on time (although it might have a bearing on HMRC's ability to defend any such appeal).  In any event, we are satisfied that the first ground – that the enquiry papers have gone missing – is not correct.  In their letter of 15 May 2009 HMRC stated that the papers had been archived and may be difficult to locate.  They did not state that the files were missing – and indeed since that letter, the files have since been located and retrieved. 

22.    Nor do we consider that the lack of information from a previous advisor provides grounds for giving permission in the circumstances of this case. The grounds do not state why Mr Leliguna has had difficulty obtaining information from his previous advisor – and whether the difficulty was caused by Mr Leliguna or by A2A. 

23.    Even if the difficulty was caused by A2A, we consider that Mr Leliguna would have sufficient information to decide whether to file an appeal without needing to obtain detailed information from A2A.  The information given by A2A to HMRC about the identity of the depositors could only have come from Mr Leliguna, and A2A confirmed in their correspondence that they had expressly informed Mr Leliguna that he would need to produce evidence that these deposits did not represent taxable income.  We therefore infer (and we find) that A2A had kept Mr Leliguna informed about the progress of HMRC's enquiries. In particular he was aware that one of the principal issues under enquiry was whether the bank deposits being reviewed represented taxable income. The closure notice and the assessment were sent to Mr Leliguna as well as to A2A.  He therefore has his own copies of these documents.  Both these documents (and we have seen copies of them), clearly set out Mr Leliguna's right to appeal and the relevant time limits. Mr Leliguna was therefore aware of the time limit applicable to appeals.  We note that Mr Leliguna has been professionally represented throughout (although not necessarily by the same firm).  All of these firms would have been aware of the time limits for appeals.

24.     Mr Leliguna has been in contact with HMRC at intervals about this tax since the closure notice and tax assessment were issued – both by telephone and by visiting HMRC's office at Chadwell Heath. At no point until Eurofirma's telephone call on 15 May 2009, was any suggestion made that Mr Leliguna disagreed with the amounts of tax determined by the closure notice and tax assessments. 

25.    HMRC submits that it is in the interests of legal certainty and public interest for there to be finality to tax obligations.  It is prejudicial to HMRC to be required to deal with late applications.  Mr Leliguna was specifically asked during the enquiries to produce evidence to prove that bank deposits did not represent taxable income, and did not do so.  HMRC question whether there is any further evidence that could now be produced on behalf of Mr Leliguna - five years after the years in question - to support his case.  The grounds of his application do not indicate that any such evidence exists.

Conclusions

26.    Having reviewed the grounds set out in the application in the light section 49 TMA and also of such of the factors in CPR 3.9(1) as are relevant, we have decided that we should not give permission for the appeal to be made after the relevant time limit.  Accordingly in accordance with Tribunal Rule 20(4)(b) the Tribunal must not admit the notice of appeal.

27.    This document contains full findings of fact and reasons for the decision.

28.    The hearing having taken place in the absence of the Appellant, the Appellant has a right to apply for this decision to be set aside.  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.

NICHOLAS ALEKSANDER

TRIBUNAL JUDGE

RELEASE DATE: 20 May 2010