[2011] UKFTT 100 (TC)

TC00976

Appeal number: TC/2010/04328

Leave to appeal out of time -- Taxes Management Act 1970 -- factors to be taken into consideration -- leave to appeal granted

FIRST-TIER TRIBUNAL

TAX

GEORGE LUPSON Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: GUY BRANNAN (TRIBUNAL JUDGE) LESLIE HOWARD (TRIBUNAL MEMBER)

Sitting in public at Holborn Bars, London EC1 on 20 September 2010.

The Appellant appeared in person

Hugh O’Leary for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.       This is an application for leave to appeal out of time under section 49 Taxes Management Act 1970.

The facts

2.       The facts were derived from a bundle of documents produced by HMRC and from unsworn statements by the Appellant at the hearing. The Appellant also produced a tenancy agreement in respect of 1 Filey Lodge and an order of the Basildon County Court dated 19 February 2008.

3.       We find the following facts.

4.       Following an enquiry into the Appellant's tax return for the year ended 5 April 2005, HMRC sent a closure notice on 18 March 2008. The closure notice was sent to the Appellant at his address, 1 Filey Lodge.

5.       In addition, a notice of assessment for the tax year ended 5 April 2003 was also sent to the Appellant by HMRC on 18 March 2008. Again, this notice was sent to the Appellant's 1 Filey Lodge address.

6.       Finally, a notice of assessment for the tax year ended five April 2004 was sent by HMRC on 18 March 2008 to the Appellant at his 1 Filey Lodge address.

7.       The Appellant's accountants appealed against the assessments for the years ended 5 April 2003 and 2005 by a letter dated 22 April 2010. (There appears to be no appeal to HMRC in respect of the year 5 April 2004 in the papers before us but  since HMRC did not raise this point before us we assume that they accept the notice of appeal to this Tribunal as notice to them as well.) The Appeal was therefore made more than two years after the closure notice and the notices of assessment referred to above were issued.

8.       The Appellant said that he had not received these documents. He said that his home, 1 Filey Lodge, had been rented out on a six-month tenancy commencing on 1 October 2007. While 1 Filey Lodge was rented out, the Appellant was living at the Green Dragon Pub in Shenfield, of which the Appellant was the landlord. The Appellant had run into financial difficulties while running the Green Dragon. On 13 March 2008 the Appellant vacated the Green Dragon pursuant to an order of the Basildon County Court dated 19 February 2008, following a claim for possession by the owner of the pub, Punch Taverns (Ptl) Ltd. After a short stay in temporary accommodation with his parents, the Appellant moved back into 1 Filey Lodge in April 2008 when his tenants vacated the property and he has lived there since that time.

9.       On 21 April 2008 HMRC telephoned Stephen Francis, an accountant who had in the past dealt with the Appellant's tax returns. In HMRC's note of that telephone conversation it was recorded that HMRC stated that the correspondence had been returned from Mr Francis's client at 1 Filey Lodge marked "no longer at this address". The note continued:

"Accountant explained that they had not heard form [sic] their client for some time now. They were originally approached to do the payroll for the Green Dragon Pub in Shenfield but Lupson hasn't even returned to their letter of appointment. They have to consider that they are no longer acting fro [sic] him."

10.    On 21 April 2008 HMRC wrote to the Appellant, presumably after the conversation with Mr Francis, enclosing the correspondence from 18 March. The letter was sent to the Green Dragon in Shenfield.

11.    The Appellant had had a serious heart attack in 2005 that had left him with brain damage as a result of lack of oxygen. Medical reports relating to 2005 were contained in the bundle of documents produced by HMRC.

Arguments for Appellant

12.    The Appellant said he had not received the closure notice and the two notices of assessment issued on 18 March. These had been sent to 1 Filey Lodge at a time when it was still occupied by tenants. The Appellant stated that his relationship with the tenants had broken down because of their failure to pay rent and they did not redirect his mail. He accepted that he had not asked the postal services to redirect his mail.

13.    The letter of 21 April 2008, addressed to the Green Dragon Public House, was sent, according to the Appellant, after he had vacated the property, pursuant to the order of the Basildon County Court, on 13 March 2008. He therefore said that he had not received that letter.

14.    The Appellant said that he had heard nothing from HMRC in respect of the closure notice and the notices of assessment until 2009.

15.    The Appellant said that he had visited his local tax office in respect of his self- assessment calculations for tax years ended 5 April 2006, 2007 and 2008 and with their assistance had calculated his self-assessment liability for those years as nil. He produced "Self Assessment -- Tax Calculation" forms for those years.

Arguments for HMRC

16.    Mr O’Leary noted that HMRC had not previously seen evidence that the Appellant was absent from 1 Filey Lodge when the various notices had been sent. He noted that the Appellant had not informed HMRC of his move. In addition, HMRC had not previously seen the repossession order from the Basildon County Court.

17.    Mr O'Leary referred to a statement contained in the HMRC bundle of documents which contained a record of the Appellant's self-assessment record. This contained references to assessments for the tax year ended 5 April 2003 and 2004. The statement was dated as at the 31 March 2008. Mr O'Leary said that a statement in similar terms would have been posted to the Appellant at 1 Filey Lodge, which was the Appellant's address at the time. He submitted that the Appellant would have therefore received a statement showing the relevant amounts due at the beginning of April. However, there is no copy of the actual statement which Mr O'Leary believed had been sent. Mr O'Leary suggested that further statements would have been sent, but none of these statements were in the bundle. In his view the Appellant would have known about the assessments well before the appeal by his accountants in 2010.

18.    Mr O'Leary submitted that there was no reasonable excuse why an appeal had not been lodged within the 30 day statutory time limit. There was no evidence why the Appellant had not contacted HMRC in respect of these assessments prior to April 2010.

19.    Mr O'Leary further submitted that there was no evidence to support injustice to the Appellant and asked that the application for leave out of time be refused.

Discussion

20.    Section 49, Taxes Management Act 1970 (as amended) ("TMA") 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. If HMRC do not agree, Section 49 (2) (b) TMA gives this Tribunal discretion to grant leave to appeal out of time ie beyond the normal 30 day statutory time limit contained in section 31A TMA. In seeking HMRC's agreement for an appeal out of time, 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.

21.    As discussed below, it is well-established, however, that this Tribunal will only give permission where there is good reason to do so and where the interests of justice would be served by granting permission, having regard to all the circumstances.

22.    The normal statutory 30 day time limit on appeals serves an important purpose of producing finality and ensuring that HMRC can regard a taxpayer's affairs as closed off in respect of certain years where no appeals have been lodged. Therefore, permission to bring an appeal out of time should not be granted lightly.

23.     We further note that 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) allows the Tribunal to apply Tribunal Rule 5(3)(a) to permit 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.

24.    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.  It is clear, therefore, that case law relating to the exercise of discretion by the Commissioners to extend time limits is therefore relevant to the question whether the Tribunal should exercise its discretion in this case.

25.    Further guidance can also be obtained from the Civil Procedure Rules 1998 ("CPRs"). The CPRs, in particular CPR Rule 3.9(1), list the factors to be taken into consideration by the English courts in exercising their discretion to extend time limits.  The overriding objectives set out in Tribunal Rule 2 are derived from 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.

26.    CPR Rule 3.9(1) provides:

 (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.

27.    In a recent decision of this Tribunal (Marius Leliunga v HMRC [2010] UKFTT 229 (TC), after setting out the statutory provisions referred to above and CPR Rule 3.9(1), the Tribunal conveniently summarised the relevant case law as follows:

"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). "

Decision

28.    In our view, there is serious doubt whether the Appellant ever received the letters initially posted to him by HMRC on 18 March 2008. Also, there was little documentary evidence in the papers that the Appellant subsequently received the information contained in those letters. We also noted that the Appellant had dealt with his tax affairs in subsequent years by visiting his local tax office. We thought it was probable that if he was aware of the outstanding assessments, which are the subject matter of this application, he would have raised these matters sooner with HMRC. We do not consider the Appellant to be entirely blameless -- no doubt he should have arranged for his mail to be redirected during the six months that he let 1 Filey Lodge. Nonetheless, bearing in mind the Appellant's medical history (in particular the brain damage that he suffered as a result of his heart attack in 2005) we have concluded, in all circumstances, that it would be in the interests of justice to allow this application.

29.    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.

GUY BRANNAN

TRIBUNAL JUDGE

RELEASE DATE: 2 FEBRUARY 2011