The facts

Introduction

The Appellant’s Rank claims

“We further wish to claim that this overpayment be stood over pending the result of any appeal that HM Revenue & Customs may wish to make in the Rank Group case in its ongoing Linneweber Appeal.”

“Your client’s [sic] also have a right to appeal to a Tribunal if you wish.  Public Notice 700 (section 28 – Appeals) gives more detailed advice regarding how to appeal and this is available online at www.hmrc.gov.uk or by ringing our National Advice Service on 0845 010 9000 (you can call between 8.00 am and 8.00 pm, Monday to Friday.)”

(1)         A letter dated 1 April 2009 from “017 Voluntary Disclosure Unit” at an address in Sunderland.  This letter referred specifically to the MCB Condé Nast Claim (though HMRC referred to it, in their usual style, as a “Fleming” claim) and said HMRC had decided to appeal the tribunal decision on MCB, consequently it was rejecting the Appellant’s claim.  It went on to say:

“If you disagree with this you may request a local reconsideration.  Any reconsideration does not affect your right to appeal to an independent Value Added Tax Tribunal under VAT Act 1994 section 83(T).  The procedure and time limit for making an appeal are set out in Notice 700, section 28 and in the explanatory leaflet issued by the president of the tribunals, obtained from our National Advice Service.”

(2)         A letter dated 1 April 2009 from the same HMRC office, acknowledging receipt of a claim “in respect of an alleged breach of fiscal neutrality regarding UK law relation to the VAT liability of gaming machines before 6 December 2005.”  It could be inferred from this that the letter related to the Slots Condé Nast Claim.  It rejected the claim (stating that HMRC did not accept there was any infringement of fiscal neutrality, and also stating that since fixed odds betting terminals only came into existence in 2001, claims for earlier periods were unacceptable), and included the same concluding paragraph as their other letter of the same date.

(3)         A letter dated 2 April 2009 from the Stroud office to which all the claims had originally been sent.  This letter, headed simply with the Appellant’s VAT number, was quite short:

“I write to acknowledge receipt of your claim dated 11^th March 2009, received in this office on 17^th Match [sic] 2009. This will be looked at in detail and a written response informing you of our decision will be issued shortly.”

“At the moment, until the result of the voluntary disclosure review is known this assessment will remain on file, but will not be enforced.”

Mr Pierce regarded this as good news, as it implied HMRC were contemplating the repayment of VAT which had been claimed in relation to MSB and MCB.

“I await your written comments as to why these claims should not be rejected on the ground of unjust enrichment before I notify the Voluntary Disclosure Unit accordingly.”

“I returned everything to the Voluntary Disclosure Seat for repayment action as far as I was concerned.  I would not expect to hear anything further myself as my involvement has finished.  I would suggest you contact the Vol Dis Seat, presumably via the National Advice Service to see what the delay is.”

“Any claims in relation to other types of bingo or gaming machines will be retained on file and dealt with in due course.”

Mr Pierce took this to be recognising that the other disputed claims were simply “on hold” until the Rank litigation was finalised.

“Irrespective of the points of law relating to the liability of the supplies above, I would also point out that, should the claims be allowed in the future, that these will be subject to capping regulations.”

Mr Pierce took this to be an acknowledgment that HMRC would reconsider their position on the MSB claims generally in the light of the outcome of the Rank litigation.

If you have any further information that you want me to consider, please send it to me now.

If you do not agree with my decision, you can

·        ask for my decision to be reviewed by an HMRC officer not previously involved with the matter, or

·        appeal to an independent tribunal

If you opt for a review you can still appeal to the tribunal after the review has finished.

If you want a review you should write to, [sic] within 30 days of the date of this letter, giving your reasons why you do not agree with my decision.  We will not take any action to collect the disputed tax while the review of the decision is being carried out.

If you want to appeal to the tribunal you should send them your appeal within 30 days of the date of this letter.”

The law

“An appeal… is to be made to the tribunal before… the end of the period of 30 days beginning with… in a case where P is the appellant, the date of the document notifying the decision to which the appeal relates…”

(1)         What is the purpose of the time limit?  In his submission, it was to provide certainty, so that the government could plan its income and expenditure without unexpected surprises caused by stale old claims.

(2)         How long was the delay?  He submitted that the Slots Capped Claim was almost 2 ½ years out of time, and the other two claims were closer to 3 years out of time.

(3)         Is there a good explanation for the delay?  He submitted there was not.  The claims were rejected and the Appellant was informed in the rejection letters that it would need to appeal that decision if it did not accept it.  It had failed to do so.  Any suggestion that HMRC had misled the Appellant or David Bailey into thinking there was no need to appeal was misconceived, especially towards the end of the period of delay.

(4)         What will be the consequences for the parties of an extension of time?  For HMRC, the consequence would be that they would be at risk of having to fund claims which they had previously considered closed for some time.  That would conflict with the principle of certainty and finality and fly in the face of the general policy that challenges to assessments should in general be brought within the statutory period.

(5)         What will be the consequences for the parties of a refusal to extend time?  Obviously, the result would be that the Appellant would lose potentially valuable claims.

(1)         The interests of the administration of justice.  He argued that “the interests of justice” required permission to be granted.  The Appellant had, he submitted, acted reasonably throughout.  They were entitled to rely on David Bailey to submit and progress their claims for them.  They had also passed through to David Bailey all the regular updates that they received about the progress of the Rank litigation and HMRC’s response to it from other sources.  The claims themselves would not be particularly difficult to deal with and the loss to the Appellant if the claims were barred was severe for it.  We would observe that Mr Henderson has in part conflated “the interests of the administration of justice” with “the interests of justice” here, but the points he made could equally well be addressed under other headings in the CPR list.

(2)         Was the application made promptly?  He submitted that the Appellant had acted quickly when it was realised there was a potential problem.

(3)         Was the failure intentional?  He submitted it was clear from the overall circumstances that it was not.

(4)         Was there a good explanation for the delay?  He submitted that from the Appellant’s perspective there was.  They had relied entirely on David Bailey, and that reliance was reasonable in the circumstances.  There had been various events (such as the repayments of two of the claims) that had bolstered this confidence, quite reasonably.  So far as Mr Pierce was concerned, the explanation was to be found in the confusing communications from HMRC, in particular in the Spring of 2009.

(5)         Compliance with other requirements.  He put no particular emphasis on this point.

(6)         Was the default that of the Appellant or of its representative?  Here, he submitted the facts showed that any default ought not to be laid at the door of the Appellant.

(7)         Can the trial date still be met?  As the claims are all “parasitic” on the Rank litigation, he submitted this was not relevant.  The Slots Capped Claim and the Slots Condé Nast Claim would await resolution of that aspect of the Rank litigation and the MCB Condé Nast Claim would now fall to be paid, subject only to verification.

(8)         The effect of the default on the parties.  He submitted that if the Appellant had submitted protective appeals in time, the situation today would be effectively the same – the appeals would simply be stayed pending the outcome of the Rank litigation.  Therefore HMRC were effectively arguing that they should be exonerated from liability as a result of a mistake by the Appellant’s adviser.  The evidence would not go stale as it was all available in the accounting records that had been used to compile the claims.

(9)         The effect of granting relief on both parties.  For the Appellant, the benefit would be immense.  It would be able to recover the significant amounts to which it should become entitled following the Rank litigation.  Conversely, for HMRC it would simply have to pay out the amounts for which it was properly liable from the outset.

Discussion and conclusion

(1)         Interests of the administration of justice.  We consider this factor to be more directly referable to the case of an extension of time in the course of litigation. 

(2)         Was the application made promptly?  When the Appellant became aware of the need for an application, it acted with reasonable speed in our view.  The question is more how we view the period of delay up to that time.

(3)         Was the failure to comply intentional?  In our view, it was not.  As soon as it was realised that an application was necessary, it was made with reasonable speed.

(4)         Was there a good explanation for the failure?  This is the heart of the matter, to which we turn in more detail below.

(5)         Has the party in default otherwise complied with relevant requirements?  Of necessity, we must take a broad view of this aspect.  As a general proposition, we consider Mr Pierce approached the whole process of making the repayment claims with a good deal of organisation and method.  Outside the context of litigation, there is no record of relevant past compliance that we can consider.  We observe that he usually took the initiative with HMRC and was prompt in his replies to their questions.

(6)         Was the failure caused by the Appellant or by its representative?  Here, the failure was clearly attributable to the adviser and not to the Appellant.  On the basis of the longstanding relationship with David Bailey, we consider the Appellant had every reason to believe matters were properly in hand until very late in the day.

(7)         Can the trial date still be met?  This is not relevant in this case.

(8)         The effect which non-compliance had on each party.  HMRC do not appear to have regarded non-compliance as particularly important until January 2011; they were involved, as part of a massive nationwide project, in intensive discussions and negotiations with numerous taxpayers including this Appellant and they made no complaint about it until very late in the day.

(9)         The effect of granting relief on the parties.  For HMRC, it is said that the effect would be to re-open some very large claims for matters which it had considered long closed.  In reality, however, these claims are a very small part of a very large ongoing project for HMRC.  For the Appellant, the effect of granting relief would be (apparently) to unlock the immediate repayment of its MCB Condé Nast Claim and, conversely, the refusal to grant relief would be to deprive it of an apparently strong legal entitlement to all three claims.  The amounts involved for the Appellant are clearly large so far as it is concerned, and whilst much of it might be regarded as being in the nature of a windfall, nonetheless it flows, to the extent it is recoverable, from a legal entitlement.

(1)         What is the purpose of the time limit?  We agree its purpose is to provide certainty, so that the government could plan its income and expenditure without unexpected surprises caused by stale old claims.

(2)         How long was the delay?  We agree that the Slots Capped Claim was almost 2 ½ years out of time, and the other two claims were closer to 3 years out of time.  But the length of the delay on its own does not tell the full story, which can only be understood by reference to the explanation for the delay, considered below.

(3)         Is there a good explanation for the delay?  We address this point below.

(4)         What will be the consequences for the parties of an extension of time?  For HMRC, the consequence would be that they would be at risk of having to fund claims which they say they had previously considered closed for some time.  On the other hand, we question whether it is reasonable, in the circumstances outlined above, to assert that HMRC should have considered the claims closed.

(5)         What will be the consequences for the parties of a refusal to extend time?  Obviously, the result would be that the Appellant would lose potentially valuable claims, at least one of which it is said will be paid without further ado if we give permission for a late appeal.

KEVIN POOLE

TRIBUNAL JUDGE

RELEASE DATE: 19 February 2014

Amended by correction of typographical error in paragraph [63] pursuant to Rule 37 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 and re-issued to the parties on 28 February 2014.