United Kingdom Upper Tribunal (Tax and Chancery Chamber)

Neutral Citation: [2023] UKUT 268 (TCC)

Case Number: UT/2022/000061

UPPER TRIBUNAL

(Tax and Chancery Chamber)

The Rolls Building, London

 

LATE APPEAL - VAT and Landfill Tax assessments - FTT allowed late appeal for VAT assessments but refused late appeal for Landfill Tax assessments - new evidence in relation to Landfill Tax assessments - Martland criteria - whether appeal against Landfill Tax assessments should be allowed to be heard out of time on the basis of new evidence - yes

 

Heard on: 24 October 2023

Judgment date: 6 November 2023

 

 

Before

 

JUDGE RUPERT JONES

JUDGE GUY BRANNAN

 

 

Between

 

OCTAGON GREEN SOLUTIONS LIMITED

Appellant

and

 

THE COMMISSIONERS FOR HIS MAJESTY’ S REVENUE AND CUSTOMS

Respondents

 

Representation:

 

For the Appellant:         Simon Farrell KC and James Bourne-Arton instructed by Watson Woodhouse Limited

For the Respondents:    James Puzey, Counsel, instructed by the General Counsel and Solicitor to His Majesty’s Revenue and Customs

 

 

DECISION

Introduction

1.             This is an appeal against the decision (“the Decision”) of the First-tier Tribunal (the “FTT”). The Decision concerned whether the FTT should give permission to the Appellant, Octagon Green Solutions Limited (“Octagon”), to make a late appeal to the FTT against two assessments raised by the Respondents, HMRC. One of the two assessments, and with which this appeal is concerned, related to Landfill Tax, and the other related to VAT.

2.             The FTT decided that Octagon’s application for an extension of time to appeal to the FTT should be refused in relation to the Landfill Tax assessment, but that, in relation to the VAT assessment, it should be granted.

3.             On 11 March 2022, the FTT received an application for permission to appeal to the Upper Tribunal (the “UT”) against the Decision in relation its conclusion in respect of the Landfill Tax assessment. The FTT (Judge Bailey) refused permission to appeal but permission was subsequently granted on two grounds by the UT (Judge Ramshaw) on 13 July 2023. Before Judge Bailey and Judge Ramshaw new evidence (“the New Evidence”) was introduced.  This was in the form of certain letters/emails, which, it was argued, indicated that the FTT had made a material error of law in the Decision. Judge Ramshaw gave permission for the New Evidence to be admitted on this appeal.

4.             For the reasons set out below, we allow the appeal and grant permission for Octagon’s appeal against the Landfill Tax assessment to be heard out of time.

The factual background

5.             The following summary of the background to this appeal is largely taken from the Decision at [3]-[13]. References in square brackets are to the Decision unless the context otherwise requires.

6.             Octagon was the operator of a landfill site. In 2014, HMRC commenced an investigation into Octagon’s operations at its landfill site. HMRC suspected that there had been fraudulent evasion of Landfill Tax and VAT in connection with the operations at the site. At the same time HMRC also investigated the activities of an associated company called Caird Peckford Ltd at another site.

7.             HMRC seized paperwork from Octagon, conducted observations at the site in February 2015 and September 2015, interrogated Octagon’s computers and arrested and interviewed under caution suspects concerned in the operation of the site.

8.             On 9 September 2016, HMRC wrote to Octagon with two assessments: one for Landfill Tax and the other for VAT. The Landfill Tax assessment was for some £57m for the period 28 February 2013 to 30 September 2015. The VAT assessment was for some £12m in respect of the same period.

9.             In relation to the VAT assessment, Mr Longstaff of HMRC wrote two letters to Octagon on 9 September. In the first letter he explained that he was making an assessment following the criminal investigation but that the assessment was separate from that investigation. He considered that the investigation indicated that there was an under-reporting of tax. Mr Longstaff continued:

“If you do not agree with my decision to assess you for landfill tax [1] detailed above

…you can… ask for a review…or appeal to an independent tribunal.

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

10.         Mr Longstaff’s second letter of 9 September 2016, headed “VAT ASSESSMENT” stated that the assessment had been issued in order to protect HMRC’s position (in order to fall within the time limits for making an assessment) and was made without prejudice to the criminal proceedings. Mr Longstaff stated:

“However due to the fact that these periods are currently subject to an investigation, these assessments… will not be enforced until such time that the criminal proceedings have been finalised.

Therefore this letter and the enclosed schedule…is currently for your information only.

Following the conclusion of criminal proceedings, we shall write to you again outlining the current position in relation to these assessments.

For your information, if we took the decision to enforce these assessments, outside criminal proceedings then the following would apply.

What to do if you disagree

If you disagree with our decision you need to write to us within 30 days… Alternatively you can appeal direct to the tribunal within 30 days of this notice….” (Emphasis added)

11.         Also on 9 September 2016, Mr Berry of HMRC wrote to Octagon in relation to Landfill Tax. Like Mr Longstaff, and in almost identical words, he explained that he was exercising his power to assess, explained that the assessment was separate from the criminal proceedings and explained that HMRC’s observations had led them to conclude that extra tax was due. Importantly, as the FTT noted at [11], Mr Berry’s letter did not include the four paragraphs (set out above in italics) that were included in Mr Longstaff’s letter. Mr Berry’s letter concluded:

“If you do  not  agree

If  you  have  additional  information  that  you  think  may  effect  this  decision  please  send  it  to  me  now. If  you  do  not  agree  with  my  decision  to  assess  for  the  Landfill  Tax  detailed  above  you  can;

- ask  for  my  decision  to  be  reviewed  by  an  HMRC  officer  not  previously  involved  in  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  me  at  the  above  address  within  30  days  of  the  date  of  this letter,  giving  your  reasons  why  you  do  not  agree  with  my  decision.

 

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

12.         Next, on 1 November 2016 (just under two months later) Mr Berry wrote again to Octagon referring to his first letter of 9 September 2016 as follows:

“Landfill Tax  —  Notice  of  Decision

Further  to  my  letter  of  9  September  2016  in  which I notified  you  of  the  fact  that  |  had  raised  a  Landfill  Tax assessment  please  note  the  following:

The  Landfill  Tax  Notice  of  Decision  and  assessment  of  tax  due  has  been  raised  in  order  to  protect  the  HMRC position  and  is  issued  without  prejudice  to  any  action  the  Commissioners  may  take  under  Paragraph  15  of Schedule  5  to  the  Finance  Act  1996,  under  any  other  enactment  or  with  regards  to  the  ongoing  criminal investigation.

However,  due  to  the  fact  that  these  assessment  periods  are  currently  subject  to  an  investigation,  these assessments  and  any  subsequent  penalties  and  /  or  default  interest  will  not  be  enforced  until  such  time that criminal  proceedings  have  been  finalised.

Therefore  the  Notice  of  Decision  and  schedule  detailing  those  assessments  is  currently,  for  your information  only.

It  follows  that  any  review  of  the  landfill  tax  decision  and  assessment  would  be  held  in  abeyance  pending the  outcome  of  the  criminal  investigation.

Following  the  conclusion  of  criminal  proceedings,  we  will  write  to  you  again  outlining  the  current  position in  respect  of  these  assessments.

For  your  information,  if  we  took  the  decision  to  enforce  these  assessments,  outside  of  any  criminal proceedings,  then  the  following  would  apply;

If you do  not  agree

If  you  have  additional  information  that  you  think  may  affect  this  decision  please  send  it  to  me  now.

If  you  do  not  agree  with  my  decision  to  assess  for  the  Landfill  Tax  detailed  above  you  can;

- ask  for  my  decision  to  be  reviewed  by  an  HMRC  officer  not  previously  involved  in  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  me  at  the  above  address  within  30  days  of  the  date  of  this letter,  giving  your  reasons  why  you  do  not  agree  with  my  decision.

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

13.         This letter of Mr Berry’s dated 1 November 2016 did include the four paragraphs that Mr Longstaff had included in his earlier letter of 9 September 2016 but it will be noted that the additional paragraph included (in italics above) did not appear in Mr Longstaff’s earlier letter.

14.         HMRC liaised with the Crown Prosecution Service (“CPS”) during its investigation, providing  reports  in  relation  to  particular  court  actions  at  various  stages. In connection with these proceedings, on 13 June 2019, Samantha Gibson of HMRC provided a statement (“the Gibson Statement”) in which she said the following in relation to the two tax assessments:

“Between June 2016 and August 2016, a large amount of information was assimilated and analysed in order to prepare protective Landfill Tax and VAT assessments within the statutory 12 month time limit.”

“Between October and December 2016, the defence/suspects made approaches with regard to appealing the Landfill Tax and VAT assessments, and a decision was made to stay these until the conclusion of any criminal proceedings. A Case Conference was held November 2016.”

15.         On 31 January 2020 HMRC submitted a file to the CPS seeking a charging decision. In August 2020 the CPS notified the suspected parties that criminal prosecutions would not be brought.

16.         Octagon submitted appeals to the Tribunal against the Landfill Tax and VAT assessments on 18 December 2020, over four years after they had been made.

The FTT’s Decision

17.         The FTT concluded at [16]-[22] that Octagon’s appeals in respect of VAT and Landfill Tax were late. The FTT considered at [17] that there was nothing in the legislation which permitted the parties to agree, or HMRC unilaterally to decide, to stay the process once an assessment had been issued.

18.         Next, the FTT considered whether time to appeal should be extended in respect of the Landfill Tax assessment and the VAT assessment.

19.         At [23]-[27] the FTT considered the strength of each party’s case and concluded at [27] that it was unable to evaluate the parties’ contentions with the result that, on the evidence available to the FTT, Octagon’s case was not obviously very strong or very weak.

20.         In relation to the Landfill Tax assessment, the FTT at [28]-[31] refused permission for the appeal to be heard out of time for the following reasons:

“28.  The  letter  of  9  September  from  Mr  Berry  does  not  contain  the  paragraphs  quoted in  paragraph  [10] [2]  above.  Those  paragraphs  appear  only  in  his  later  letter  of  1  November 2016.  The  recipient  of  the  9  September  letter  could  not  have  drawn  from  that  letter  any reason  to  consider  that  he  had  more  than  30  days  to  seek  a  review  or  to  appeal.  There was  no  evidence  before  us  that  enquiries  had  been  made  of  HMRC  on  behalf  of  Octagon as  to  whether  the  terms  of  the  VAT  letters  applied  equally  to  the  Landfill  tax  assessment - or  as  to  whether  more  time  would  be  given  for  a  review  (Mr  Bourne-Arton [counsel for Octagon ] explained that  such  evidence  was  not  available  because  the  company’s  current  advisors  had  taken over  in  2018).  It  did  not  seem  to  us  that  the  statement  made  by  Samantha  Gibson  (see the extract  at  [6]  above [3])  spoke  to  this  period.  In the  period  from  9  September  to  1 November  we  cannot  therefore  find  that  there  was  a  good  reason  why  a  review  was  not sought  or  an  appeal  notified.

29.  Thus  even  if  delay  after  1  November  was  occasioned  by  an  understanding  of  that letter  that  HMRC  had  consented  to  additional  time  for  a  review  or  agreed  to  support  an application  for  a  late  appeal,  there  was  a  significant  period  of  delay  for  which  there  was no  good  reason.

30.  We  accept  that  the  prejudice  to  Octagon  which  would  arise  if  it  could  not  dispute the  assessment  is  potentially  very  great.  We cannot  say  that  it  is  great  because  we  cannot evaluate  the  evidence,  and  the  nature  of  the  appeal  is  that  its  outcome  would  depend  on the  evidence.  Set  against  that  prejudice  is  the  statutory  interest  in  the  compliance  with time  limits,  the  lengthy  delay  and  the  lack  of  a  good  reason  for  the  delay  in  the  period after  9  September  2016  and  1  November  2016.

31.  We  conclude  that  permission  to  notify  the  appeal  should  be  refused.” (Emphasis added)

21.         The FTT then considered whether permission to notify the appeal against the VAT assessment out of time should be granted. Although the FTT’s conclusion on this point is not the subject of the present appeal, the FTT’s reasoning is instructive.

22.         The FTT at [32] drew attention to the letters from Mr Longstaff of 9 September 2016 and, in particular, to the letter which contain the phrases “will not be enforced”, “for your information only”, “awaiting outcome”, “if we took the decision to enforce… the following would apply… within 30 days.”

23.         The FTT decided at [37] to grant permission for the appeal against the VAT assessments to be heard out of time. Its reasons were set out at [33]-[36] as follows:

“33…. To our minds the letters are  ambiguous.  The  second  letter  suggests  that  the  appeal  and review  procedure  is  relevant  only  “if  [HMRC]  took  the  decision  to  enforce  these assessments”;  the  other  that  any  request  for  a  review  or  appeal  had  to  be  made  within 30  days  of  the  date  of  the  letter.  The  meaning  of  the  phrase  “for  your  information  only” is  also  unclear  but  it  could  not  wholly  unreasonably  be  taken  to  mean  that  no  action  was needed  from  or  required  by  the  recipient.  (These  statements  of  course  were  made  at  the time  the  VAT  assessment  was  issued  -which  was  not  the  case  with  the  Landfill  tax assessment).

34.  We  think  that  a  cautious  lawyerly  appraisal  of  the  letters  would  have  prompted either  a  request  for  a  review,  as  Caird  Peckford  did,  a  “protective”  appeal  (echoing HMRC’s words) or a request  for  clarification  to  HMRC.  It seems  to  us  likely  however that  the  company’s  reading  was  less  formal  and  that  in  reliance  on  its  understanding  of the  letters  that  the  clock  had  stopped,  it  delayed  asking  for  a  review  or  making  an  appeal. We  consider  that  this  was  not  an  unreasonable  reading  of  the  second  letter.

35.  We  acknowledge  that  HMRC  had  no  power  to  stay  the  process  but  we  note  that on  a  request  from  a  taxpayer,  section  83D  requires  HMRC  to  undertake  a  review  (at  the conclusion  of  which  an  appeal  might  be  made)  if  they  consider  that  the  taxpayer  has  a reasonable  excuse  for  failing  to  seek  a  review  within  the  30  days  given  for  acceptance. Even  a  cautious  lawyer  might  have  read  the  letters  as  indicating  that  once  criminal proceedings  had  been  settled  HMRC  were  likely  to  allow,  or  even  indicating  that  they would  allow,  a  late  review  request  on  this  basis.

36.  We  start  our  evaluation  of  all  the  circumstances  by  recognising  that  the  delay  in making  the  appeal  of  over  4  years  was  both  serious  and  significant.  We  find  the  reason for  the  delay  was  the  view  taken  by  the  company  of  the  meaning  of  the  letters,  a  view which  we  find  not  unreasonable,  if  not  the  best.  Given  the  size  of  the  assessment  we find  that  the  prejudice  which  would  arise  to  Octagon  if  it  could  not  dispute  it  is significant  even  where  its  chances  of  success  are  not  obvious.  The company’s  case  was not  obviously  a  very  strong  one  or  a  very  weak  one.  We think  it  is  likely  that  HMRC expected  the  assessment  to  be  challenged  and  that  the  prejudice  to  them  in  permitting  a late  appeal  is  therefore  not  great.  Given the  acceptance  by  both  parties  that  the determination  of  the  tax  actually  due  would  in  any  event  have  to  await  the  settling  of the  criminal  proceedings,  it  does  not  seem  to  us  that  regard  for  efficient  conduct  of litigation  weighs  against  extending  the  time  limit.  We take  into  account  the  weight  to be  placed  on  the  statutory  time  limits.

37.  Taking  all  those  factors  into  consideration  we  give  permission  for  this  appeal  to be  heard.”

The new evidence

24.         In her decision of 13 July 2022, Judge Ramshaw gave Octagon permission to admit the New Evidence. The New Evidence comprised various emails between Mr Wanless of Octagon and Octagon’s newly-appointed accountant, Mr Keeling of Inquesta Accountants, in September and October 2016 as well as an internal HMRC email between Mr Berry and Ms Alison Broughton dated 4 October 2016.

25.         In an email from Mr Keeling to Mr Wanless dated 19 September 2016, Mr Keeling says:

“I write further to our discussion on Friday regarding the letters you have received from HMRC. Further to your instructions we will act on your behalf and shall make contact with Ivor Berry of HMRC. This shall initially be done by way of a telephone conversation, then subsequent written correspondence.”

26.         In an email dated 20 September 2016 from Mr Wanless to Mr Keeling, Mr Wanless states:

“Regarding the letters I received from the HMRC I would be happy that you contacted Ivor Berry to discuss the case.”

27.         In our view, “the letters” referred to in this email include the letter from Mr Berry dated 9 September 2016.

28.         Next, on 26 September 2016, Mr Wanless wrote to Mr Berry as follows:

“Re: Octagon Green Solutions Ltd - Blaydon Landfill Site

I write further to your letter of 9 September 2016, regarding the Notice of Decision in respect of your assessment of under-declared Landfill Tax for Octagon Green Solutions Ltd.

I can confirm that I have instructed Mr Tim Keeling of Inquesta Accountants to assist me with this matter and have given my authority, in my position as Director of Octagon, for Mr Keeling to act on behalf of the business in respect of this matter.

I understand that you are currently on annual leave and that, in your absence, Mr Keeling that he has spoken to your colleagues Ms White and Mr Middleton, to acknowledge receipt of the letter and to request a meeting with yourselves.

Mr Keeling has advised me that he considers a meeting would be the best way forward, given the complexity of this matter and amounts that are assessed as owing. I also believe this the most sensible approach.

Mr Middleton advised that it best to wait until you return to be able to fix a date for the meeting.

I am conscious that there is a time limit to respond to your letter, and therefore in case your return to work is after this date, I considered it best to write to you also to let you know of the steps taken so far.

I trust that this is sufficient for the time being and look forward to hearing from you upon your return to work.”

29.         On 5 October 2016, Mr Keeling emailed Mr Wanless informing him of his telephone conversation with Mr Berry:

“Further  to  our  earlier  discussion I detail  below  a  summary  of  my  conversations  with  HMRC  that I  had today,  on  behalf  of  Octagon;

Call to Ivor Berry re Landfill  Tax  Notice  of  Decision.

1.  Mr  Berry  returned  my  call  at  13:13,  following  an  earlier  message I had  left  for  him.

2.1  queried  whether  he  had  received  the  letters  from  Mr  Wanless  and  details  of  my  previous calls  with  his  colleagues  during  his  absence.

3.  He  advised  that  he  had  done  so  and  was  aware  of  my  involvement  and  reasons  for  me  being instructed.

4.  I advised  that  based  on  the  information  that  had  been  provided  in  his  letter  of  9  September 2016,  I  had  a  number  of  queries  which I  wished  to  discuss.

5.  I advised  that  given  the  complexity  of  the  matter  and  the  amounts  involved  that I  believed the  best  approach  would  be  for  a  face  to  face  meeting  in  order  that  these  details  may  be discussed,  along  with  any  solutions  for  resolution  of  this  matter.

6.  Mr  Berry  advised  that  his  calculations  had  simply  been  based  on  the  information  provided  to him  by  the  investigating  team  for  the  criminal  proceeding  which  he  referred  to  as  FIZ.

7.  I advised  that  having  reviewed  through  the  information  he  provided  there  were  a  number  of anomalies  and  gave  the  example  of  the  number  of  vehicles  shown  as  arriving  and  leaving  the site  in  February  not  correlating.

8.  Mr  Berry  advised  that  he  had  not  prepared  these,  merely  that  FIZ  provided  the  schedules  to him.  He  stated  that  he  had  none  of  the  records  on  which  the  schedules  were  based  nor  would  he be  able  to  provide  these,  or  indeed,  any  further  information  than  that  he  provided  in  the  letter.

9.  He  advised  that  these  would  need  to  be  obtained  from  FIZ,  and  that  they  would  need  to  be contacted  directly.

10.  I queried  with  him  the  part  in  his  letter  about  this  being  a  separate  assessment  and  distinct from  the  criminal  investigation.  He  advised  that  it  is  more  the  case  that  the  two  are  intrinsically linked.

11.  I advised  that  Octagon  has  all  their  records  seized  by  the  police  and  therefore I was  unable to  use  there  as  a  method  to  undertake  any  assessment.  He said he was aware of this.

12. I advised  that I  had  been  instructed  by  Mr  Wanless  that  he  wished  to  resolve  this  matter  if at  all  possible,  but  in  the  absence  of  the  information  it  is  not  possible  to  verify  the  assessment made  by  HMRC.

13.  Mr  Berry  advised  that  he  did  not  have  the  authority  to  be  able  to  be  able  to  make  any decision  regarding  the  quantum  or  indeed  for  any  resolution  as  the  matter  was  been  led  by  FIZ.

14.  I advised  of  Mr  Wanless’  concerns  in  that  there  are  now  two  matters,  ie  the  civil  and criminal  matter  running  concurrently.  The  next  date  for  anything  to  happen  on  the  criminal  case is  December  interviews,  which  Mr  Berry  was  aware  of.  I advised, that  there  was  concern therefore  over  the  civil  matter  just  being  left  in  abeyance  by  Octagon,  such  that  enforcement proceedings  may  ensue.

15.  Mr  Berry  advised  that  he  understood  the  predicament,  and  intimated  to  me  that  this  would not  be  the  case,  and  murmured  agreement  when I said  the  civil  proceedings  were  therefore more  a  matter  of  protocol  being  followed.

16.  Mr  Berry  further  raised  the  point  of  the  ramifications  on  the  criminal  proceedings  were  any meeting  to  take  place.

17.  I advised,  that I would  therefore  discuss  the  situation  with  Mr  Wanless  and  his  solicitor acting  on  his  behalf on  the  criminal  matter,  in  order  to  see  if  it  would  be  possible  to  obtain  the information I  require  from  FIZ.

18.  I advised  that I would  keep  Mr  Berry  appraised  of  the  situation  going  forward,  and  whether this  would  be  sufficient  for  him,  at  this  stage  in  respect  of  the  civil  matter,  such  that  no  further action  would  be  taken  by  him.  Mr Berry confirmed that he was in  agreement  with  this.

Call to Kevin Longstaff  re VAT  assessment.

1.  I called  Mr  Longstaff  immediately  following  my  conversation  with  Mr  Berry.  I advised him of my  conversation  with  Mr  Berry  and  the  current  situation.

2.  Mr  Longstaff  confirmed  that  his  calculations  were  also  derived  from  information  provided  to him.

3.  Mr  Longstaff  was  also  in  agreement  that  he  was  fine  for  the  matter  to  be  effectively  stayed until  such  time  as  Octagan [sic]  were  able  to  obtain  any  further  documentation.  I advised,  as  with  Mr Berry,  I would  keep  him  appraised  of  the  situation.

I will  speak  to  you  soon  with  a  view  to  arranging  a  further  meeting.”

30.         Finally, there was an email from Mr Berry to Alison Broughton of the HMRC criminal case team at 14:28 on 4 October 2016 which provided Mr Berry’s note of his conversation with Mr Keeling. The email (edited to remove references to another taxpayer) was as follows:

“Alison

Just to keep you updated I have spoken today to … Mr Keeling of Inquesta representing OGS.

… 

Mr Keeling followed up Mr W's letter with a request for a meeting. When I questioned the purpose of the meeting he started to talk about the number of vehicles in and out of the site on the observation days. I said that he would have to discuss that with yourselves as I was only responsible for putting together a Landfill Tax assessment from the information provided to me. He said that MR W had asked him to look at the quantum of the assessment but he was having difficulties because he has no access to the records which we seized. I directed him to you in relation to any request for disclosure/return of records. MR W seems to have a concern about us enforcing the assessments ahead of any criminal investigation and the impact on the business. In my letter we did not make it clear that the assessement would not be enforced while the crminal [sic] case was ongoing. I made it clear that whilst I was happy to discuss the methodology for the assessment with him I would not be able to discuss the evidence on which it is based. His plan now is to contact yourselves to obtain information to inform his review prior to seeking any meeting with Keith and I. He suggested that MR W was seeking a meeting to resolve the situation and again I stated that that I would not be in a position to make any agreement at such a meeting, I could only clarify any issues relating to the methodology.

Ivor [sic]”

Grounds of appeal

31.         Judge Ramshaw has given Octagon permission to Appeal on Grounds 2 and 3, refusing permission to appeal on Ground 1 (viz that Octagon had appealed in time). The grounds of appeal are as follows.

Ground 2

32.         The FTT was wrong to find that the period between 9th September and 1st November 2016 was a significant period of delay for which there was no good reason.

Ground 3

33.         The FTT failed to consider “all the circumstances” in relation to the Landfill Tax assessments.

applicable caselaw

34.         It was common ground that the correct test to be applied in the present case was that provided for by the Upper Tribunal in Martland v HMRC [2018] UKUT 178 (TCC) (“Martland”). Essentially, Martland laid down a three-stage test to be applied when determining whether to allow an application for an appeal to be heard out of time: (1) was the delay serious? (2) what were the reasons for the delay? and (3) a consideration of all the relevant circumstances. In considering the third stage of the Martland test particular importance was to be given to the need for litigation to be conducted efficiently and at proportionate cost and to enforce compliance with rules, practice directions and orders.

Discussion

Ground 2: The FTT was wrong to find that the period between 9th September and 1st November 2016 was a significant period of delay for which there was no good reason.

35.         Mr Farrell KC, appearing with Mr Bourne-Arton for Octagon, submitted that with the benefit of the New Evidence it could now be seen that at [28]-[29] (set out at paragraph 20 above) the FTT made a material mistake of fact. Furthermore, Mr Farrell argued that given the terms of those paragraphs in the Decision it was clear that the error was material because it led to the conclusion that permission to allow an appeal out of time was refused.

36.         In addition, Mr Farrell drew attention to the Gibson Statement. The FTT at [28] found that the Gibson Statement did not refer to the period from 9 September to 1 November 2016. However, the New Evidence gave further substance to the view that the Gibson Statement did, indeed, refer to that period.

37.         Mr Puzey, appearing for HMRC, argued that Mr Berry’s letter of 1 November 2016 did not say at any point that there was no requirement either to request a review or lodge an appeal. Furthermore, in Mr Puzey’s submission, the email from Mr Keeling to Mr Wanless, recording his conversation with Mr Berry, stated that both Mr Berry and Mr Longstaff had agreed that the civil proceedings would be “effectively stayed”. The email did not, Mr Puzey observed, refer to the prospect of any appeal being lodged and did not refer to any request from Mr Keeling for a review by HMRC. Mr Puzey further submitted that the email was unsupported by witness statement from Mr Keeling or any contemporaneous notes. Moreover, the email from Mr Berry to Ms Broughton of 4 October 2016, in Mr Puzey’s view, merely suggested that HMRC would not enforce the Landfill Tax assessment pending the conclusion of the criminal investigation.

38.         Mr Puzey submitted that at no point did HMRC inform Octagon that there was no need to appeal or that time limits for appealing were stayed or in abeyance. In any event, any such assurance could have no legal effect. Even if an unrepresented lay taxpayer might understand the New Evidence to suggest that no appeal needed to be filed and no request for a review made, the same could not be said of a professional representative.

39.         We accept Mr Farrell’s arguments. It seems to us that the conclusion drawn by the FTT at [28] cannot stand in the light of the New Evidence. The New Evidence indicated that enquiries were made of HMRC on behalf of Octagon and we think that Octagon could reasonably have formed the impression from those discussions that the Landfill Tax assessment was being held in abeyance pending resolution of the criminal proceedings and that no further procedural steps, such as seeking a review or lodging an appeal, were necessary. In our view, Mr Berry’s letter of 1 November 2016 merely confirmed the prior understanding of HMRC and Octagon that it was not necessary to lodge an appeal or seek a review until after the criminal proceedings had been concluded.

40.         Furthermore, we were informed that the underlying facts and evidence in relation to the VAT assessments were the same as for the Landfill Tax assessments. At the hearing, the two assessments were described as inextricably linked. To say that the VAT assessments should be held in abeyance but that the Landfill Tax assessments should be progressed is a strange conclusion which, of itself, suggests that Octagon’s understanding of the position was a reasonable one.

41.         There is one further matter with which we should deal.

42.         In August 2020, the CPS informed the Octagon-related suspected parties that criminal prosecutions would not be brought. However, it was not until 18 December 2020 that Octagon filed its notice of appeal in relation to the Landfill Tax assessments. We were informed that it was only on 15 December 2020, in forfeiture proceedings before the Magistrates Court, that it became apparent to Octagon that HMRC were arguing that Octagon was out of time to appeal those assessments. It then lodged its notice of appeal. However, we consider that Octagon were entitled to rely on the statement in Mr Berry’s letter of 1 November 2016 which stated:

“Following  the  conclusion  of  criminal  proceedings,  we  will  write  to  you  again  outlining  the  current  position in  respect  of  these  assessments.”

43.         As we understand it, no such letter was ever written and it was not until 15 December 2020 that Octagon became aware of the need to file a notice of appeal. In our view that is a good reason for Octagon not filing its notice of appeal from the date in August 2020 on which the suspected parties in the criminal investigation were informed that no prosecution would be brought until 18 December 2020.

44.         In conclusion under Ground 2, we consider that the FTT made an error of law in making factual findings at [28]-[29] that could not reasonably have been made having regard to the whole of the evidence, including the New Evidence. We further consider that the error of law was plainly material to the outcome in relation to the Landfill Tax assessment. No criticism can be made of the FTT in finding as it did - the New Evidence was not before it.

45.         We therefore allow the appeal on Ground 2.

Ground 3: The FTT failed to consider “all the circumstances” in relation to the Landfill Tax assessments.

46.         Because we have allowed the appeal on Ground 2, it is unnecessary for us to deal with Ground 3.

Remaking the decision

47.         Pursuant to section 12 Tribunals, Courts and Enforcement Act 2007 we may (but need not) set aside the Decision. In the light of our conclusion that the Decision contains a material error of law, we set the Decision aside.

48.         We must then decide whether to remit the case to the FTT or remake the Decision.

49.         The FTT judge, Judge Hellier, has retired and it is therefore not possible to remit the case to an identically constituted FTT. In any event, we consider that there is no need to remit the case. The facts are not in dispute and are relatively simple. We therefore consider that we should remake the Decision.

50.         Applying the Martland criteria described above, we first consider that the delay of approximately four years was significant and serious. Secondly, as we have already found, we consider that there was a good reason for the delay because Octagon reasonably formed the impression that the Landfill Tax assessments were being held in abeyance until the conclusion of the criminal proceedings and, specifically, that that impression held true in respect of the need to request a review or file an appeal.

51.         Thirdly, considering all the circumstances of the case, we accept the finding of the FTT that Octagon’s case was neither very strong nor very weak. We also accept that Octagon would suffer considerable prejudice if it were not able to contest the Landfill Tax assessment of some £57m. On the other hand, we accept that HMRC does suffer some prejudice by having to contest an appeal which it thought had been concluded, albeit that that prejudice is somewhat self-inflicted: HMRC should have realised that its statements to Octagon in September, October and November 2016 were, at the very least, ambiguous. Moreover, the extent of the prejudice suffered by HMRC in having to contest what is probably a fact-intensive appeal in respect of the Landfill Tax assessments is reduced by the knowledge that essentially the same factual matrix is already under appeal in relation to the VAT assessments. Therefore, considering all the circumstances and bearing in mind the need to observe time limits, we consider that the balance lies in favour of Octagon.

Conclusion

52.         We therefore allow the appeal, set aside the FTT’s Decision and remake it, granting permission to Octagon to appeal the Landfill Tax assessments out of time.

costs

Any application for costs in relation to this appeal must be made in writing and served on the Tribunal and the person against whom it is made within one month after the date of release of this decision as required by rule 10(5)(a) and (6) of the Tribunal Procedure (Upper Tribunal) Rules 2008.

 

JUDGE RUPERT JONES

JUDGE GUY BRANNAN

 

UPPER TRIBUNAL JUDGES

Release date: 06 November 2023