• Share

• Articles, News
• Commercial Disputes
• Author: Ranjeet Johal

Application for permission to appeal out of time in the First-tier Tribunal (Tax Chamber)

The decision in Angel Beauty Parlour Limited v HMRC [2019] TC/2018/00973, gives useful guidance on how the Tribunal approaches applications for permission to appeal out of time.

The Appellant, Angel Beauty Parlour Limited (‘the Company’) operates beauty salons and kiosks in shopping centres around the country. HMRC opened up an investigation into the Company in July 2015 in respect of alleged unpaid PAYE and NICS. Following a lengthy assessment, during which it was alleged that the Company had failed to engage with HMRC, a determination was issued seeking unpaid tax of totalling £528,056.42 for the years between 2012 and 2017. Once penalties had been added, the total sought by HMRC was £897,695.90, together with interest. HMRC issued a winding up petition which was withdrawn by consent after the Company appealed HMRC’s decision 5 months out of time.

The decision in Angel Beauty Parlour Limited v HMRC [2019] TC/2018/00973, gives useful guidance on how the Tribunal approaches applications for permission to appeal out of time. The Appellant, Angel Beauty Parlour Limited (‘the Company’) operates beauty salons and kiosks in shopping centres around the country. HMRC opened up an investigation into the Company in July 2015 in respect of alleged unpaid PAYE and NICS. Following a lengthy assessment, during which it was alleged that the Company had failed to engage with HMRC, a determination was issued seeking unpaid tax of totalling £528,056.42 for the years between 2012 and 2017. Once penalties had been added, the total sought by HMRC was £897,695.90, together with interest. HMRC issued a winding up petition which was withdrawn by consent after the Company appealed HMRC’s decision 5 months out of time.

It was accepted by the Company that the appeal was being made significantly out of time. However, there were mitigating circumstances to this. The director of the Company had been away when the review letter had been received. He had then made various efforts to contact HMRC with a view to resolving the matter but to no avail. The correspondence received from HMRC had not been sufficiently clear that alternative dispute resolution was no longer available once the Company had missed the statutory 30 day deadline to appeal HMRC’s decision.

The test applied to appeals out of time is set out in Martland v HMRC [2018] UKUT 178 (TCC). It is a three-stage test, which requires the Tribunal to:

1) Establish the reason for the delay and whether it is serious or significant;

2) Establish the reasons why the delay occurred; and

3) Evaluate all of the circumstances of the case and carry out a balancing exercise to consider whether relief should be granted, including the prejudice to both parties, the need for the statutory time limits to be respected and the conduct of litigation efficiently and at proportionate cost.

There was no question that the delay was serious and significant – the Company had appealed 5 months out of time. The Tribunal accepted that the Company had acted reasonably through this period, and had taken reasonable steps to try and resolve the matter. Some of the correspondence had lacked clarity and the Company’s director had continued to try and resolve the matter throughout the period.

In considering all of the circumstances of the case, the Tribunal paid particular attention to the merits of the case. The calculations carried out by HMRC in assessing the level of the tax had some significant errors. The total amount of the supposed unpaid tax was “unreasonable, even ludicrous”. The Company’s appeal had obvious merits and the Company was likely to suffer significant prejudice if the appeal was not allowed to continue. In light of this, the Company was given permission to appeal out of time.

This decision gives further guidance on how the Tribunal deals with applications for permission to appeal out of time, in particular in circumstances where an appellant will suffer a great deal of prejudice if their appeal is not allowed to proceed.

Mills Chody acted for the successful Company.

---