Maqsood Hussain t/a Nisa Local v The Commissioners for HMRC

Mr Hussain has filed three Notices of Appeal (“NoA”) at the Tribunal:

On 24 May 2022, HM Revenue and Customs (“HMRC”) objected to the Third Appeal proceeding (“the Objection”), on the basis that it was not a new appeal but an application to reinstate the First Appeal. Mrs Nkonde submitted that it was not in the interests of justice for that application to be allowed. I considered the Third Appeal and the Objection, and on 24 November 2022, issued a brief summary decision agreeing with HMRC that the Third Appeal was essentially the same as the First Appeal and was thus a reinstatement; I refused permission for it to proceed.

On 6 December 2022, Mr Hussain asked for a full decision, and this is that decision. It includes a detailed examination of the law in relation to late applications for reinstatement, and identifies provisions and related case law which were neither referred to by the parties nor considered in the summary decision. I accept that overlooking those provisions and the related case law was an error of law, and that this full decision therefore constitutes a review of that earlier summary decision under Rule 41 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (“the Tribunal Rules”).

In relation to the application for reinstatement, I decided that the Tribunal had no jurisdiction, and even if that were wrong, the delay was extremely serious and significant without any good reason, and in all the circumstances of the case, it was not in the interests of justice to give permission.

In this decision I also set out, with reference to case law fully explained in the summary decision, why Mr Hussain does not have permission to appeal against the two other matters, namely the Penalties and the January 2916 Decision, to which he made reference in the Third Appeal. In a nutshell, this is because the delay was even longer, again with no good reason, and it was not in the interests of justice to give permission.

As a result of the foregoing, Mr Hussain’s applications were refused.

The facts are taken from the documents provided by the parties.

Mr Hussain operates a shop trading under the name “Nisa Local”. Until at least January 2016, his accountants were a firm called Lindlay Adams Ltd (“LAL”).

On 10 August 2015 and 24 September 2015, Officer Higham decided that input tax claimed for periods 05/14, 11/14 and 05/15 was not allowable, and he issued assessments under s 73 of the Value Added Taxes Act 1994 (“VATA”) to collect the VAT. The 11/14 assessment related to the costs of shop fitting; the other two related to management charges made by a company called MH Investments Ltd, of which Mr Hussain was the director.

LAL asked for a statutory review of those decisions; this was carried out by Officer Hanrahan. Her review letter was issued to Mr Hussain on 29 January 2016 and a copy sent to LAL; this was the “January 2916 Decision”.

Officer Hanrahan upheld Officer Higham’s decision in relation to periods 05/14 and 05/15, but cancelled that relating to period 11/14. She informed Mr Hussain that if he did not agree with the review decision, he could refer the matter to the Tribunal within 30 days. He did not do so.

Mr Hussain was subsequently issued with penalties totalling £8,195 relating to periods 08/13 to 08/15 inclusive (“the Penalties”): these were included in a copy of Mr Hussain’s “ledger” with HMRC which had been provided at his request on 12 May 2021 (“the Ledger”). The Penalties were entered in the Ledger on 14 April 2014, although HMRC’s covering letter advised that the date on the Ledger may not be identical with the decision date. In an email dated 20 June 2017, Officer Higham confirmed the total of £8,195. No information was provided to the Tribunal as to the reason for the Penalties.

Mr Hussain annotated the email from Officer Higham with the words “penalties which should have been appealed in the first place”. I find that no appeal was made against the Penalties within the statutory deadline.

On 15 November 2016 HMRC received a Notification of Errors form (VAT 652) from Mr Hussain’s new accountant, Ms Greene, for an alleged overpayment of £35,100 of output tax for periods 08/13 to 02/16. The explanation given by Ms Greene was as follows:

HMRC wrote to Ms Greene requesting further details about this alleged overpayment, but no information was provided.

On 16 June 2017 HMRC visited Ms Greene’s offices to check the calculation of the alleged overpayment, but no analysis, detail or breakdown was provided at that visit. Correspondence ensued, and Ms Greene subsequently provided some recalculated figures. However, these did not reconcile with the “error correction” which Ms Greene had previously submitted. When HMRC asked for an explanation, Ms Greene said she did not have a copy of “the initial error correction calculation”. On 13 July 2017, HMRC issued Mr Hussain with a decision rejecting the error correction of £35,100.

During the same visit on 16 June 2017, HMRC identified that the error correction had been calculated on the basis of the Direct Calculation retail scheme, whereas Mr Hussain’s VAT returns had been submitted on the basis of Apportionment Scheme 1.

In their letter of 13 July 2017, HMRC explained that retrospective changes of retail schemes are not normally permitted, but that if Mr Hussain considered he should exceptionally be allowed to make such a change, he should write to HMRC “giving as much detail as possible”.

On 31 July 2017, HMRC issued a further decision refusing a retrospective change of the retail scheme for periods 08/13 to 02/16, the same periods as had been included in the “error correction” submitted by Ms Greene. A statutory review of this new decision was requested by Ms Greene on 25 August 2017; a review letter was issued on 15 November 2017 upholding the decision.

On 19 January 2018, Mr Hussain appealed to the Tribunal. The Tribunal clerk contacted Ms Greene to say that the document did not include the grounds of appeal. On 22 March 2018, Ms Greene put forward new calculations, which did not rely on assuming that the retail scheme had been retrospectively changed. On that new basis, the amount now in dispute was £9,525.07 rather than the original £35,100. I therefore infer that the First Appeal sought to challenge both the retail scheme decision and the error correction decision, but that Mr Hussain (via Ms Greene) subsequently abandoned the former.

HMRC applied to the Tribunal for a case management hearing so that further clarification could be provided as to Mr Hussain’s position, and the Tribunal directed that this hearing be listed.

HMRC’s file shows that on 29 May 2019 they were informed by the Tribunal that on 8 May 2019 Ms Greene had withdrawn the appeal by writing to the Tribunal. No reinstatement application was made within the 28 days following 8 May 2019, and the Tribunal closed the file.

In relation to the withdrawal of the First Appeal, Mr Hussain attached the following emails to the NoA for the Third Appeal:

I find as facts that Ms Greene wrote to the Tribunal on 8 May 2019 withdrawing the appeal, and that the Tribunal informed HMRC of the withdrawal by letter on 29 May 2019. I come to those findings taking into account the following:

On 10 January 2020 Ms Greene lodged a new appeal at the Tribunal on behalf of Mr Hussain. On 3 February 2020, the Tribunal wrote to Ms Greene noting that the Second Appeal concerned the same matters as the First Appeal, and that Mr Hussain had either to make an application for reinstatement or explain how the two Appeals differed. Neither Ms Greene nor Mr Hussain responded.

On 31 October 2020, the Tribunal wrote to Ms Greene saying that unless a response was received within 14 days, the Tribunal would close the file. No response was received and the Tribunal closed this second file.

On 27 November 2021, Mr Hussain completed the NoA for the Third Appeal by hand; this was posted and received by the Tribunal on 2 December 2021. The NoA said that Mr Hussain was appealing against £10,793 of VAT and £9,544.45 of penalties.

Under “grounds of appeal”, Mr Hussain wrote (text as in original):

In answer to the question “why are you late” Mr Hussain wrote (again, text as in original):

At Part 21 of the NoA, appellants are instructed to “select the letter you are enclosing with your appeal”, followed by two check boxes, one entitled “original notice letter or decision document” and the second entitled “review conclusion letter”. Mr Hussain ticked neither. The next box is headed “list any other documents you have enclosed”. Mr Hussain wrote:

Attached to the NoA was the January 2916 Decision; a copy of the Ledger; the emails between Ms Greene and HMRC set out at §23; an email of 22 March 2018 from Ms Greene to Mr Hussain about changing the grounds of appeal; part of a letter from Ms Greene to HMRC dated 2 November 2015; the email from Officer Higham dated 20 June 2017, which confirmed that Mr Hussain owed the Penalties of £8,195 and other amounts, and an invoice dated 2014 from a supplier to Nisa Local. These attachments also include some brief hand-written annotations such as that referred to at §12.

On 24 May 2022, HMRC filed and served the Objection.

The main point in the NoA is that HMRC “have not given [Mr Hussain] the repayments which were due”, and that he “should have been given a refund of VAT”. I have taken this to be a reference to the “error correction” originally calculated as £35,100, but subsequently reduced to £9,525.07 after it was accepted that the retail scheme could not be changed retrospectively.

I agree with Mrs Nkonde that as both the First and Second Appeals related to that same issue, and that as the First Appeal had been withdrawn, the Third Appeal is a reinstatement application. I consider whether to allow or refuse the reinstatement application at §36ff below.

The NoA also refers to the January 2916 Decision and to penalties of £9,544.45. I consider these at §51ff below.

I first set out the Tribunal Rules, followed by the law on late reinstatement applications; I then apply that law to Mr Hussain’s case.

Rule 17 of the Tribunal Rules is headed “withdrawal” and it reads:

Rule 7(3) gives the Tribunal the power 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”.

Rule 7 thus gives the Tribunal the discretion to allow a late application to reinstate which is made after the 28 days set out in Rule 17(4), but only if that would not conflict with another statutory provision which prevents the Tribunal exercising such a discretion.

VATA s 85 is headed “settling of appeals by agreement” and provides that:

Thus, VATA s 85 provides that:

In OWD v HMRC [2018] UKFTT 0497 (TC), Judge Falk (as she then was) considered the interaction between the Tribunal Rules and VATA s 85. She held, rightly in my view, that where s 85 applies it is not possible for an appeal to be reinstated. That is because s 85 deems the agreement between the parties to have the same consequences as if the Tribunal had come to a decision in the same terms. It is not possible to reinstate an appeal after it has been decided by the Tribunal.

Section 85 applies where:

However, in Mr Hussain’s case, Ms Greene did not notify HMRC. Instead, she gave notice to the Tribunal, and the Tribunal told HMRC the appeal was withdrawn. I considered whether that indirect notification was sufficient for s 85 to take effect.

A similar situation was considered in Albert House v HMRC [2020] UKUT 373 (TCC) in relation to Sch 10, para 37 of Finance Act 2003; that appeal concerned stamp duty land tax (“SDLT”), but the wording of the relevant provision is the same as that in VATA s 85.

In Albert House, the appellant had withdrawn its appeal, but HMRC objected to the withdrawal and wanted the case to proceed. VATA s 85(4) and the equivalent SDLT provision both state that if HMRC wish to prevent a withdrawal taking effect, they must give the appellant notice in writing to that effect. In Albert House, HMRC had not given notice to the appellant; instead, they had only written to the Tribunal, and the Tribunal had informed the appellant. The appellant’s case was that this was insufficient to meet the statutory requirements, and that s 85 required the parties to notify each other directly, as summarised by the UT at [66]:

The UT rejected that submission, holding at [74] that the purpose of the provision was that “an appellant who seeks to withdraw its appeal should know within 30 days whether HMRC are objecting to that withdrawal and should be told this in writing so that there is a record”. It went on to hold at [88] (emphases in original):

In my judgment, the position is the same here. Ms Greene wrote to the Tribunal on 8 May 2019 withdrawing the appeal, and the Tribunal informed HMRC of the withdrawal by letter on 29 May 2019. There was no doubt that HMRC had been told about the withdrawal; this was the purpose of the provision. Section 85 therefore applied; as a result, the First Appeal was deemed to have been decided by the Tribunal, and no reinstatement was possible.

For the reasons explained above, Mr Hussain’s application to reinstate the First Appeal is refused.

Even if that were to be wrong, I would not have granted Mr Hussain permission to make a late application to reinstate his appeal. That is for the same reasons as set out below in relation to the Penalties and the 2016 Decision. Although the delay in applying for reinstatement is less than the delay in relation to the Penalties and the 2016 Decision, it was still two and a half years between the withdrawal of the First Appeal and the filing of the Third Appeal. This is plainly very serious and significant, and all other factors are the same.

Mr Hussain referred to two other matters in his NoA. I first set out those matters, followed by the law on late appeals; I then apply that law to the facts.

As noted above, Mr Hussain said in the text of the NoA that he was appealing in part because (emphasis added) “a complete review is required of the charges and VAT refunds and penalties as I believe errors were made by both HMRC and my accountants”.

Mr Hussain did not attach any HMRC penalty decision(s) to his NoA. However, he attached the Ledger and the email from Officer Higham dated 20 June 2017, which confirmed the total as being £8,195.

The amount of the penalties in the NoA for the Third Appeal was stated to be £9,544.45 rather than £8,195, but in the absence of any more information, I have assumed the difference to be interest.

I have therefore taken the Third Appeal to encompass an application for a late appeal against the Penalties of £8,195 charged on or before April 2014.

As already set out at §10ff, on 29 January 2016 Officer Hanrahan upheld a decision made by Officer Higham to disallow input tax relating to management charges in 05/14 and 05/15. The First Appeal concerned only the “error notification” and the retrospective change to the retail scheme, both of which concerned output tax. It did not refer to Officer Hanrahan’s decision or indeed anything to do with managing charges or input tax.

I therefore find that there has been no appeal to the Tribunal against the 2016 Decision, and that by attaching the review letter to the Third Appeal Mr Hussain was in terms applying to make a late appeal against that decision too.

I next considered whether to allow or refuse Mr Hussain’s application to make late appeals in relation to the Penalties and the 2016 Decision.

VATA s 83 provides that there is a right of appeal against assessments made under VATA s 73 and also against penalties.

VATA s 83G provides that the taxpayer can appeal directly to the Tribunal, but is required to do so within 30 days of the date of the assessment or decision. Alternatively, the taxpayer can accept HMRC’s offer of a statutory review within 30 days, and can then appeal the review decision to the Tribunal by 30 days after the date of that decision.

A person can only appeal to the Tribunal after those statutory deadlines if the Tribunal gives permission for a late appeal, see VATA s 83G(6).

The case of Martland v HMRC [2018] UKUT 0178 (TCC) (“Martland”) concerned an application to make a late appeal against excise duty and a related penalty, but the principles there set out have been applied and followed when deciding late appeal applications in relation to VAT and other taxes and duties, see for example Websons v HMRC [2020] UKUT 154 (TCC).

In Martland at [37] the UT set out Rule 3.9 of the Civil Procedure Rules (“CPR”), which reads:

The UT then considered the authorities, in particular Denton v TH White Limited [2014] EWCA Civ 906 (“Denton”) and BPP v HMRC [2017] UKSC 55 (“BPP”). The UT said:

The UT noted at [42] that the Supreme Court in BPP had implicitly endorsed the approach set out in Denton. That Court also confirmed at [26] that “the cases on time-limits and sanctions in the CPR do not apply directly, but the Tribunals should generally follow a similar approach”. At [43] the UT said:

At [44] the UT set out the following three stage approach by way of guidance to this Tribunal:

The UT also said at [46]:

The time limit for appealing the Penalties was no later than 30 days after 14 April 2014, the date they were entered in the Ledger. The Third Appeal was made on 2 December 2021, so more than seven years after the statutory time limit.

The time limit for appealing the 2016 letter was 30 days after 29 January 2016, when it was issued. The delay was thus almost six years.

In Romasave v HMRC [2015] UKUT 254 (TCC) (“Romasave”), the UT said at [96] that:

The delays here are many times longer than the three months referred to in Romasave, and were plainly serious and significant.

The only reason Mr Hussain gave for the delay was that his accountants gave him poor advice and poor service, and did not inform him about what was happening. In Katib v HMRC [2019] UKUT 189 (TCC) (“Katib”), where the UT said at [49] (their emphasis):

The UT returned to this issue at [54], saying:

The UT then cited the Court of Appeal’s judgment in Hytec Information Systems v Coventry City Council [1997] 1 WLR 666 (“Hytec”). Ward LJ, giving the leading judgment, said at p 1675:

In Katib, the UT continued at [56] by concluding that the correct approach was:

This was followed at [58] by the following passage:

In deciding that little weight should be given to Mr Katib’s reliance on his adviser, the UT also took into account that Mr Katib should have noticed “warning signs”, including direct contact from HMRC in the form of enforcement action, which “should have alerted him”. The UT therefore concluded Mr Katib was “not without responsibility in this story”.

In accordance with Katib and Hytec, this Tribunal should therefore not normally find that reliance on an adviser provides a good reason for delay. There was nothing in Mr Hussain’s case which took it outside that normal range. Moreover, Mr Hussain was sent the original 2016 Decision, which included the 30 day time limit for making an appeal, see §10. He was plainly aware of the Penalties because they were set out in the Ledger, and they would thus have been included in his Statements of Account; they were also referred to in the email from Officer Higham dated 20 June 2017 which he attached to the Third Appeal. I therefore find that reliance on his accountants does not provide Mr Hussain with a good reason for delay.

The third step in the Martland approach is to consider all the circumstances, and then to carry out a balancing exercise.

Significant weight must be placed as a matter of principle on the need for statutory time limits to be respected. This was described as “a matter of particular importance” in Katib; the same point is made in Martland at [46]. The delay in relation to the 2016 Decision was more than seven years, while that in relation to the Penalties was almost six years, and there was no good reason for those delays.

As already noted, in Katib the UT found at [56] that reliance on advisers was unlikely to amount to a “good reason” for missing the statutory deadlines in the context of the second stage of the evaluation required by Martland. The UT continued in the same paragraph:

At [59] the UT considered the submission made on Mr Katib’s behalf that “Mr Katib did not have the expertise to deal with the dispute with HMRC himself”, but went on to say:

I find that the Mr Hussain’s reliance on his advisers is a factor to be weighed in the balance in favour of allowing a late appeal, but that relatively little weight is to be given to that factor as compared to the particular importance of respecting statutory time limits, for the reasons given in Katib. In addition, Mr Hussain was aware of the time limit applying to the 2016 Decision when it was issued, and was clearly copied on some of the correspondence with HMRC. I place little weight on Mr Hussain’s reliance on advisers.

Although it is possible to take the merits of an appeal into account, see Martland cited earlier, there is no information as to the merits of Mr Hussain’s appeal against either the Penalties or the 2016 Decision.

Mr Hussain will suffer prejudice if he is unable to appeal, but that is an inevitable consequence of losing the opportunity to challenge an HMRC decision. HMRC will suffer prejudice if the Tribunal were to give permission, because they will have to devote time and attention to defending these very old decisions. Granting permission also prejudices the position of other taxpayers, in that both HMRC and the Tribunal will divert resources from other cases.

It is clear from the above that the balancing exercise is overwhelmingly in favour of refusing permission to appeal.

For the reasons explained above, the Tribunal refuses Mr Hussain permission to make late appeals against the 2016 Decision and/or the Penalties.

Mr Hussain’s application to make a late reinstatement application is refused because the Tribunal has no jurisdiction; his application to make late appeals in relation to the 2016 Decision and the Penalties is also refused.

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 Rules. 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.