Candido Pereira Rodrigues v The Commissioners for HMRC

The Upper Tribunal in Martland has given guidance on the correct test to be applied when considering an application for permission to make a late appeal and paragraphs 43 to 47 read:

The appellant frankly conceded that he did not have a good memory and he could not recall dates. He also appeared to have difficulty with names. He had very little recollection of any detail. The issues with which the Appeal is concerned happened many years ago.

Whilst, of course, it deals with a completely different part of the tax legislation, nevertheless, we agree with Judge Amanda Brown QC and Member Duncan McBride in Cry Me A River Limited v HMRC (Footnote: ¹) (“Cry Me”) where they state at paragraphs 11 to 14 as follows:-

It is very relevant in this appeal and therefore where there are contemporaneous documents the Findings in Fact are predicated thereon rather than on the later submissions or oral evidence. Furthermore, almost all of that documentation was originally produced in the Submission Bundle.

The appellant was the sole registered director and shareholder of Pazzia Limited (“the Company”) which operated an Italian restaurant. On 14 September 2016, HMRC visited the premises and thereafter opened an enquiry into the Company’s tax affairs. They believed that the Company had not declared all of its income as there were significant sales identified with the Merchant Acquirer data which were not included in the sales figures.

The Company ceased trading on 28 February 2017. On 9 June 2017, the Company changed its registered office from c/o ATS Business Solutions Limited in Graham Road, London to an address at Merton Road London. The latter address had been used prior to 27 July 2012. On 9 November 2018, it was changed to the liquidator’s address.

The Company was placed into creditors’ voluntary liquidation on 18 October 2018.

On 20 June 2018, Officer Moore wrote to the Company issuing penalty factsheets and enclosing VAT Assessments in the sum of £579,988 in order to recover the lost revenue.

Corporation Tax Assessments in the sum of £709,005.63 were issued on 26 July 2018 in order to recover the lost revenue.

The assessments were never appealed.

On 20 July 2018, Officer Moore received a telephone call from Martin Armstrong of Turpin Barker Armstrong (“Turpin”) who said that he was with the appellant and that he was a licensed insolvency practitioner. During the telephone call he forwarded to HMRC a mandate signed by the appellant authorising him to act on behalf of the Company. It was his first meeting with the appellant.

He said that:

On 27 July 2018, on the basis of deliberate behaviour, HMRC issued the Company with VAT penalties in the sum of £272,214.86 and Corporation Tax penalties in the sum of £464,909.87. Those were not paid by the Company.

The assessments and the penalties were all sent to the Merton Road address.

On the same day the two PLNs were sent to the appellant’s home address and those were intimated to the Company at the Merton Road address.

A Code of Practice 9 (“COP9”) investigation was opened by HMRC on 26 July 2018. The appellant was advised that HMRC had reason to suspect him of tax fraud and he was offered the opportunity to enter the Contractual Disclosure Facility (“CDF”). That letter was sent to the appellant’s home address with a copy to ATS, whom HMRC referred to as Accountancy and Taxation Services.

On 11 September 2018, Mr Armstrong contacted Officer Moore by telephone intimating that the liquidation would proceed and the insolvency notices would be issued that week. He said that the appellant had received the PLNs. He asked if the PLNs would form part of the COP9 procedure and the officer referred him to the colleague dealing with COP9.

On 12 September 2018, Azed and Co notified HMRC that they had been appointed to act for the appellant.

On 2 October 2018, Turpin wrote to HMRC intimating that they had been appointed as tax advisers for the COP9 investigation.

On 11 October 2018 Turpin lodged with HMRC the appellant’s Outline Disclosure (“Disclosure”) in terms of the CDF.

At the opening meeting for COP9 on 30 January 2019, which was held at Turpin and where the appellant was represented by both Mr Clark of Turpin and by Mr Azed, the terms of the Disclosure were read out to the appellant. He agreed that it was accurate. There were 11 bullet points. He had confirmed that, amongst other things, he had been responsible for (a) the suppression of business profits, and therefore the understatement of corporation tax liabilities, and (b) the submission of inaccurate VAT returns leading to the under-declaration of output VAT. In the full copy of the Disclosure in the Bundle, I observe that whilst the appellant accepted responsibility for all of the omissions, he also attributed blame to ATS.

It is clear from paragraph 48 of those notes that that was not the first meeting between the appellant and HMRC since a conflict in the information provided at a previous meeting was identified. In the course of the meeting the appellant is recorded as having attributed blame to his previous accountant. It was agreed that Turpin would provide a complete report for HMRC on behalf of the appellant and his wife within nine months.

Correspondence ensued and Turpin requested an extension of time to allow the appellant to sell an investment property to make a payment on account.

In November 2019, Azed & Co provided some computations in relation to personal tax.

Following a meeting on 28 November 2019, at Turpin’s offices, where HMRC had requested a Statement of Assets and Liabilities, on 23 December 2019, Azed & Co furnished that to HMRC.

On 11 May 2020, Turpin resigned agency but Azed & Co continued.

On 15 May 2020, HMRC emailed Mr Azed advising that the intention was to raise Income Tax assessments and, on 31 May 2020, Mr Azed furnished information that they had given to Turpin.

On 12 June 2020, Income Tax Discovery Assessments for the years 2001/02 to 2016/17 were issued to the appellant and copied to Azed and Co. On 23 and 29 July 2020, penalty determinations and assessments were issued to the appellant covering the same years and copied to Azed & Co.

On 29 July 2020, Reliance wrote to HMRC intimating that they had been appointed to act for the appellant.

On 14 August 2020, HMRC wrote to Reliance narrating the history at some length detailing exactly what had happened and when (including what I have outlined above). Pertinently they enclosed copies of all of the correspondence that they had identified. That included the PLNs.

The letter concluded by noting that Reliance had said to them that:- “After receiving and reviewing all documents, we will make a formal appeal which will not be within the statutory period…”. HMRC therefore referred Reliance to their published guidance ARTG2240 and quoted the relevant part that dealt with late appeals. HMRC pointed out that an application would have to be made to the Tribunal.

On 20 August 2020, HMRC wrote to Reliance referring to a letter from them dated 14 August 2020 (which is not in the Bundles). They quoted from that letter saying:

HMRC replied confirming that the copy correspondence referred to in HMRC’s letter of 14 August had been sent to Reliance in:

On 10 September 2020, HMRC replied to a letter of 24 August 2020 from Reliance (which is not in the Bundles.) After dealing with the Discovery Assessments and postponement of tax, under headings in bold referring to the PLNs, the officer quoted section 49 Taxes Management Act 1970 (“TMA”) and went on to point out that:

On 3 November 2020, Reliance wrote to HMRC referring to that letter with the writer, stating that although the letter had been received in his office on 15 September 2020, he was abroad and only returned at the beginning of October 2020 and had self-isolated for 14 days. He stated that an appeal to the Tribunal in relation to the PLNs had been prepared but had not been submitted pending confirmation that payment would not be a prerequisite for an appeal.

He went on to argue that the first meeting between the appellant, his wife and Turpin was the COP9 meeting in January 2019 and the appellant had a reasonable excuse in that it was alleged that Turpin had worked at the behest of HMRC and there had been a conflict of interest. He said that the “reasonable excuse only ended once we were hired to review the outstanding matters and now advising of the appeals (sic)”.

On 10 June 2022, Womble Bond Dickinson (UK) LLP, acting for the Liquidator of the Company, wrote to the appellant pointing out that, with effect from 8 August 2019, the appellant had given a disqualification undertaking to the Secretary of State for Business, Energy and Industrial Strategy under the Company Directors Disqualification Act 1986 (“CDDA”) that he would not act as a director for a period of 10 years. The matters of unfitness which, solely for the purposes of the CDDA, were not disputed by the appellant were:

They confirmed that HMRC had submitted a proof of debt in the liquidation in the total sum of £2,826,083.78 reflecting the unpaid VAT, Corporation Tax/Section 455 tax plus penalties surcharges and interest. They confirmed that Azed & Co had made various representations to the Liquidator on the appellant’s behalf to the effect that that was overstated but they maintained their claim in that sum of the debt.

In deciding whether to give permission, I have adopted, as I must, the three stage approach in Martland. However, in the particular circumstances of the Appeal the first two stages are inextricably linked.

The delay in this case is some 27 months after the time limit for appealing had expired. In the context of a 30 day time limit the delay in this case cannot be described as anything other than serious and significant. That is acknowledged in the Submission.

However, in the Submission, it was argued at paragraph 3 that the PLNs only came to the “knowledge” of the appellant in September 2020 and “thereafter Reliance” requested copies so they were appealed timeously (given Covid-19). That is quite simply inaccurate as can be seen from the Findings in Fact.

In paragraph 129 I have added emphasis because that makes it clear that not only did Reliance know about the PLNs in August 2020, but that knowledge was derived from Azed & Co who have been involved since 2018. The Submission states that they were appointed in June 2018, which is before the PLNs were issued. Whilst that is possible, that is unlikely since their mandate was only lodged with HMRC on 12 September 2018.

That raises another issue. The Submission states that it was the appellant’s original advisers, ATS, who referred the appellant to Turpin as the appellant’s “tax advisers”. It goes on to say that they were initially hired as tax advisers and enquiry specialists. HMRC’s contemporary record is that Mr Armstrong of Turpin first contacted them in July 2018 but as an insolvency practitioner, and that on 11 September 2018 he contacted them to say the liquidation would proceed.

It was only on 2 October 2018, that Turpin confirmed that they had been appointed as tax advisers in the COP9 enquiry. It was a different individual in Turpin who acted in that capacity. Mr Armstrong is an insolvency practitioner and was ultimately appointed as Liquidator. Turpin are Insolvency Practitioners but they are also Chartered Accountants. It was a Mr Clark, who is no doubt an accountant and tax adviser, who acted in the COP9 enquiry.

I endeavoured to explore that in the hearing but there was a total lack of clarity. In oral evidence, the appellant said that it was Azed & Co who appointed Turpin. The appellant thought that they had been tax advisers in the first instance and then they had acted in the insolvency. I do not think that that is an accurate recollection.

On balance, it seems unlikely that the Submission is correct in saying that it was ATS who involved Mr Armstrong of Turpin. The HMRC note of call states that Mr Armstrong told them that ATS were no longer acting for the Company in July 2018 although they were still on the record as advisers.

The Submission argues that ATS passed no files to Azed & Co and therefore the appellant can have had no knowledge of the PLNs (or anything else).

Mr Azed attended the COP9 meeting and was therefore aware of the Disclosure. He worked closely with Turpin. Leaving to one side, the appellant’s assertion that he did not receive the PLNs and HMRC’s tracked delivery note and the note of call with Mr Armstrong which records that he did, it is clear that Turpin were aware of the PLNs and that Azed & Co also were aware of them. Azed & Co prepared the appellant’s Statement of Assets and Liabilities and, on the balance of probability, since it was accepted by HMRC, it must have included the PLNs. It was a liability and not a small one.

As can be seen, on request, HMRC promptly provided very full information to Reliance. They clearly corresponded with Azed & Co at some length.

Even if ATS did not provide information, on the balance of probability, HMRC will have done so. In any event, I consider it to be extremely unlikely that Turpin would not provide full details to Azed & Co given that they both worked on the information required for the COP9 investigation.

I find that on the balance of probabilities, Azed & Co will have been aware of the PLNs from a very early stage.

The reasons given by the appellant for the delay are interesting.

At paragraph 78, I have explained that the Notice of Appeal appears to have been drafted by Mr Shahid. The reason given for the late appeal was stated to be:

In the Grounds of Appeal it was argued that there had been collusion between Turpin and HMRC because from the beginning they had actively advised against appealing the assessments and had failed to “protect my legal rights…they failed to explain the tax implications of personal liability notices to me”.

In Reliance’s letter of 3 November 2020 to HMRC it stated that:

In the Submission, as I have indicated, it was argued that the appellant had not known about the PLNs until September 2018. ATS had referred the appellant to Turpin. He had relied upon Turpin who had never discussed or showed the PLNs to him. The allegation of collusion was reiterated and reliance was again placed on the suggestion that Mr Clark advised against Tribunal proceedings. It was further argued that Turpin had either wilfully suppressed the PLNs or they had treated the PLNs as non-appealable and failed to inform the appellant.

There are a number of problems with all three of these arguments.

In relation to the reasons given in the Notice of Appeal, firstly, as HMRC have pointed out, on the one hand the appellant states that he never received the PLNs and then he states that they did arrive. Neither argument is consistent with the Submission which stated that Reliance obtained copies (albeit, as I have pointed out that was not in September 2018).

Secondly, the clear implication is that they “arrived” before Reliance were appointed on 29 July 2020 or bankruptcy litigation commenced. However, I observe that the Statutory Demand in the Bankruptcy was served on the appellant on 11 May 2020. The covering letter that was served with it stated that at a meeting on 26 February 2020 the appellant had agreed that bankruptcy was appropriate. Furthermore, the Creditor’s Bankruptcy Petition was served in the High Court on 25 June 2020. On 7 August 2020, NR Legal Solicitors Limited filed the opposition to the Petition. (The petition was ultimately dismissed). Clearly, bankruptcy loomed long before Reliance were appointed.

The arguments about Turpin in the letter from Reliance and the Submission are not for me to adjudicate upon but HMRC’s note of telephone call is long and clear. Firstly, Mr Armstrong made it explicit that he was acting for the Company. That is not the same as acting for the appellant. The assessments were assessments on the Company and not the appellant. Mr Armstrong’s duties were to the Company.

Secondly, the argument advanced by Reliance about Mr Clark, who did act for the appellant, is noted. I simply observe that this is a specialist Tribunal. I am not surprised to see it recorded in one sentence in a 206 paragraph note that one of the professional advisers present (Mr Azed was also there) had indicated that he would not be recommending tribunal proceedings. It must be read in context. The appellant had lodged a Disclosure covering significant omissions in relation to a wide number of tax issues. The purpose of a COP9 meeting is to negotiate, if possible, a way forward to avoid criminal proceedings. The objective is settlement. If that fails, both Alternative Dispute Resolution and Tribunal proceedings become a possibility. Furthermore, the PLNs formed no part of the COP9 meeting which was concerned with suspected tax fraud by the appellant.

Lastly in that regard, for the avoidance of doubt, in both the letter from Reliance and the Submission, arguments are advanced in relation to another taxpayer who is a client of Reliance. I will not refer to those as that taxpayer is entitled to confidentiality and, in any event, I can only consider what happened in the appellant’s case.

For obvious reasons HMRC argue that any suggestion of collusion is completely unfounded. HMRC point out that the PLNs are short, which they are, are couched in plain English and make the appeal rights explicit. They do.

In the Submission, it is argued that “inherent in the appeal is the appeal against the penalty notices issued to the Company” and the appellant wishes to challenge the penalty amounts etc. Since it is accepted that those were served on the Company, it is then argued that :

Although it is not very clear, I think that what is being argued for the appellant is that the usual time limit of 30 days in section 83 VATA does not apply because the underlying penalties were not served on the appellant and he only became aware of them when he received the PLNs.

That is not a tenable argument. Only the Company or the Liquidator could appeal the penalties. Neither chose to do so. The appellant has no standing to appeal the penalties himself.

The assessments to which the penalties relate were not appealed so the tax due, which is the basis for the penalty calculations, is treated as being finally agreed. HMRC pointed out to Azed & Co in a letter to them dated 12 June 2020 that, in that situation, if the appellant disagreed with the assessments then he could, and should, quantify different figures in the Disclosure Report for COP9. That has not been done.

As the PLNs themselves make explicit, PLNs are issued in terms of paragraph 19, Schedule 24, Finance Act 2007 (“FA 07”). That reads:

The only person who can appeal a PLN issued under those provisions is the officer of the company. In any appeal of the PLN, as the case law demonstrates, that officer, whilst unable to appeal the penalties issued to the company, can challenge the basis for, and the quantum of, the penalties. If the appellant wished to do that he would require to produce the relevant information.

In this case that officer of the company is the appellant. Section 83G(1)(ii) is not relevant. The time limit is the default time limit of 30 days.

The Submission accepts that a delay of more than three months is both significant and serious as the Upper Tribunal found in Romasave (Property Services) Limited v HMRC [2015] UKUT (TCC).

On the balance of probability the delay in this case is well in excess of that. I also observe that Reliance cannot be described as having acted promptly since HMRC repeatedly pointed out that late appeals would have to be lodged.

The appellant blames ATS and then Turpin. Unfortunately for the appellant, it is well established that “when considering applications for permission to make a late appeal, failures by a litigant’s adviser should generally be treated as failures by the litigant” as the Upper Tribunal’s decision in Katib makes clear at paragraph 54. In Katib, the Upper Tribunal had to consider the extent to which reliance on an adviser was a justifiable reason for failing to make an appeal in time. In that case, the adviser did not provide competent advice to Mr Katib, misled him as to what steps were being taken to appeal and failed to appeal on Mr Katib’s behalf. On the facts of the case, the Upper Tribunal concluded that failings by the appellant’s agent could not be relied upon by the appellant at any stage in the Martland analysis.

The Upper Tribunal observed at paragraph 56 that: “… the correct approach in this case is to start with the general rule that the failure of [the adviser] to advise Mr Katib of the deadlines for making appeals, or to submit timely appeals on Mr Katib’s behalf, is unlikely to amount to a ‘good reason’ for missing those deadlines when considering the second stage of the evaluation required by Martland. However, when considering the third stage of the evaluation required by Martland, we should recognise that exceptions to the general rule are possible and that, if Mr Katib was misled by his advisers, that is a relevant consideration.”

In paragraphs 58 and 59 the Upper Tribunal said:

I note that the appellant attributes any delay to ATS and then to Turpin. He argued that he had been charged a lot of money to ATS and they had not done much for him. He said that he then used Azed & Co but they too had not helped him and referred him to Turpin. I explained to him that I understood that he believed that he had received poor advice but that that cannot assist him in terms of a reason for the delay given and what the Upper Tribunal has said in Katib.

This evaluation proceeds from the starting point that it is important that litigation be conducted efficiently and at proportionate cost, and that time limits be respected (see Martland at paragraph 45). I must undertake a balancing exercise, assessing the reasons for the delay and the prejudice which may be caused to both parties by granting or refusing permission.

I have already pointed to some factual inaccuracies in the Submission but there are some other issues. It is argued at paragraph 34 that because of the sums of money involved the PLNs “merited a prompt action and response. There is no way he would sit down and relax, having received such liability notices.” I am afraid that the procedural history of the Appeal certainly belies that. There has been considerable delay, actual strike out of the Appeal and a number of failures to respond to the Tribunal. I do not accept that argument.

It is also argued that the appellant was not living at his home address when the PLNs were issued. The Submission states that he was living at Dungeness House. That is a property referred to in the Disclosure as being an investment property which produced rental income. The Notes of the meeting (at paragraph 57) disclose that it was rented out privately for £700 per calendar month and that at that time there was a rental agreement in place. At paragraph 150 the appellant is recorded as saying that he received £700 or £800 in rental income per month and that although he had lived in the property at one point, he had been renting it out ever since. HMRC’s letters to Reliance pointed out that Azed & Co had produced detail of the rental income. Production of a water bill does not assist me.

The appellant’s oral evidence did not assist because it just was not credible. He said that for six or seven months in 2018/19, because he had water damage in his own home and builders were working, he had “rented elsewhere”. He could not confirm when that had been the case or where he had stayed but the fact is that that is not consistent with living in his own property, which was in his name alone and for which he would not be paying rent.

He said that he would pass HMRC letters that he had received to Mr Shahid but I accept that that is after the date of delivery of the PLNs.

The appellant appears to have received the letter from HMRC about the COP9 enquiry which was addressed to his home address and copied to ATS and issued on 26 July 2018.

I had other difficulties with the appellant’s evidence, which, in general, could best be described as vague and lacking in detail. For example, he could not remember who had acted for him and when. He argued that he was simply a chef and had been naïve. That was why he had paid professional advisers.

A particular issue was that he said that Turpin had told him that they had spoken with HMRC and HMRC had agreed that he could continue in business after the liquidation of the Company; ie that he could have a “phoenix” company. It is not credible that HMRC would ever have said anything of the sort since the primary focus of the PLN legislation is to put a stop to phoenix companies. The suggestion was that Turpin had deceived him by saying that.

Officer Moore’s evidence was short, straightforward and credible. The notes of the telephone calls are detailed contemporaneous evidence, and do not simply cover the point that HMRC made, which was that when Mr Armstrong called Officer Moore on the second occasion he said that the appellant had received the PLNs. Pertinently it is recorded that during the first phone call when the appellant was allegedly sitting with him, quite apart from discussing the VAT assessments, the possibility of liquidation of the Company and the mandate from the Company, Mr Armstrong had “talked about the director’s behaviour and mentioned disqualification, but I did not comment on this”.

Of course, as I have indicated, the appellant was duly disqualified.

As the Upper Tribunal indicates at paragraph 46 in Martland, one of the factors that I must consider, without looking at the merits in detail, is the strength or weakness of the challenge to the PLNs.

The Submission is incorrect in stating that the enquiry into the Company was opened “around early 2018”. The enquiry started on 16 September 2016. I do not have records of the enquiry but, as I have identified at paragraph 119, thereafter HMRC had pursued their enquiries and at least one other meeting had taken place. The Company had ceased trading on 28 February 2017. HMRC had Merchant Acquirer data which showed significant card sales well in excess of the declared turnover. They were in a position to, and did, issue the VAT assessments on 20 June 2018.

On 20 July 2018, before the penalties were issued on 27 July 2018, Mr Armstrong, acting for the Company and authorised to do so by the appellant, had told them that the Company was on the point of liquidation and that the appellant’s behaviour was such that disqualification as a director was a possibility.

I do not know or need to know the detail. I reiterate these facts since the Submission argues that there may be “serious procedural errors” in relation to the assessments and penalties and that strengthens the appellant’s case.

On the face of it, at the point that the penalties were issued to the Company, and the PLNs to the appellant, HMRC appear to have had grounds to do what they had done.

Further, although they were at a later date, the terms of the CDDA and the Disclosure for COP9, do not suggest that, in light of Mr Armstrong’s disclosures, HMRC’s arguments on penalties would be particularly weak.

Whilst I accept that the appellant states that he intends to sue Turpin, at this stage that is simply an argument put forward by him. The most that could be said at this juncture would be that if he were here to appeal the PLNs he would advance the same arguments as he has done here in regard to his advisers.

The Submission also argues that the appellant has an argument that the PLNs imposed the full amount of the penalties on the appellant, whereas there is an argument that HMRC should have considered whether or not a manager might bear some part of the liability. As I have indicated at paragraph 164, a manager would only be considered if the Company was not a body corporate. All the indications are that it was.

I find that the appellant’s case does not appear to be strong; in the words of Martland the merits of the appeal are not overwhelmingly in his favour.

Of course, the appellant will be prejudiced if I refuse to grant him permission to notify the appeals late, in that he will have lost the opportunity to contest the PLNs and will be liable to pay a substantial sum of money. That, however, is a consequence of the failure to notify the appeals in time and it cannot be right that a delay which is significant and for which there was no good reason should be overlooked, simply because the amount at stake is very large or significant to the would-be appellant. If that were so, there would be no point in having a time limit for notifying high value appeals, or appeals of lower value by poorer taxpayers.

As I pointed out in the course of the hearing, the Upper Tribunal made it clear at paragraph 60 in Katib that a taxpayer:-

Against that prejudice to the appellant, I balance the prejudice to HMRC and the public interest if the appeals are allowed to proceed after such a long period of delay and the need for statutory time limits to be respected. As the Submission recognises, if the Appeal is permitted to proceed, HMRC would be required to divert resources, time and costs for a matter that had been considered to be final a long time ago.

I consider that the appellant has not given a sufficiently good reason for a serious and significant delay in appealing against the PLNs and, in all the circumstances, it is not appropriate to give permission for the appellant to make late appeals in this case.

For all of the reasons set out above, the appellant’s application for permission to notify the Appeal late is refused and, accordingly, the Appeal is not admitted.

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.