Firstheaven Limited & Ors v The Commissioners for HMRC

With the consent of the parties, the form of the hearing was V (video) held on Teams. The documents to which I was referred were a Hearing Bundle of 538 pages.

Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.

This matter relates to claims for relief under the Income Tax (Construction Industry Scheme) Regulations 2005 (the Regulations) by a number of companies within the P4i Group (the Group), which were engaged in the conversion and development of properties. HMRC issued refusal decision notices to a number of these companies. Some were appealed on time and others were not. The Appellant applied for permission to appeal late. HMRC objected.

This is part of a group of 16 late appeals for 16 separate companies within the same group (P4i Group), all sharing common directorships and with the same issues in all 16 cases. They are all appeals against refusal decision notices sent out between 22 March and 12 April 2023. If allowed, these appeals would join another 18 for companies in the same group that will be litigated behind lead cases.

HMRC issued a Refusal Decision Notice to the Appellant on 24 March 2023 (the RDN).

The RDN stated that if the Appellant wished to appeal against the decision, it must write to HMRC within 30 days of the date of the RDN.

On 7 June 2023 the Appellant emailed HMRC with their view on the CIS position of all of the P4i Group companies.

On 13 June 2023 HMRC replied and sent a copy of the RDN by zip file via email.

On 20 June 2023 HMRC sent a copy of the RDN via Dropbox link, the Appellant having had difficulty with the zip file.

On 25 August 2023 the Appellant submitted an appeal against the RDN (by email).

On 12 September 2023 HMRC wrote to the Appellant to ask for the reasons why the appeal was submitted late.

On 13 September 2023 the Appellant replied giving reasons for the delay.

On 3 October 2023 HMRC refused the appeal on the grounds that there was no reasonable excuse for the delay.

The approach to be taken by the Tribunal in considering an application for permission to appeal late was set out clearly in the case of William Martland v The Commissioners for HM Revenue and Customs [2018] UKUT 0178 (TCC) (Martland)and can be summarised as follows.

The statutory time limit applies unless the applicant can satisfy the Tribunal that permission for late appeal should be granted.

In considering the application the Tribunal must:

The facts as set out above are not disputed. The question is whether there is a reasonable excuse for the delay in appealing the RDN which justifies allowing it to proceed.

HMRC’s position was that it issued RDNs in respect of all the Group companies in the same manner. There was no change of registered address (so all were sent to the correct address). HMRC have a record of all of the RDNs being issued. None were returned undelivered. The notices were therefore properly served in accordance with statutory rules. Furthermore, many of the Group companies did lodge appeals in time, so the Appellant could and should have done so too.

HMRC also asserted that if the RDN had not been received when first issued, the Appellant could and should have appealed on receipt of the copy on 20 June rather than taking a further two months and five days to do so.

HMRC maintained that they should be able to rely on statutory time limits and to allow a late appeal in this case, where no good reason has been given, would be inconsistent with the principles of good administration of justice and the need for matters to proceed efficiently and at a proportionate cost.

HMRC noted that the Appellant might argue there was no real prejudice to HMRC given that, if allowed, the case would be stayed behind lead cases and so not necessitate further work, but argued that, whilst this may be a factor, it should not be determinative.

HMRC acknowledged that refusing the late appeal would prevent the Appellant from challenging the RDN but argued that this alone was not enough to warrant an appeal out of time.

HMRC noted that a detailed evaluation of the merits of the case need not be carried out but asserted that, to the extent it was relevant, the Appellant’s case was weak and there were no exceptional circumstances.

Whereas HMRC argued successful receipt of other decision notices at the same address in the same period demonstrated the likelihood that the RDN in question had been properly delivered and received, the Appellant argued the contrary: the fact that a number of decision notices had been received and acted on showed that the Appellant would have appealed the RDN on time had it received it.

The Appellant’s position was that the initial delay was the result of not having received the RDN. They did not argue that it had not been issued, or that the statutory deeming provisions regarding service did not apply, just that it had not actually been received when originally sent and this was the simple explanation for the initial period of delay. The Appellant pointed to the email of 7 June 2023, which set out the directors’ and accountants’ understanding of the position i.e. for which companies notices had been issued and which led to HMRC re-sending RDNs that they maintained had not previously been received.

Following receipt of the re-sent RDN, the Appellant said it submitted its appeal at the earliest possible opportunity. That this took some weeks reflected the number of RDNs the accountants were dealing with for the group. The accountants prioritised those RDNs that were not yet out of time in order to meet deadlines where still possible, meaning those that were already late became later.

The Appellant argued that it acted as quickly as possible in the circumstances and that, since the same point was at issue in all of the RDNs and 18 appeals were already proceeding behind lead cases, it would be unfair and contrary to the interests of justice if they were not all treated in the same way simply because of a delay in appeal which stemmed from the initial non-receipt of the RDN. The liability of the Appellant should be determined on the basis of the legal issue which was already to be heard by the Tribunal. It would be contrary to the interests of justice if the liability stood due to the justified delay in lodging the appeal even if the legal issue were ultimately determined in favour of the taxpayer.

Following Martland, the Tribunal must first establish the length of the delay. The deadline for appeal against the RDN was 23 April 2023. The appeal was made on 25 August 2023. It was therefore 124 days late.

Compared with a 30 day appeal period, 124 days is a significant delay.

The reason given for the first part of the delay was that the RDN had not been received. This is effectively the reason for the first 58 days of the delay.

The reason given for the second part of the delay was that the directors and their accountants were dealing with a large number of notices and appeals relating to various members of the Group and that they did so as quickly as possible in the circumstances. This is the reason for the latter 66 days of delay.

No evidence of lack of receipt of the RDN was presented. The Appellant’s representative asserted the fact in his argument.

The reason given for the delay after receipt of the re-sent RDN on 20 June 2023 is essentially that the directors and their accountants had a lot to deal with given the notices issued to 32 companies within the group and it therefore took longer than the usual 30 day period to assess the notices and lodge the appeals. The Tribunal notes that no evidence was presented of the Appellant having sought to communicate this issue or the likely delay to HMRC before making the appeal late. There was no suggestion that the Appellant was not aware of the deadline for making an appeal.

In evaluating all the circumstances of the case, the Tribunal “should take into account the particular importance of the need for litigation to be conducted efficiently and at proportionate cost, and for statutory limits to be respected” (Martland). This is an important factor in considering whether to allow a late appeal.

The prejudice which would be suffered by each party if the appeal is allowed or refused is also relevant. In this case, HMRC has acknowledged that the actual impact on it of allowing the appeal, in terms of additional work, may not be as significant as in other circumstances, given that this appeal would be stayed along with others made in time behind lead cases. However, this in itself is not sufficient reason to allow the appeal (Revenue and Customs Commissioners v Websons (8) Limited [2020] UKUT 0154 (TCC)).

The prejudice to the Appellant of refusing permission to appeal would be the loss of the opportunity to argue its case and, potentially, depending on the outcome of the appeals in the lead cases, a financial liability that could otherwise have been properly avoided. The Tribunal acknowledges that this is significant.

The Tribunal is not required to undertake a detailed review of the merits of the appeal itself. It should take into account any obvious strengths or weaknesses of the appeal since this will may affect the balance of considerations. It would not be in the interests of justice to grant permission for an appeal that is obviously doomed to fail. In this case, neither party went into any detail on the merits of the case. HMRC asserted that it was weak. The Appellant did not agree. No detail was presented to enable the Tribunal to ascertain the strength of the Appellant’s case.

Having weighed the arguments and considered the evidence and documents put before it, the Tribunal considers that in this case the reasons given for the delay are insufficient to justify the length and significance of the delay and to override the importance of observing the statutory deadlines, notwithstanding the inevitable prejudice to the Appellant of having permission to appeal late refused.

The application for permission to appeal late is 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 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.