Neil Lyon v The Commissioners for HMRC

On 7 June 2024, the appellant’s solicitors (“Freeths”) lodged with the Tribunal a Notice of Appeal which contained an application (“the Application”) to commence a late appeal concerning Class 1 National Insurance Contributions (“NICs”). HMRC had served a Personal Liability Notice (“PLN”) dated 15 June 2023 on the appellant.

On 13 November 2024, HMRC lodged with the Tribunal a Notice of Objection to the application for a late appeal (“the Objection”).

With the consent of the parties, the hearing was conducted by TEAMS. 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.

The documents to which we were referred were a Joint Application Bundle extending to 522 pages.

Beyond the fact that it was a late appeal concerning NICs, the Application contained very little information stating only that the original decision had been appealed and “My appeal to HMRC was late. I am applying to be allowed to make a late appeal to HMRC”.

The grounds of appeal were described as “see attached document” and it stated that the desired outcomes were “included in the document attached to this notice”.

We could trace no such attached document in the Bundle. Therefore, in advance of the hearing, I contacted the Tribunal administration and discovered that 177 documents which included the Notice of Appeal had been lodged by Freeths for the appellant when lodging the Notice of Appeal. Those documents were not indexed and apparently included copies of correspondence between the parties.

At the outset of the hearing, we asked what the “attached document” with the Notice of Appeal might have been, and whether we required the 177 pages. Mr Hackett confirmed that all relevant documents were included in the Joint Application Bundle and therefore there was no necessity to obtain and peruse the 177 pages.

The Hearing proceeded on that basis.

Unsurprisingly, at the outset of the hearing, Ms Man said that she adopted the submissions in the Objection. Those submissions addressed Martland v HMRC [2018] UKUT 178 (TCC) (“Martland”) on the basis that, in summary, the appeal to the Tribunal dated 7 June 2024 was “nearly 11 months after the expiration of the statutory time limit”, no explanation of the delay had ever been offered and in the circumstances of this appeal the merits of a substantive appeal were very weak.

Surprisingly, Mr Hackett argued that the decision in Martland was not relevant as the only issue before the Tribunal was whether or not a letter from the appellant to HMRC dated 27 June 2023 (“the June Letter”) was a valid appeal.

That letter was described in the Bundle as a “Notice of Intention to Appeal” comprising the June Letter which was one page long and marked in handwriting as “Sent 27/6/23 1^st Class Post” and a copy of a six page letter from HMRC dated 15 June 2023 and marked in handwriting “Received 18/6/23”.

We had difficulty with that. We asked Mr Hackett to explain why Martland was not relevant. The points made included:

We explained that

We granted an adjournment to enable Freeths to discuss with the appellant whether or not he wished to give evidence in order to explain the reasons for the delay which is the second stage in Martland. Before doing so, we asked Ms Man to summarise her submissions so that the appellant would have be fully aware of the issues that might arise. She did so.

The appellant declined to give evidence.

Mr Hackett intimated that he would make submissions on the appellant’s behalf, albeit we had earlier pointed out that the Upper Tribunal in Barry Edwards v HMRC [2019] UKUT 131 (TCC) (“Edwards”) at paragraph 52 had endorsed a finding made by the First-tier Tribunal to the effect that an “advocate’s assertions and/or submissions are not evidence…”.

The PLN was in the sum of £231,723.42 and was issued pursuant to section 121C of the Social Security Administration Act 1992 (“SSAA 1992”). It made the appellant personally liable for the NIC debts of Fifth Zone Limited (“the Company”).

The appellant had been appointed as a director of the Company on 5 February 2018 and he was the only formally appointed director throughout the period under appeal.

On 1 March 2018, Companies House were notified that the appellant had “75% or more Ownership voting rights”.

The Company entered into Creditors Voluntary Liquidation on 6 September 2021 and was dissolved on 9 February 2024.

HMRC had opened an enquiry into the Company’s failure to pay the NICs declared as being due to HMRC in respect of section 121C SSAA 1992. On 5 October 2022, Officer Love wrote to the appellant intimating that he had opened the enquiry and explaining that:

A formal request for information was enclosed. The appellant was invited to make representations within 30 days of the date of the letter.

On 1 December 2022, the officer wrote again to the appellant setting out what he considered to be the key issues and his findings to date. He again offered an opportunity to the appellant to provide information and make representations before a decision was made as to whether or not a PLN would be issued.

On 5 January 2023, the officer again wrote to the appellant providing him with a further opportunity to make representations. He enclosed a further copy of the formal information request and asked that a reply be furnished within 30 days of the date of the letter.

On 18 April 2023, the officer issued a decision letter confirming that a formal decision had been made to issue a PLN.

In summary, the decision to treat the appellant as a “culpable officer” was reached on the basis that

The letter included a Notice of Liability under section 121C SSSA 1992 which stated that the appellant was due to pay £231,723.42 to HMRC by no later than 18 May 2021.

The letter included the following paragraph:-

“What to do if you disagree

If you disagree with my decision to issue you with a Personal Liability Notice you can appeal by writing to me. You need to do this within 30 days of the date of this letter telling me why … specifying one or more of the grounds of appeal as specified at Section 121D of the Social Security Administration Act 1992”.

The letter also included a template for a Notice of Appeal and stated that could be used to appeal and also indicated where further information on appeals could be found.

No appeal was lodged and no payment was made.

On 30 May 2023, Officer Love wrote to the appellant referring to the letter of 18 April 2023 and stating that in the absence of any response, HRMC assumed that the appellant did not wish to take the matter further and appeal the decision to issue a PLN. Accordingly, the matter would be treated as settled by agreement under Regulation 11 of the Social Security Contributions (Decisions and Appeals) Regulations 1999 (“the Regulations”). That letter included the following paragraph:

“Making an Appeal

If you wish to make a late appeal against the decision to issue you with a Personal Liability Notice under the legislation at section 121C above, then it is important that you do so without undue delay following receipt of this letter. As you are now outside the statutory 30-day appeal period, in addition to making an ‘appeal to HMRC’ you will also need to include an application for the admission of a ‘late appeal’”.

On 15 June 2023, Officer Love reissued the PLN to the appellant, having identified an incorrect payment date on the original PLN. He pointed out that the issue of the amended PLN also opened a new right of appeal which ran from 15 June 2023.

That letter also included the following paragraph:

“What to do if you disagree

If you disagree with my decision to issue you with a Personal Liability Notice you can appeal by writing to me. You need to do this within 30 days of the date of this letter telling me why you think my decision is wrong, and by clearly specifying one or more of the grounds of appeal as specified at Section 121D of the Social Security Administration Act 1992…”.

The Officer went on to summarise that section and identify the four possible grounds of grounds of appeal as being:

“(a)

The whole or part of the amount specified in the Notice does not represent contributions to which Section 121C should be applied;

(b)

The failure to pay the contributions specified in the Notice was not attributable to any fraud or neglect on your part;

(c)

You are not an officer of the company at the time of the alleged fraud or neglect;

(d)

The opinion formed by HMRC in terms of the apportionment of the unpaid contributions between one or more culpable officers was unreasonable.”.

The officer enclosed another Notice of Appeal template.

On 2 August 2023, the officer again wrote to the appellant pointing out that the letter of 15 June 2023 had advised him about his rights of appeal and that no appeal had been received. He again said that the matter would be treated as settled by agreement. The letter went on to state:

“Making an Appeal

If you wish to make a late appeal against the decision to issue you with a Personal Liability Notice under the legislation at Section 121C above, then it is important that you do so without undue delay following receipt of this letter. As you are now outside the statutory 30-day appeal period, in addition to making an ‘appeal to HMRC’ you will also need to include an application for the admission of a ‘late appeal’.

If you wish HMRC to consider acceptance of a late appeal, you will need to explain why the appeal is being made late and show that the appeal is being made without any further undue delay.”

The letter went on to refer to HMRC’s guidance on late appeals and enclosed a copy of part of that.

On 24 August 2023, as no appeal or response had been received, the officer wrote to the appellant referring to the letters of 15 June and 2 August 2023 informing him that the enquiry was now closed and the matter of the PLN was treated as settled in terms of the Regulations.

On 10 January 2024, Officer Barcroft wrote to the appellant to inform him that the debt of £231,723.42 was still outstanding and asked him to pay online or contact HMRC. He was warned that if he neither paid the debt nor contacted HMRC, HMRC might take action to collect the debt and that might include bankruptcy.

There was no response.

On 21 February 2024, Officer Barcroft wrote to the appellant again warning him that HMRC would be applying for a Bankruptcy Order if nothing was heard from him before 6 March 2024. That was sent by recorded mail and was signed for by the appellant on 22 February 2024.

On 6 March 2024, the appellant emailed Officer Barcroft, copied to Freeths, stating that he had contacted a solicitor and “I did not realise the severity of the matter and therefore I am requesting additional time to prepare a response. Please can you delay the next stage of your process whilst I confer with them”.

The officer offered an extension of time until 13 March 2024 and copied that email to Freeths.

On 13 March 2024, Freeths wrote to HMRC asking why HMRC had failed to reply to the June Letter, a copy of which was enclosed.

Freeths acknowledged that the appellant had:

They summarised the June Letter as stating that:

They argued that the June Letter had been a valid appeal and yet HMRC had continued to “issue PLN warnings and threats of bankruptcy”.

On 14 March 2024, Officer Love responded confirming that neither the June Letter nor any other letter had been received from the appellant in relation to the enquiry. He narrated the history of the enquiry identifying all of the letters that he had issued and the lack of responses from the appellant.

He then addressed the June Letter pointing out that the only stated ground of appeal was that the decision was “grossly unfair and wrong” and there had been no reference to the four grounds of appeal specified in Section 121D SSAA 1992.

He explained that in his letter of 15 June 2023 he had identified those grounds of appeal. He pointed out that, notwithstanding the fact that the June Letter had not been received, nevertheless it was not a valid appeal as there was no reference to those statutory grounds of appeal.

He also made it clear that no explanation had been given for the failure to reply to the letters of 2 and 24 August 2023 which had both specifically stated that no appeal had been lodged with HMRC.

On 11 April 2024, Freeths responded stating that the June Letter, summarised as previously (see paragraph 46 above) set out a “number of valid reasons as to why the company could not pay the outstanding tax”.

It went on to comment on the officer’s arguments about the bank statements of the Company and the CJRS payments arguing that the failure to make payment of the NICs was not attributable to the appellant and that therefore the June Letter was a valid appeal. Their starting point was that the June Letter was a timeous appeal to HMRC.

They argued that if HMRC had followed their own guidance they should have accepted that the appellant had sent the June Letter to them because the appellant claimed that he had done so.

They concluded by stating:

“We would be grateful for HMRC to confirm that a late appeal may be accepted in the circumstances…”.

On 18 April 2024, Officer Love replied explaining again that there was no record of the June Letter ever having been received but that more pertinently (even if it had been) the contents of the letter did not constitute a valid appeal in terms of Section 121D SSAA 1992.

He pointed out that he had seen no explanation as to why the appellant had not responded:

The application for a late appeal was rejected because:

The letter included the following paragraphs:

“Application to tribunal

If you do not agree with HMRC’s decision to reject your clients late appeal you have the right to ask an independent tribunal to rule that HMRC must accept your late appeal. To do this you should write to the Tribunals Service. You can find out more about tribunals, including the appeal form, on the Tribunals Service website… or you can phone them on…

Further information

You can find further information about appeals and reviews on the HMRC website at…”.

On 22 April 2024, Freeths responded arguing that the June Letter had been a valid appeal.

The officer replied on the same day pointing out again that there was no letter of appeal dated 27 June 2023 and there was no other correspondence from the appellant in relation to the enquiry. Furthermore, the appellant had never responded to the letters of 2 and 24 August 2023 which had pointed out that no appeal had been received. The appellant had also failed to reply to Officer Barcroft’s first letter.

He explained that he had treated Freeths’ letter dated 13 March 2024 as a late appeal but that in the absence of a reasonable excuse for the late appeal, the late appeal was rejected. He again pointed out that an appeal could be made to the Tribunal in the same terms as we have narrated at paragraph 55 above.

On 24 April 2024, Freeths wrote to HMRC again advancing arguments about the June Letter. They concluded stating:

“The question here is not whether our letter dated 13 March 2024 should be allowed as a late appeal in respect of the PLN issued against Mr Lyon. Instead HMRC must conduct a review of the grounds on which a PLN was issued in response to Mr Lyon’s appeal dated 27 June 2023, and how the failure to pay in this instance can be attributable to serious neglect on the part of Mr Lyon.”.

On 26 April 2024, Officer Love replied explaining that there were no longer any rights of appeal with HMRC and again highlighted the right to appeal to the Tribunal whether in relation to the decision to reject the late appeal or in relation to the PLN.

On 1 May 2024, Freeths again wrote to HMRC arguing that the June Letter was valid.

On 3 May 2024, Officer Love responded pointing out that:

On 13 May 2024, Freeths again wrote to HMRC arguing that the June Letter was a valid appeal and cited case law in support of their position arguing that “An appeal to the tribunal is not appropriate at this stage…”.

On 14 May 2024, Officer Love replied

On 15 May 2024, Freeths wrote to the officer. Under the heading “Grounds of appeal” they advanced further arguments on the cases that they had previously cited. They also amplified their reliance on the June Letter highlighting that, in addition to having said that the PLN was “grossly unfair and wrong” the appellant had said:

The officer replied the same day stating again that the appellant’s only option was to appeal to the Tribunal and he had nothing to add.

On 20 May 2024, Freeths wrote to Officer Barcroft rejecting a statutory demand dated 24 April 2024 that had been served on the appellant. The officer replied that day stating that the only course of action open to the appellant was to apply for a late appeal as stated by Officer Love “on numerous occasions”. She went on to say; “Please apply to the tribunals so this process can start…”.

On 22 May 2024, the officer wrote again stating she had reviewed the letter of 20 May, rejected the argument about the statutory demand and reiterated the view that until an appeal was lodged with the Tribunal matters would not change. Freeths replied that day stating that amongst other things the appellant reserved the right to apply to the Tribunal “should the ongoing discussions between him and HMRC not lead to a resolution”.

On 7 June 2024, the Notice of Appeal was lodged with the Tribunal.

We have narrated the detail of the correspondence at such length since there was such evident confusion about the issue before the Tribunal and indeed the Tribunal’s jurisdiction.

In oral submissions, although they addressed the three stage approach in Martland, albeit in minimal detail,Freeths continued to focus on the June Letter having been a valid and timeous appeal and advanced arguments on what constitutes a valid appeal.

In closing submissions, it was argued that it was obvious that the appellant had wanted to appeal and the June Letter should be treated as a valid appeal until HMRC had the relevant information to decide the matter. In that regard Mr Hackett again relied upon HMRC’s guidance which was not before us.

Freeths consistently argued that the appellant wished the June Letter to be treated as a valid appeal and that the Tribunal should then direct HMRC to review their decision.

As we intimated at the outset of the hearing, the June Letter is not, and cannot be, an appeal to the Tribunal.

Despite the fact that we had pointed out the relevance of Section 49 TMA, no argument was advanced in that regard by either party. Section 49(1) and (2) read:

“(1)

This section applies in a case where—

(a)

notice of appeal may be given to HMRC, but

(b)

no notice is given before the relevant time limit.

(2)

Notice may be given after the relevant time limit if—

(a)

HMRC agree, or

(b)

where HMRC do not agree, the tribunal gives permission.”

The letter of 18 April 2024 intimated that HMRC did not agree to a late appeal and that is why Officer Love pointed out that the appellant’s only option was to apply to the Tribunal for permission to lodge a late appeal (ie to make an application under Section 49(2)(b) TMA).

The statutory provisions in relation to review are to be found at Section 49A TMA and insofar as relevant that reads:-

“(1)

This section applies if notice of appeal has been given to HMRC.

(2)

In such a case—

(a)

the appellant may notify HMRC that the appellant requires HMRC to review the matter in question (see section 49B),

(b)

HMRC may notify the appellant of an offer to review the matter in question (see section 49C), or

(c)

the appellant may notify the appeal to the tribunal (see section 49D).”

The problem for the appellant is that HMRC have always argued that no appeal of the June 2023 decision had ever been received by HMRC and the first intimation of an appeal was Freeths’ letter of 13 March 2024.

In the absence of the Tribunal giving permission for a late appeal in terms of Section 49(2)(b) TMA no notice of appeal has been “given” to HMRC in terms of Section 49A(1) and therefore the subsequent provisions do not apply.

It does not suffice to assert that there is an appeal, not only when that is disputed, but where the appellant has failed to explain his repeated failure to say to HMRC that he had appealed. There is no proof that the June Letter was sent to HMRC before 13 March 2024. The handwritten note on it is not proof. The appellant has declined to give evidence.

The Tribunal only has jurisdiction to determine whether or not a late appeal should be permitted. The validity, or not, of the June Letter would then be the subject matter of an application by HMRC for strike out, or not.

We do not accept the arguments that the correspondence that followed the letter of 18 April 2024 amounted to appealable decisions and in particular, as argued by Mr Hackett, that the letter of 15 May 2024 was an appealable decision and thus the Notice of Appeal was in fact lodged timeously.

Not only does that fly in the face of the terms of the Application but it is simply wrong. We agree with Ms Man that the fact that HMRC, as a public body, continued to answer correspondence for some time after issuing a decision on the late appeal does not extend the statutory deadlines.

HMRC are correct to say that the length of the delay was almost 11 months until the appellant lodged the appeal with the Tribunal and that that is both serious and significant.

However, Ms Man fairly accepted that it was arguable that the delay was only until the letter from Freeths dated 13 March 2024 was received; that is a delay of approximately six months after he had been told on 2 August 2024 that no appeal had been received. That is also both serious and significant. However, there was also the further delay between the issue of the letter of 18 April 2024, refusing the late appeal and the application to the Tribunal on 7 June 2024.

Mr Hackett argued that the appellant had assumed the June Letter “was being processed in the background” in the period before Freeths were instructed in March 2024 approximately eight months later. The appellant was a party litigant and had not necessarily understood the letters from HMRC until the recorded delivery letter was received.

Quite apart from the fact that we heard no evidence on that point, that is simply not credible. All of the letters from both officers were written in plain English and were very clear in their terms. The appellant was told explicitly and repeatedly that no appeal had been received by HMRC.

We were told that the appellant had written the June Letter. If he did, it is articulate and makes it clear that he had read and understood the letter of 15 June 2023. We do not accept that the appellant has established a good reason, effectively a reasonable excuse, for the delay until 6 March 2024.

We also do not accept that he should have been in any doubt about the severity of the matter since he had already been threatened with bankruptcy if he did not make arrangements to make payment. Officer Bancroft’s first letter could not have been more clear. Underlined and in bold the heading in the short letter read “Please pay now £241,765.79”.

Under a similar heading which read “If you don’t pay or contact us” there were four concise bullet points, namely “court action at the Magistrates or County Court, attachments of earnings, taking possession of your assets, and, making you bankrupt”. He should have been in no doubt of the need to contact HMRC but, as previously, he did not do so.

Lastly, there is the delay between the letter of 18 April 2024 and the application for a late appeal on 7 June 2024. It was argued that no application was made to the Tribunal “in the interests of expense and proportionality” as there was ongoing correspondence with HMRC; there was no need to apply to the Tribunal. Clearly that part of the delay, if we are considering an 11 month delay, was based on advice from Freeths. As HMRC repeatedly told Freeths that all appeal rights with HMRC had been exhausted. They were. The application to the Tribunal should have been made at an earlier stage.

Ms Man had referred the Tribunal to HMRC v Katib [2019] UKUT 189 (TCC) (“Katib”) at paragraph 17 in the context of the need to observe statutory time limits but Katib at paragraph 58 makes it very clear that reliance on poor advice of an adviser does not amount to a reasonable excuse.

In summary, we do not accept that the appellant has established a reasonable excuse for the very long delay whether it is eight or 11 months.

As can be seen from paragraph 44(3) of Martland (see paragraph 14 above), we must then move to the third stage of Martland and balance the reasons given for the delay and the prejudice that would be caused to the parties by granting or refusing permission.

It is helpful to look at further relevant quotations from Martland and those read:

“45.

That balancing exercise should take into account the particular importance of the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected…The FTT's role is to exercise judicial discretion taking account of all relevant factors, not to follow a checklist.

46.

In doing so, the FTT can have regard to any obvious strength or weakness of the applicant’s case; this goes to the question of prejudice – there is obviously much greater prejudice for an applicant to lose the opportunity of putting forward a really strong case than a very weak one. It is important however that this should not descend into a detailed analysis of the underlying merits of the appeal… To that limited extent, an applicant should be afforded the opportunity to persuade the FTT that the merits of the appeal are on the face of it overwhelmingly in his/her favour and the respondents the corresponding opportunity to point out the weakness of the applicant’s case. In considering this point, the FTT should be very wary of taking into account evidence which is in dispute and should not do so unless there are exceptional circumstances.

47.

Shortage of funds (and consequent inability to instruct a professional adviser) should not, of itself, generally carry any weight in the FTT’s consideration of the reasonableness of the applicant’s explanation of the delay… Nor should the fact that the applicant is self-represented – Moore-Bick LJ went on to say (at [44]) that “being a litigant in person with no previous experience of legal proceedings is not a good reason for failing to comply with the rules”; HMRC’s appealable decisions generally include a statement of the relevant appeal rights in reasonably plain English and it is not a complicated process to notify an appeal to the FTT, even for a litigant in person.”

As can be seen from paragraph 45 of Martland we must take into account the particular importance of the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected.

In relation to prejudice, Mr Hackett contended that an appeal of the PLN had merit and Ms Man argued that the case was very weak. The appellant’s total lack of co-operation with HMRC and his failure to provide any information beyond what is contained in the June Letter does not assist him.

As Ms Man pointed out, the Company had failed to account for NICs before Covid, receipts continued to rise and significant CJRS payments had been claimed and that was all in a period when the appellant was the only director and controlled the company.

We do not accept that, even if proved, his argument in the June Letter that “I have not benefitted at all personally from this business” and thus he could not be personally liable would assist him in an appeal. The test is one of neglect. His other argument in regard to the decisions as to whom the company paid, or did not, were not made by him “as I am not qualified to do so… I was not aware of what was required of me in terms of HMRC payments” not only do not assist but infer a lack of knowledge of his statutory obligations and thus possible neglect.

We are unable to form a definitive view on the weakness of the appellant’s appeal without hearing and evaluating the evidence and arguments which would be inappropriate in an application for permission to make a late appeal. It is clear that there are major gaps and, therefore, areas of potential weakness in the evidence.

As the Upper Tribunal cautioned in Martland, we should be very wary of taking into account evidence which is in dispute and it would not be appropriate to do so in this case without hearing detailed evidence on the point and giving HMRC an opportunity to challenge it.

It is certainly not clear to us that the appellant’s case has merits that are overwhelmingly in his favour. However, in the absence of any evidence about the failure to pay the NICs we cannot determine whether HMRC are correct in saying that the case for the appellant would be very weak.

Of course, the appellant will be prejudiced if we refuse to grant him permission to notify the appeal late in that he will have lost his opportunity to contest the PLN and will be liable to pay a substantial sum of money or indeed be made bankrupt. That, however, is a consequence of the failure to notify the appeal in time or in response to the subsequent letters stating that there was no appeal. 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 the same statutory time limit for notifying high value appeals and appeals of lower value by poorer taxpayers.

Against that prejudice to the appellant, we 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.

We find that the appellant has not given a sufficiently good reason for a serious and significant delay in appealing the PLN in circumstances where he was repeatedly told that no appeal had been lodged with HMRC and, in all the circumstances, it is not appropriate to give permission for the appellant to make a late appeal in this case.

For 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.