Kunal Ajwani v The Commissioners for HMRC

On 17 February 2021, HMRC sent to the Appellant notices of assessment in relation to the tax years ending 5 April 2015 and 5 April 2016. The amounts assessed were £13,200 and £21,518.60 respectively, and related to additional tax found to be due as a result of disallowance of claims for Enterprise Investment income tax relief that had been made by the Appellant in each of those tax years. The assessments explained that payment could be made electronically (and further details could be found on gov.uk) or cheque (and the address to send a cheque to was provided). In relation to interest, the assessments stated:

“We charge late payment interest on tax that is paid late. We charge interest on a daily basis, from the date the tax should have been paid to the date you paid it…”

By Notice of Appeal dated 15 June 2021 (received by the Tribunal on 18 June 2021), the Appellant appealed to the Tribunal. That appeal was allocated reference TC/2021/02380.

On 23 November 2021, following correspondence with HMRC, the Appellant emailed the Tribunal in the following terms:

“I wish to withdraw my appeal as I have decided to settle the outstanding monies with HMRC. Please can you reply to this email confirming the withdrawal of this.”

On 25 November 2021, the Tribunal wrote to the Appellant as follows:

“Thank you for notifying the Tribunal of your withdrawal of your appeal n this case, which has been referred to the respondent.

The effect of your withdrawal is that your appeal has failed and any hearing date is cancelled.

You have the right to apply in writing within 28 days of this letter for reinstatement of your appeal. If the Tribunal hears nothing to the contrary within 28 days, the file will be closed.”

The Appellant did not, within 28 days (or the 30 days referred to in s54(2) of the Taxes Management Act 1970 (“TMA 1970”)) write to the Tribunal to seek reinstatement of his appeal.

In November and December 2021, the Appellant emailed HMRC to ask that they provide the bank details for the account that he should make payment to and to confirm what payment reference he should use.

On 17 December 2021, HMRC replied to the Appellant as follows:

“I note that you have now withdrawn your appeal and wish to make payment of the total tax due of £31,663.02. This amount is currently suspended on your Self-Assessment statement. Once you make payment, the tax will be released for your payment to be set against.

There are a number of options available on how to make payment. Please see the section ‘How to pay your SA tax bill’ on the HMRC website (www.gov.uk – link below).

…

Please note that as per the original Notice of assessment, interest is charged on this amount from the dates(s) that the tax was originally due. One you have made payment of the tax and the charge is released, the interest will show on your Self-Assessment statement and you will need to make payment of the interest...”

Despite the Appellant not paying the assessments, HMRC appear not to have contacted him again until 11 May 2023 when they sent him a Statement of Liabilities which showed tax of £31,663.02 plus interest of £6723.67.

In a letter dated 19 May 2023 (emailed to HMRC on 23 May 2023), the Appellant stated that he had understood the tax of £31,663.69 to have been “suspended” and had been “awaiting details whether this was to be reinstated and when I needed to pay”. The Appellant went on to state:

“As I have said previously I am prepared to pay the £31,663.69 but I was not made aware of any interest charges on top of that amount.”

The Appellant then sent two further emails stating that he was willing to pay the tax amount but not the interest.

On 2 June 2023, HMRC replied to the Appellant stating:

“…

Please be aware that the Tribunal procedure is final as you withdrew your appeal against the assessments.

With reference to the amount owing, I have included a copy of my earlier letter dated 17 December 2021…As advised at the time, the total amount of tax due is £31,663.02. As you correctly state this amount was suspended…due to your appeal…Again, as per my letter I advised that once you had made payment, the tax would be released for your payment to be set against. I then provided information on different ways you could make payment. As you state in your letter, you are yet to make payment.

You were advised that we were charging late payment interest on the initial Notice of assessments for each year, dated 17 February 2021 and that it would continue to be charged until the date you made payment of the tax. I also referred to this in my letter dated 17 December 2021…”

In June 2023, a debt collection agent seeking to collect the monies owed to HMRC visited the Appellant. The Appellant then wrote to HMRC stating that whilst he was willing to pay the £31,663 he was “not going to make any payment towards the interest because it is invalid” as he was “never told there was interest added on, …was told specifically that the case was suspended, and…had no letters from HMRC for over 18 months…” . The Appellant also stated that he wished to make a formal complaint.

On 6 June 2023, the Appellant paid the assessed amounts (but not the late payment interest).

On 15 August 2023, HMRC partially upheld the Appellant’s complaint on the basis that “customer service has been below the levels you should expect from us” in not contacting the Appellant in the period between December 2021 and May 2023. HMRC agreed to make an ex--gratia payment of £120 to the Appellant. The Appellant was told that, if he wished to challenge the late payment interest, he would need to contact the Interest Review Unit.

On 18 August 2023, the Appellant wrote to HMRC stating that he wished to escalate his complaint to “tier 2” and wanted to challenge the late payment interest.

In September 2023, HMRC wrote to the Appellant to notify him that the Interest Review Unit had reviewed the late payment interest applied to his account and had decided that there were no grounds for that interest charge to be removed/disapplied.

On 23 September 2023, the Appellant requested that the late payment interest charge be reviewed again and “written off”. The Appellant stated “If you or the IRU cannot do that then I would like to contest the original £31,663 approx that I was bullied into paying in June 2023”.

On 4 October 2023, the conclusion of the “tier 2” complaint was notified to the Appellant. The amount of the ex-gratia payment was increased to £160. HMRC maintained that the Appellant had properly been informed that late payment interest would be charged.

On 1 November 2023, HMRC informed the Appellant that the Interest Review Unit had again reviewed the late payment interest applied to his account and had again decided that there were no grounds for that interest charge to be removed/disapplied. The amount of the late interest charge was said at that date to be £6877.21.

By Notice of Appeal dated 1 November 2023, the Appellant appealed to the Tribunal against the assessments (£31,663.02). That appeal was allocated reference TC/2023/16315.

On 9 November 2023, the Appellant filed a further Notice of Appeal seeking to appeal against tax of £31,663.72 and a “penalty or surcharge” of £6877.21 (which was the interest amount notified to the Appellant on 1 November 2023). That appeal was allocated reference TC/2023/16292. The Appellant subsequently confirmed that the appeal in relation to the “penalty or surcharge” of £6877.21 was intended to be an appeal against the late payment interest.

On 8 January 2024, HMRC applied to strike out appeal TC/2023/16315 on the basis that it sought to appeal against the same assessments that were the subject of the Appellant’s previous appeal (TC/2021/02380) that was withdrawn in November 2021.

On 17 October 2024, the Tribunal struck out appeal TC/2023/16292 on the basis that it was a duplicate of appeal TC/2023/16315, and made directions in relation to determination of HMRC’s 8 January 2024 strike out application.

The basis of HMRC’s strike out application is that because the Appellant withdrew his previous appeal against the assessments (TC/2021/02380) and did not, within 30 days of that withdrawal, apply to repudiate/rescind that withdrawal, section 54(1) and (4) TMA 1970 apply and the Tribunal has no jurisdiction in relation to a further appeal against the assessments. Further, there is no right of appeal against late payment interest (liability to which is predicated on liability to the assessed amounts).

Section 54 TMA 1970 states in material part:

“(1)

Subject to the provisions of this section, where a person gives notice of appeal and, before the appeal is determined by the tribunal, the inspector or other proper officer of the Crown and the appellant come to an agreement, whether in writing or otherwise, that the assessment or decision under appeal should be treated as upheld without variation, or as varied in a particular manner or as discharged or cancelled, the like consequences shall ensue for all purposes as would have ensued if, at the time when the agreement was come to, the tribunal had determined the appeal and had upheld the assessment or decision without variation, had varied it in that manner or had discharged or cancelled it, as the case may be.

(2)Subsection (1) of this section shall not apply where, within thirty days from the date when the agreement was come to, the appellant gives notice in writing to the inspector or other proper officer of the Crown that he desires to repudiate or resile from the agreement.

…

(4)

Where –

(a)

a person who has given a notice of appeal notifies the inspector or other proper officer of the Crown, whether orally or in writing, that he desires not to proceed with the appeal; and

(b)

thirty days have elapsed since the giving of the notification without the inspector or other proper officer giving to the appellant notice in writing indicating that he is unwilling that the appeal should be treated as withdrawn.

the preceding provisions of this section shall have effect as if, at the date of the appellant’s notification, the appellant and the inspector or other proper officer had come to an agreement, orally or in writing, as the case may be, that the assessment or decision under appeal should be upheld without variation.”

In Tuncel v HMRC [2014] UKFTT 171 (TC), the Tribunal stated:

“33.

Once agreement has been reached in writing (or has been confirmed in writing), then section 54 TMA is engaged and the only statutorily permissible means of cancelling that agreement is through the “cooling off” provisions of section 54(2) TMA.  It is common ground that no notice was given within 30 days under that sub-section purporting to repudiate or resile from the agreement and accordingly we find that section 54(1) applies to this agreement.  Thus, so far as the income tax and NIC amendment/assessments are concerned,  “the like consequences shall ensue for all purposes as would have ensued if, at the time when the agreement was come to, the tribunal had determined the appeal and had… varied it…” in the manner agreed.

34.

This means that, for the purposes of the Appellant’s application to “reinstate” the part of his appeal that relates to the income tax and NIC amendment/assessments, we are required to assume that the Tribunal has already determined that part of the appeal on the basis agreed.  In such a case, the doctrine of res judicata means that it would be an abuse of the Tribunal’s process to permit the appeal to be re-opened, because the Tribunal would thereby be allowing the parties to re-litigate an appeal which had already been deemed by statute to have been determined on an agreed basis.”

In relation to the interplay between s54 TMA 1970 and Rule 17 of the Tribunal Rules (which provides that a party that has withdrawn an appeal may, within 28 days, apply for the appeal to be reinstated), HMRC referred to the case of HMRC v CM Utilities Ltd [2017] UKUT 305 (TCC), where the Upper Tribunal stated:

“20.

Two features of Rule 17 are readily apparent. The first is that it provides for the process of withdrawal (and reinstatement) of a party’s case, but it does not provide for the consequences of withdrawal. The second is that it is expressly subject to statutory provisions relating to both withdrawal and settlement. It is to those statutory provisions that we must look to determine the consequences of withdrawal”

The Appellant’s submissions focused on his contention that he only entered into the EIS arrangements on the basis of professional advice, that HMRC should be taking action against the Appellant’s former adviser, and that it was not fair that he should be liable to pay late payment interest as he was not notified that interest would be applied. The Appellant did not make any submissions in relation to the effect of s54 TMA 1970.

I have decided that this appeal must be struck out. I have reached that decision because:

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.