Elliot Schwarzea v The Commissioners for HMRC

 For the hearing I was provided with a hearing bundle of 235 pages and an authorities bundle of 241 pages. No witness statements were provided. However the Appellant gave evidence and was cross examined. HMRC did not provide any evidence.

During the hearing the Appellant referred to letters sent to an address in Crantock Close (the ‘Crantock Close Address’) that were not in the hearing bundle. I directed the Appellant to provide copies of these letters 7 days after the date of the hearing, and HMRC to provide written representations, if any, as to their position with regard to their record of the Appellant’s address in light of such letters. The Appellant provided a further five letters (although the copies were incomplete they clearly show the address to which they were sent) and HMRC provided further representations in light of those letters. The further five letters are dated 13 June 2018, 2 August 2018, 7 December 2018 and two dated 11 December 2018. Subsequently I have seen complete copies of the letters dated 2 August 2018 and 7 December 2018 and the parties made further brief representations. None of the further representations seek to argue that the content of those five letters is relevant to the issues before me, nor do HMRC deny that the five letters were sent to the Crantock Close Address, and I proceed on these bases.

I am grateful to the Appellant and Ms Shamin for their submissions on the facts and the law and I summarise them below. The parties should, however, be assured that when preparing this decision, the hearing bundle, the parties’ written representations and my notes of the hearing were reviewed. Because I do not deal specifically with any point it does not mean that it was not considered in the round when reaching my decision.

I set out the majority of our findings of fact in this part of my decision. Most of them require no discussion as they were not in dispute and derive from the documents provided in the hearing bundle and provided after the hearing. I also make some findings of fact in other parts of this decision where it is clearer to do so.

On 13 July 2016 Officer Ewen, an officer of HMRC, wrote to the Appellant at an address in Budworth Close (the ‘Budworth Close Address’). That letter advises that Officer Ewen is checking the Appellant’s self assessment tax return for the year ended 5 April 2015.

On 10 November 2016 Officer Ewen wrote to the Appellant at an address in Applewood Grove (the ‘Applewood Grove Address’). That letter refers to a letter dated 13 July 2016 (which it states is enclosed) advising the Appellant that Officer Ewen was checking the Appellant’s self assessment tax returns for four years ended 5 April 2015. It goes on to say that the 13 July 2016 letter was returned undelivered by the Post Office. Further, that Officer Ewen’s records indicated that the Appellant had relocated to Applewood Grove. [The copy of the letter in the hearing bundle dated 13 July 2016 only referred to the year ended 5 April 2015 but nothing turns on this apparent discrepancy.]

On 24 February 2017 Officer Ewen wrote to the Appellant at the Applewood Grove Address. The letter describes itself as a legal request for information or documents pursuant to paragraph 1 Schedule 36 following Officer Ewen’s letter of 10 November 2016.

On 2 May 2017 Officer Ewen wrote to the Appellant at the Applewood Grove Address. The letter is a penalty notice for £300 pursuant to paragraphs 39 and 46 Schedule 36. It also sets out the process by which to appeal the penalty to HMRC.

On 27 June 2017 Officer Ewen wrote to the Appellant at the Applewood Grove Address. The letter is a penalty notice for 55 daily penalties of £20 (total £1,100) pursuant to paragraphs 40 and 46 Schedule 36. It also sets out the process by which to appeal the penalty to HMRC.

On 11 September 2017 Officer Ewen wrote to the Appellant at the Applewood Grove Address. The letter is about the failure to co-operate with Officer Ewen’s checks into the Appellant’s self assessment tax returns for the years ended 5 April 2012 – 2015 and explains the basis on which Officer Ewen will be issuing closure notices in respect of those self assessment tax returns. The letter also explains that Officer Ewen is considering penalties pursuant to Schedule 24.

The hearing bundle contained Officer Ewen’s note of a phone call with the Appellant on 3 October 2017. The Appellant did not suggest that this phone call did not take place and I find that it did. Officer Ewen’s note records that the Appellant referred to his decision letter dated 11 September 2017. I accept that that is the letter referred to in the preceding paragraph. The reason that I accept this is because a number of details from Officer Ewen’s note of the phone call match what is set out in the letter. For example, the fact that Officer Ewen in his 11 September 2017 letter reduces the Appellant’s expenses to nil for the year ended 5 April 2012. Also, that the ‘CIS Deductions’ were revised from £12,300 to £7,844 for the year ended 5 April 2012. The note records that Officer Ewen and the Appellant agreed that the Appellant would provide further information to Officer Ewen within 30 days.

Also on 3 October 2017 Officer Ewen emailed the Appellant asking for consent to communicate via email. The hearing bundle did not contain a response to that email.

On 15 November 2017 Officer Ewen wrote to the Appellant at the Applewood Grove Address. The letter says that as Officer Ewen has not heard from the Appellant he will proceed as outlined in his 11 September 2017 letter ie to issue closure notices for the years ended 5 April 2012 – 2015.

On 2 May 2018 Officer Ewen wrote to the Appellant at the Applewood Grove Address. There are numerous letters: a covering letter and closure notices for each year ended 5 April 2012 – 2015.

On 13 June 2018 HMRC’s Debt Enforcement Team wrote to the Appellant at the Crantock Close Address.

The hearing bundle contained Officer Ewen’s note of a phone call with the Appellant on 24 July 2018. The Appellant did not suggest that this phone call did not take place and I accept that it did. It states in relevant part:

On 2 August 2018 HMRC’s Debt Enforcement Team wrote to the Appellant at the Crantock Close Address.

On 17 August 2018 Officer Ewen wrote to the Appellant at the Applewood Grove Address. There are numerous letters: a notice of penalty assessment and penalty explanation schedules covering various inaccuracies in the tax years ended 5 April 2012 – 2015 pursuant to Schedule 24 totalling £92,631.54 ie for the Schedule 24 Penalties. The notice of penalty assessment includes an explanation of how to appeal to HMRC.

On 7 December 2018 HMRC’s Debt Enforcement Team wrote to the Appellant at the Crantock Close Address.

On 11 December 2018 HMRC’s Self Assessment Team sent two letters to the Appellant at the Crantock Close Address.

On 9 July 2019 Officer Ewen wrote to the Appellant at the Crantock Close Address. There are two letters: a closure notice in relation to the Appellant’s self assessment tax return for the year ended 5 April 2016; and a closure notice in relation to the Appellant’s self assessment tax return for the year ended 5 April 2017.

On 16 October 2023 the Appellant wrote to HMRC’s Self Assessment Team appealing the compliance charges of approximately £92,000 from his account late ‘….. due to failure to submit documentation in time as the letter sent by yourselves was sent to the wrong address, which I have now updated.’.

Between 7 December 2023 and 25 January 2024 the Appellant corresponded with HMRC about various matters including the charges of around £92,000 via email. Subsequent to that correspondence on 12 February 2024 Officer Helen Craig, from Individual and Small Business Compliance, wrote to the Appellant again about various issues. Those issues included the confirmation that given the lapse of time the Schedule 24 Penalties needed to be appealed to the Tribunal directly. Insofar as the Schedule 36 Penalties the only relevant statement is a generic one:

It was not in dispute between the parties that HMRC had refused to consider a late appeal to them in respect of the Schedule 36 Penalties and the Schedule 34 Penalties (together the ‘Penalties’). Nor was it in dispute between the parties that HMRC had posted all the letters referred to or that the only letter that had been returned undelivered was the 13 July 2016 letter to the Budworth Close Address. Therefore, I proceed on these bases.

I asked the Appellant to set out what were the correct addresses for him for what periods, the evidence he gave was that:

In an attempt to clarify the position re the Appellant’s address from HMRC’s perspective Ms Shamin submitted, as I understood it from looking at HMRC’s systems that she had access to, during the hearing that:

I comment below on the Appellant’s evidence and HMRC’s submissions.

Schedule 36 and Schedule 24, in broad terms, relevantly provide:

HMRC’s position was that the ‘notification’ of the Penalties must be done in accordance with s115 Taxes Management Act 1970 (‘TMA’) which relevantly provides:

S7 Interpretation Act 1978 provides what constitutes service by post.

An appeal may be brought against a penalty assessed pursuant to paragraphs 39 and 40 Schedule 36, see paragraph 47(1) Schedule 36. Such an appeal must be made in writing, to HMRC before the end of the period of 30 days beginning with the date on which the notification under paragraph 46 was issued, see paragraph 48(1) Schedule 36.

Part 5 TMA relating to appeals has effect in relation to appeals pursuant to paragraphs 47 and 48 Schedule 36, see paragraph 48(5) Schedule 36. Part 5 TMA includes s49 that allows a late notice of appeal to be given to HMRC where HMRC agree or in the absence of HMRC’s agreement where this Tribunal gives permission.

An appeal may be brought against a penalty issued pursuant to paragraph 1 Schedule 24, see paragraph 15 Schedule 24. Such an appeal is to be treated in the same was as an appeal against an assessment to the relevant tax (here income tax), including the application of bringing the appeal by notice to HMRC, see paragraph 16(1) Schedule 24. Such an appeal must be made to the officer who gave the notice of assessment (here penalty) within 30 days after the date of notice (here notification), see s31 TMA.

Also, similarly to Schedule 36 Part 5 TMA applies to the Schedule 24 Penalties including s49 TMA that allows a late notice of appeal to be given to HMRC where HMRC agree or in the absence of HMRC’s agreement where this Tribunal gives permission.

The Upper Tribunal provided guidance on the correct test for the First-tier Tribunal to apply when considering an application for a permission to make a late appeal in Martland v HMRC [2018] UKUT 178 (TCC) at [23] – [47] ('Martland'). The key passage is at [44] of Martland:

The Upper Tribunal goes on at paragraph [45] of Martland to highlight the need for the balancing exercise to 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 HMRC v Katib [2019] UKUT 189 (TCC) ('Katib') the Upper Tribunal at [17] emphasised that the need to respect statutory time limits is a matter of particular importance to the exercise of the First-tier Tribunal's discretion as to whether to admit a late appeal. Although see further discussion below on this point.

The Upper Tribunal in Martland at [46] is discussing the role that the merits of an appeal may have when conducting the balancing act or 'third stage':

As set out above the Upper Tribunal in Martland stated that the third (balancing) stage 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. However, the more recent decisions of the Upper Tribunal in Medpro Healthcare Ltd v HMRC [2025] UKUT 255 (TCC) ('Medpro') at [93] – [98] followed by Pawar v HMRC [2025] UKUT 309 (TCC) ('Pawar') at [84] – [94] concluded that no extra weight should be given to these 'compliance' factors. In Lands Luo Ltd v HMRC [2025] UKFTT 1207 (TC) ('Lands Luo Limited'), released after Medpro and Pawar, the First-tier Tribunal at [53] – [71] (which included Lord Justice Dingemans, the Senior President of Tribunals as member of the panel) agreed with the approach in Martland. Lands Luo Limited considered Medpro but not Pawar. Medpro, Pawar and Lands Luo Limited all confirm that the three stage test in Martland should be applied.

At [70] in Lands Luo Limited the First-tier Tribunal observed that often the difference in approach to the test to be applied (ie the weight to be given to the 'compliance' factors) when considering whether to grant permission to bring a late appeal between Martland and Medpro would not yield a different result. I shall consider the Medpro test first and then the Martland test and if the results are different it will be necessary to discuss which approach will determine the application and why.

The parties’ argument were straightforward.

The Appellant says that he was not aware of either the Schedule 36 Penalties or the Schedule 24 Penalties until around the time he appealed them in October 2023. That is because notification had not gone to his correct address which was the Crantock Close Address. Once he was aware of the Penalties he appealed to HMRC.

HMRC note that:

HMRC’s position is that:

HMRC’s position is that they had notified the Appellant of the Schedule 36 Penalties and Schedule 24 Penalties. They say this because the letters dated 2 May 2017 and 27 June 2017 in respect of Schedule 36 and the letter dated 17 August 2018 in respect of Schedule 24 were posted to the Appellant’s ‘last known place of residence’ pursuant to s115(1) TMA and s7 Interpretation Act 1978. I accept that such an action would constitute valid notification of the Penalties, whether or not this happened is a question of fact to be determined.

Ms Shamin said a number of things in her submissions about what was recorded on HMRC’s systems (see above). However, submissions are not evidence. The Appellant said numerous things in evidence about where he was living and when. However, this was of limited assistance because the Appellant could not recall the detail of when he had updated HMRC as to his changes in address. Therefore, I shall determine if the Appellant was notified of the Schedule 24 Penalties and Schedule 36 Penalties by reference to the correspondence and telephone notes before me.

Officer Ewen’s letter of 10 November 2016 records that his 13 July 2016 letter sent to the Budworth Close Address was returned undelivered by the Post Office. This was not in dispute and accords with what the Appellant said about having left the Budworth Close Address by late 2015. Officer Ewen’s 10 November 2016 letter states that his records show that the Appellant had relocated to the Applewood Grove Address. HMRC did not provide any information as to what those records were. However, absent any evidence from the Appellant about updating HMRC regarding his move to the Crantock Close Address in late 2015, in light of the returned correspondence from the Budworth Close Address and in the absence of anything else before me to suggest that HMRC knew of a different address for the Appellant until 13 June 2018, I find that on 10 November 2016 the Applewood Grove Address was the Appellant’s ‘last known place of residence’ insofar as HMRC and this did not change until 13 June 2018. My conclusion is fortified by the fact that it appears the Appellant received letters sent to the Applewood Grove Address after this date. For example, Officer Ewen’s note of the phone call with the Appellant on 3 October 2017 clearly referred to the letter dated 11 September 2017 sent to the Applewood Grove Address (see above). Additionally, Officer Ewen’s note of his phone call with the Appellant on 24 July 2018 records that the Appellant referred to the closure notices sent to the Applewood Grove Address on 2 May 2018. Neither of these points were disputed by the Appellant.

On 13 June 2018 HMRC (Debt Enforcement) began writing to the Appellant at the Crantock Close Address. No explanation (in submissions or evidence) was given as to why this was. It clear that something had happened within HMRC which meant that HMRC concluded that the Appellant’s ‘last known place of residence’ had changed to the Crantock Close Address. On that basis, which accords with the Appellant’s position, I find that on 13 June 2018 the Appellant’s ‘last known place of residence’ insofar as HMRC became the Crantock Close Address. Ms Shamin submitted essentially that Officer Ewen was not aware of this because Debt Enforcement are a separate part of HMRC. I do not accept that bare submission: HMRC are one organisation. Ms Shamin also pointed to Officer Ewen’s note of his phone call with the Appellant on 24 July 2018 (see excerpts above). That note records that Officer Ewen and the Appellant are discussing where to send correspondence and the Applewood Grove Address is referred to as the Appellant’s parents’ address. In the absence of any evidence from Officer Ewen and in light of HMRC’s agreement that the Crantock Close Address (in written submissions) is the Appellant’s parents’ address I can only conclude that there was an error/misunderstanding in what was recorded by Officer Ewen. In my view it is more likely that there was an error/misunderstanding about what address was the Appellant’s parents’ address rather than Officer Ewen incorrectly recording a reference to the Appellant’s parents’ address ie the error in the note is to the Applewood Grove Address not the Appellant’s parents’ address. Therefore I am not satisfied that the Appellant’s ‘last known place of residence’ insofar as HMRC reverted to the Applewood Grove Address following the phone call on 24 July 2018. There was nothing else before me to support a conclusion that the Appellant’s ‘last known place of residence’ had changed from the Crantock Close Address by 17 August 2018. HMRC made the general point that the Appellant was aware of the possibility of the penalties. However, they did not during the hearing or in their written representations following the hearing seek to argue that anything other than the 17 August 2018 letter was notification of the Schedule 24 Penalties.

The consequences of my findings are that:

The issue to be determined is whether the Appellant should be given permission to bring a late appeal ie to notify an appeal to HMRC on 16 October 2023

Applying the three-stage approach required by Martland, I first consider the seriousness and significance of the failure to comply with the original time limit. The relevant time limit is 30 days from 2 May 2017 and 27 June 2017. In this case, by my calculation which differs slightly but not materially from HMRC’s the appeals were 6 years, 5 months and 14 days late and 6 years, 3 months and 19 days late which was significantly outside the 30-day time limit. Clearly, such delays cannot be described as anything other than serious and significant.

The second stage of Martland is to consider the reason why the time limit was not respected. The Appellant's reason is that he had not received the notification of the Schedule 36 Penalties. However, for the reasons set out above I have found that he did: they were sent to his ‘last known place of residence’.

The third stage is to consider all the circumstances of the case. I must balance the merits of the reason(s) given for the delay and the prejudice which would be caused to both parties by granting or refusing permission to make a late appeal. I have considered all the relevant factors, and set out those of particular relevance as follows:

In balancing all of the relevant factors, I have concluded that following the Medpro approach that the Appellant ought not to be permitted to make an appeal out of time. I reach the same conclusion following the stricter approach set out in Martland. (Footnote: ¹)

For the reasons set out above:

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.