If a taxpayer wants to challenge an HMRC decision the appeal must normally be submitted within 30 days of the decision being notified to the taxpayer. Andy Keates explains when and how a late appeal may be accepted.
A taxpayer has the right to appeal against most of HMRC’s actions, such as closure amendments, assessments, penalty notices. In every case there is a deadline by which the appeal has to be made, normally 30 days from the date of issue of the notice, assessment, etc. The right to appeal is not automatically lost if the appeal deadline is not met. Appeals may be considered even if a significant amount of time (months or years) has passed since the deadline.
First ask HMRC in writing to give permission for the appeal to be considered out of time. HMRC has a strict statutory test it must follow, set out in TMA 1970, s 49. HMRC must give permission for the late appeal to be heard if it is satisfied that:
there was a reasonable excuse for failing to meet the deadline; and
the request for a late appeal was made without unreasonable delay as soon as the reasonable excuse ceased.
It is important that the letter seeking permission for the late appeal should contain as much detail as possible on the circumstances which led to the delay.
While the law requires HMRC to be satisfied, it is up to the taxpayer and you as their agent, to do the satisfying! Remember, while you or I might find the client’s excuse satisfactory, there is no guarantee that HMRC will be “satisfied” by it.
If HMRC is not satisfied on both of the points in TMA 1970, s 49, it must notify the taxpayer accordingly, and advise of their right to seek permission for a late appeal from the first tier tribunal (FTT).
Ask the FTT
The tribunal (quite properly) has a broader remit than HMRC, and has a duty to consider the wider picture. While enforcing the time limits should be the general rule, the FTT has the discretion to relax the time limits, even when the circumstances are not exceptional.
The Upper Tribunal (in Martland  UKUT 0178) instructed the FTT to follow a three-stage process, as set out by the Court of Appeal in the case of Denton  EWCA Civ 906. At each stage, the tribunal has to remember that “the FTT’s role is to exercise judicial discretion taking account of all relevant factors, not to follow a checklist.” Those three stages are:
1.Was there a serious or significant delay?
This stage is all about proportionality. If you have been given 30 days to do something, there is a huge difference between taking 32 days and taking two years to submit the appeal.
This does not mean that a minor delay will automatically succeed, or that a serious or long delay will automatically result in failure. In either case, the FTT still needs to look at the next two stages.
2. What is the explanation for the delay?
This goes wider than HMRC’s obligation to consider a “reasonable excuse”. The standard test for a “reasonable excuse” is how a hypothetical rational person would have been expected to behave in the circumstances.
Stage two allows the FTT to go beyond that, and to ask whether the taxpayer’s behaviour, even if not strictly “reasonable”, offers a credible reason for missing the deadline. The judge in Denton said: “Where there is a good reason for [even] a serious or significant breach, relief is likely to be granted”.
Do not despair: even if the delay is serious and there was no good reason for it, the FTT will consider “all the circumstances of the case, so as to enable it to deal justly with the application”.
3. Dealing justly with the application
Here is where the balancing act comes into play. While statutory time limits should normally be respected, the efficient exercise of justice may require the judge to permit them to be breached.
Factors outside the specific case might be relevant. There may be a broader public interest in permitting the appeal to be heard, perhaps to serve as a test case. Equally, it could be in the interests of justice for the appeal to lapse, permitting finality to the situation.
The taxpayer’s past compliance history may be considered. Someone who consistently misses deadlines might attract less sympathy than one with a spotless compliance record.
The FTT may also look at the taxpayer’s likely prospects of winning the case in the event of the appeal going forward. If his grounds for appealing are particularly strong, it would be unfair for him to lose by default, merely through having missed a deadline. On the other hand, allowing a late appeal which is essentially frivolous or hopeless would be a misuse of public funds.
Having said that, it is not the FTT’s job at this stage to over-analyse the substantive grounds for the appeal. They are merely one factor to be put into the balance, and fall within the scope of what is termed “prejudice”.
The FTT needs to examine whether there would be disproportionately adverse consequences to one or other party, should they lose the argument. Prejudice can be used as a powerful argument to tip the scales one way or the other.
In other words;
What are the consequences for HMRC of allowing the appeal to be heard?
What are the consequences for the taxpayer of not allowing it?
For example, in Armstrong (TC06606), the judge felt that:
“the prejudice to HMRC should I give permission is non-existent as they have fully argued their case against the appeals”, while
“the prejudice to the appellant is severe as she would have to pay what by any standards are harsh penalties.”
All it takes for HMRC to refuse to accept a late appeal is the absence of a convincing reasonable excuse. The FTT has a much wider remit, and is allowed to consider whether it would be fair to allow the late appeal, after taking account of all the circumstances. The stronger the actual case being argued in the appeal, the more likely the FTT will want to allow it to be heard.