inTAX’s late appeal success at the First Tier Tribunal

Late appeal cases are rarely straightforward, particularly where statutory deadlines have been missed, and HM Revenue & Customs (HMRC) considers matters closed.

During the COVID pandemic, many businesses were required to move quickly in unfamiliar and volatile markets.

This case arose from one such situation, involving a UK client trading as a provider and broker of personal protective equipment and COVID testing supplies.

Our client entered negotiations with an overseas supplier for a substantial volume of COVID tests, with purchase orders and invoices raised once commercial terms had been agreed.

However, before the transaction could be completed, price fluctuations and delays caused the deal to collapse.

Although no supply ultimately took place, the original accounting entries were not reversed.

As a result, the transaction was incorrectly included in a VAT return and VAT was claimed on a purchase that never occurred.

HMRC later concluded that the error amounted to a deliberate and concealed inaccuracy, issuing penalties totalling more than £100,000 together with a personal liability notice against the Director.

Unfamiliar with the appeals process and faced with poor and inconsistent communication from HMRC, the client believed the matter remained under discussion, only to be pursued by Debt Management on the basis that no valid appeal had been made in time.

At that stage, the client approached us to determine whether any realistic option remained to challenge the penalty and prevent enforcement action.

Why the matter escalated

Following the issue of the penalty notice and personal liability notice, the client believed the position remained under review.

They had engaged with HMRC and understood that correspondence was ongoing, particularly given their attempts to obtain further information about the basis of the decision.

Despite this, HMRC treated the statutory appeal deadline as having passed without a valid response and proceeded on the basis that the penalties were final.

As a result, the matter was escalated internally and passed to Debt Management, with enforcement action being pursued even though the client considered the dispute to be unresolved.

This disconnect between the client’s understanding and HMRC’s procedural stance significantly worsened the situation and increased both financial and personal pressure on the Director.

Assessing the options after the deadline had passed

When inTAX was instructed, the position was already highly constrained.

The statutory time limits for either accepting a review or appealing to the Tribunal had expired, and HMRC maintained that no valid appeal had been made.

An initial approach was made to HMRC to request a late acceptance of the offer of a review, but this was refused.

HMRC also confirmed that it would object to any application for a late appeal.

At that stage, the only option available was to pursue a late appeal to the Tribunal, despite it being approximately eight months out of time.

This carried significant risk, as late appeals are rarely permitted unless there is a compelling explanation for the delay and clear evidence to support it.

A full review of the case papers identified a critical procedural issue, however.

While the client had received the penalty notice and the personal liability notice, the underlying decision letter referenced within those documents had never been received.

This decision letter set out the basis for HMRC’s conclusions and was fundamental to understanding the precise grounds on which any appeal should be made.

Without sight of that letter, the client was unable to assess the decision properly or formulate an informed appeal.

This absence became central to the argument on lateness, as it directly impacted the client’s ability to engage meaningfully with the appeals process within the required timeframe.

Using HMRC’s complaints process as evidence

The client maintained that they had written to HMRC promptly after receiving the notices, specifically requesting a copy of the missing decision letter.

HMRC denied receiving this correspondence.

To resolve this dispute, inTAX initiated a formal complaint through HMRC’s complaints process, focusing on the quality of communication and document handling during the compliance check.

The complaints investigation confirmed that the client’s letters had in fact been received by HMRC centrally but had not been scanned or passed to the compliance officer dealing with the case.

This internal processing failure proved crucial as it provided independent confirmation that the delay was not caused by inaction on the client’s part, but by failures within HMRC’s own systems.

The late appeal to the First Tier Tribunal

Armed with this evidence, a late appeal was submitted to the First-tier Tribunal, focusing solely on the issue of lateness.

The argument advanced was that the client could not reasonably have appealed earlier without the missing decision letter, and that once it was finally obtained following inTAX’s involvement, the appeal was made without further delay.

Counsel, Michael Avient, of Temple Tax Chambers, was instructed to present the case at the hearing.

The submission emphasised the procedural failures, the client’s repeated attempts to engage, and the prejudice caused by HMRC’s handling of correspondence.

The Judge accepted that the missing decision letter was a key document and that its absence materially affected the client’s ability to appeal in time.

The Tribunal concluded that the delay was adequately explained and that it was fair and just to grant permission for a late appeal.

As a result, the application to appeal out of time was allowed, enabling the substantive appeal against the penalty and personal liability notice to proceed to a further hearing.

A successful late appeals outcome for our client

This decision prevented immediate enforcement action and removed the requirement for the client to pay the penalty purely on procedural grounds.

Crucially, it preserved the client’s right to challenge HMRC’s classification of the error as deliberate and concealed, as well as the validity of the personal liability notice against the Director.

Rather than being forced into payment due to missed deadlines, the client is now able to have the merits of the case properly considered by the Tribunal.

Late appeals are inherently difficult, as statutory deadlines are strictly applied and Tribunals are cautious not to undermine them.

This case demonstrates the importance of detailed evidence, persistence, and a thorough review of HMRC’s procedures when challenging decisions on lateness.

For taxpayers and advisers alike, it highlights that procedural failures within HMRC can be highly relevant and that using all available avenues, including the complaints process, can be decisive in building a successful late appeal argument.

To identify these procedural issues, it is likely that you will need help and guidance from a tax investigations specialist with inherent knowledge of the way that HMRC works.

If you require assistance with a tax investigation, appeal or enquiry, please get in touch with our experts.

You can get in touch with our friendly and experienced team on: 0203 675 8122 or email info@intaxltd.com.

inTAX is a specialist tax disputes firm. We deal with disclosures, investigations, and tax enquiries of all descriptions, including COP9, fraud investigations, VAT fraud, tax avoidance, let property disclosures and tribunal appeals. However, we don’t just deal with the serious end of tax investigations; we are also happy to handle smaller enquiries, disputes and problems that can be equally as worrying for our clients.