Judgment summary
By a Notice of Appeal dated 3 January 2025, the Appellant sought permission to make a late appeal against two misdeclaration penalty assessments dated 3 August 2017, issued under s 63 of the Value Added Tax Act 1994 for the 03/06 and 06/06 VAT periods (1). The penalty for 03/06 was £1,707,846 and for 06/06 was £811,340, later reduced to £200,870 by a letter dated 8 December 2022 (1, 37).
HMRC objected to the late appeal (3). The Tribunal (Judge Natsai Manyarara) considered the Martland three-stage test, as amplified by Katib and subsequent authorities, and decided not to admit the late appeal (4, 106).
Background
Between 2000 and 2006 the Appellant traded in mobile telephones, largely as agent for a Singapore company, Dhalomal Ramchand Pte Limited (DRPL), and also on his own account, claiming input VAT repayments on both categories of trade (7-10). HMRC refused input tax claims of £22,392,775 for the 03/06 and 06/06 periods on Kittel grounds, alleging the Appellant knew or ought to have known the transactions were connected with fraudulent evasion of VAT (10, 16).
The Appellant's Kittel appeals were struck out in 2015 for non-compliance with an Unless Order requiring him to specify issues in dispute, and reinstatement was refused, with the UT refusing permission to appeal in November 2017 (18-28).
On 3 August 2017 HMRC charged the Misdeclaration Penalties under s 63 VATA. The Appellant appealed out of time on 13 September 2017 and HMRC did not object; the appeal was admitted (TC/2017/06848) (29). Extensive further litigation followed, including strike-out applications, an FtT decision by Judge Mosedale (20 December 2018), an Upper Tribunal decision (22 July 2020) and a Court of Appeal decision (28 October 2021), addressing abuse of process and Article 6 ECHR arguments (30-36).
On 8 December 2022 HMRC reduced the 06/06 penalty from £811,340 to £200,870 due to a mis-apportionment, reducing the overall penalty figure to £1,908,716 (37). On 15 August 2023 the Appellant confirmed his intention to withdraw the penalty appeal, and the Tribunal endorsed a Consent Order recording the withdrawal on 5 December 2023 (38-40). No application to reinstate that appeal was made. The present Notice of Appeal, dated 2 January 2025 (referred to in the decision variously as 3 January 2025), sought to appeal the same 2017 Misdeclaration Penalties (1, 41).
Core dispute
The Appellant argued that the December 2022 letter (and a further email of 9 February 2023) constituted a new, appealable decision distinct from the original 2017 penalties, such that his current appeal was not late, or was late only from December 2022, and that the Misdeclaration Penalties were invalid due to miscalculation, breach of HMRC's Code of Practice, and breach of Article 6 ECHR through excessive delay (47).
HMRC contended that the appeal was filed very late on any view, that the December 2022 letter was not a new appealable decision but simply notice of a reduction in the 06/06 penalty, that the same issues had already been litigated and the previous appeal withdrawn without any reinstatement application, and that issue estoppel and/or abuse of process barred the appeal in any event (48).
Court findings
The Tribunal found that the length of delay was serious and significant on any calculation: eight years from the 2017 penalty notices, or three years even taking the December 2022 letter as the relevant date (87-90). Mr Fox, for the Appellant, accepted that the appeal was late (89).
The Tribunal held that the December 2022 letter was not an appealable decision; it did not charge a new penalty but merely reduced the amount already assessed in 2017, and no statutory right of appeal arose from it under s 83(1)(n) or (q) VATA (96-97). The Appellant had already been notified of, and had appealed against, the underlying liability in 2017, before withdrawing that appeal (97).
The Tribunal found that the Appellant had not provided a good reason for the failure to make a timely appeal, noting he was represented throughout, was aware of the appeal process from his prior appeal, and had made no application to reinstate the withdrawn appeal within the 28-day time limit under the Tribunal Procedure Rules (91-99).
Applying Stage 3 of Martland, the Tribunal weighed the public interest in finality of litigation, referencing Romasave, Data Select and Katib, and HMRC's submissions on issue estoppel and abuse of process arising from the earlier withdrawal and the struck-out Kittel appeals (100-104). The balance of prejudice, and the interest in finality, favoured refusal of the extension of time (105).
Outcome
The application to make a late appeal was refused (106). The Tribunal noted the parties' right to apply for permission to appeal against the decision within 56 days under Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (107).
Major issues / areas of contention
- Whether the Tribunal should exercise its discretion under s 83G(6) VATA to permit a late appeal against misdeclaration penalties issued in 2017.
- Whether the December 2022 letter reducing the 06/06 penalty constituted a new appealable decision, restarting the time limit for appeal.
- Whether the length of delay (eight years, or three years on the Appellant's alternative case) was serious and significant under the Martland test.
- Whether the Appellant had provided a good reason for the delay in appealing.
- The relevance of the Appellant's earlier withdrawal of his appeal against the same penalties, and his failure to apply for reinstatement within the applicable time limit.
- Whether issue estoppel and/or abuse of process arising from the earlier struck-out Kittel appeals and the withdrawn penalty appeal were relevant considerations at Stage 3 of Martland.
- The application of the Martland three-stage test as amplified by Katib, Medpro UT, Pawar, Lands Luo and Medpro CoA.
- The balancing of prejudice to the Appellant against the public interest in finality of litigation and respect for statutory time limits.