Judgment summary
This is a decision of the First-tier Tribunal (Tax Chamber) on an application by Excel Building Contractors Limited to reinstate its appeal against a Notice of Requirement (NOR) for VAT security, after the appeal had been struck out for non-compliance with an Unless Order (1).
The application was determined on the papers by Tribunal Judge Bailey on 14 September 2026, having considered the Tribunal file, the two Unless orders, the confirmation of striking out, the Appellant's reinstatement application and HMRC's opposition.
The Tribunal refused the application for reinstatement (2).
Background
On 10 October 2024, HMRC issued a Notice of Requirement for security in respect of VAT, later reduced to £50,880.83, or £44,480.83 if the Appellant opted for monthly VAT returns (5). HMRC's review decision of 18 December 2024 upheld the requirement in those reduced amounts (6).
On 17 January 2025, the Appellant, acting by its sole director Mrs Zaidi, appealed to the Tribunal on the grounds that the amount requested was unfair and would jeopardise the business's viability, and sought additional time to pay (7).
The Tribunal issued Directions on 24 February 2025, intending the appeal to proceed by video hearing as quickly as possible given the serious consequences of trading without the required security (8, 9, 10). HMRC complied with the Directions, filing their Statement of Case, listing information, list of documents, and bundles on time (11, 12, 13).
The Appellant did not comply with any of the Directions and did not respond to a Tribunal chaser letter of 14 June 2025 (14, 15). On 2 October 2025, the Tribunal issued a first Unless Order requiring written confirmation by 16 October 2025 that the Appellant wished to proceed, failing which the appeal would be struck out automatically (16). No timely response was received, though Mrs Zaidi emailed on 22 October 2025 citing health issues and asking how to appeal (17, 18). On 27 October 2025, the duty judge retrospectively extended time to 10 November 2025 rather than confirming the strike out (19).
On 7 November 2025, Mrs Zaidi filed a one-page witness statement referring to cash flow strain, but without supporting documents or listing information (20). Following a further direction on 26 November 2025 and HMRC's compliance, the Appellant again failed to respond (21). A second Unless Order was issued on 11 February 2026, requiring confirmation by 25 February 2026 (22). No timely response was received; the Appellant emailed HMRC (copying the Tribunal) on 27 February 2026 and again on 2 March 2026, citing ill health and requesting relief from sanctions (23, 24, 25).
On 31 March 2026, the Tribunal confirmed the striking out of the appeal, with 28 days allowed to seek reinstatement (26). On 26 April 2026, the Appellant applied for reinstatement under Rule 8(5) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, again citing Mrs Zaidi's health issues as sole director (27). HMRC opposed reinstatement on 5 May 2026, noting the repeated pattern of non-compliance and absence of supporting evidence (29). Further Tribunal directions of 6 May 2026 and a chasing letter of 2 July 2026 asking for representations and medical evidence went unanswered by the Appellant (30, 31, 32).
Core dispute
The issue before the Tribunal was whether the appeal, which had been automatically struck out for failure to comply with a second Unless Order, should be reinstated under the Tribunal's discretion, given the Appellant's history of non-compliance and the reasons advanced (ill health of the sole director) for that non-compliance (1, 33, 39).
HMRC opposed reinstatement, pointing to the Appellant's consistent failure to comply with multiple Tribunal directions since the Notice of Appeal was filed, and the lack of evidence supporting the reasons given for reinstatement (29).
Court findings
The Tribunal applied the three-stage approach in Martland v HMRC [2018] UKUT 178 (TCC), as adapted for reinstatement applications by Chappell v The Pension Regulator [2019] UKUT 209 (TCC), and re-approved in Breen v HMRC [2023] UKUT 00252 (TCC) and Medpro Healthcare Limited v HMRC [2026] EWCA Civ 14 (33, 34, 35, 39).
On the merits of the underlying appeal, the Tribunal found that the Appellant had not identified any way in which HMRC's decision to require security was unreasonable, had filed no supporting documents, and that Mrs Zaidi's witness statement lacked detail. The Tribunal concluded the merits were not so weak that HMRC would succeed on a strike-out application, and so the merits did not weigh for or against reinstatement (40, 41, 42).
On seriousness and significance of breaches, the Tribunal found multiple breaches by the Appellant, nearly all serious and significant, including failure to comply with the original Directions, the chaser letter, partial compliance after the retrospective extension, failure to provide listing information leading to the second Unless Order, failure to comply with that Order, and subsequent failure to respond to post-strike-out directions (43 to 47).
On reasons for default, the only explanation given was the ill health of the sole director, but no medical evidence was provided despite being directed to do so, and no explanation was given as to why alternative arrangements were not made for someone else to manage the appeal. The Tribunal noted Mrs Zaidi was able to respond to an HMRC email within 15 minutes in February 2026, undermining the claim of incapacity, and found no explanation at all for later breaches in May and July 2026 (48 to 52).
In evaluating all the circumstances, the Tribunal accepted there would be prejudice to the Appellant if the appeal were not reinstated, including possible serious consequences from trading without the required security, but found this prejudice resulted from the Appellant's own failures. Prejudice to HMRC and to other Tribunal litigants from reinstatement was also considered, alongside the importance of efficient and proportionate conduct of litigation (53 to 57, 60).
Outcome
The Tribunal concluded that the balance of factors favoured refusing reinstatement, notwithstanding that refusal caused greater prejudice to the Appellant than reinstatement would cause to HMRC and other litigants, because that prejudice arose from the Appellant's own repeated non-compliance (61, 62).
The application for reinstatement was REFUSED (2, 63).
The decision notice records the Appellant's right to apply for permission to appeal under Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, with any application to be received not later than 56 days after the decision is sent (64).
Major issues / areas of contention
- Whether a VAT appeal automatically struck out for breach of a second Unless Order should be reinstated.
- The correct approach to reinstatement applications following Chappell v The Pension Regulator, applying the three-stage Martland test as adapted.
- Whether the underlying merits of the struck-out appeal should be taken into account, applying the Global Torch exception for very weak or very strong cases.
- Whether the Appellant's repeated failures to comply with Tribunal Directions and two Unless Orders amounted to serious and significant breaches.
- Whether ill health of the Appellant's sole director provided a good reason for the defaults, in the absence of medical evidence.
- The balance of prejudice between the Appellant, HMRC, and other Tribunal litigants if the appeal were or were not reinstated.
- The weight to be given to the need for litigation to be conducted efficiently and at proportionate cost.