Judgment summary
This decision concerns an application to bring a late appeal in respect of Annual Tax on Enveloped Dwellings (ATED) matters. The Tribunal considered three categories of dispute: refusal of relief from ATED, late payment penalties, and late filing penalties (paragraph 2).
The Tribunal found the evidential bundle severely lacking, missing fundamental documents from both parties, and allowed further written submissions and evidence after the hearing (paragraphs 4 to 6).
The Tribunal set out the statutory background to ATED under the Finance Act 2013, including the charge under section 94, the filing obligation under section 159, and the overpayment relief regime under Schedule 33 (paragraphs 8 to 12).
Having reviewed the facts, submissions and the principles in Martland v HMRC [2018] UKUT 178 (TCC), the Tribunal allowed the appeals against the eight late filing penalties, allowed the appeals against three late payment penalties that HMRC accepted had been cancelled in 2017, refused permission to bring a late appeal against the remaining three late payment penalties, and refused permission to appeal the ATED relief refusal on the basis that no decision had in fact been communicated to the Appellant (paragraph 84).
Background
Mountrail Company Holdings Limited owned a UK property and was required to submit ATED returns for the tax years 2013/14 to 2017/18. Returns were filed for each of those years, some close to and some by the relevant deadlines, reporting ATED liabilities including £70,000, £71,850.30 (typed as £7185030), £109,050, £109,050 and £0 respectively (paragraphs 14 to 15).
A series of late payment penalties totalling six notices were issued between 19 February 2014 and 23 September 2016 (paragraph 16). In August 2018, HMRC's debt management team issued a payment demand and, a week later, a warning of winding up action for £93,102.04, comprising ATED charges, late payment penalties, and interest (paragraphs 17 to 18). It was accepted that three of the late payment penalties were paid by the Appellant (paragraph 19).
In August 2021, agents for the Appellant, Parvez & Co, submitted further ATED returns for 2013/14 to 2016/17 claiming relief on the basis the property was held as an investment for rental or sale (paragraph 20). HMRC issued further late filing penalties in late 2021 and early 2022 in respect of these returns, totalling eight penalties (paragraph 21).
Correspondence continued between Parvez & Co and HMRC, including an appeal letter dated 24 March 2022 (received 25 July 2022), a complaint letter of 25 July 2022, a complaint response of 28 September 2022, an appeal response of 21 September 2022 upholding late filing penalties, and further complaints correspondence through late 2022 and 2023 (paragraphs 22 to 27). On 10 November 2023, an HMRC officer wrote confirming that the Appellant would need to appeal directly to the Tribunal and that a late appeal application could be made (paragraph 28).
On 12 February 2024, the Appellant lodged an appeal with the Tribunal seeking repayment of £392,400, relating to ATED charges for 2012/13 to 2017/18 and late filing penalties of £4,546.78 and £1,639.64 (paragraph 29).
Core dispute
The core question was whether the Tribunal should grant permission for a very late appeal to proceed, and what the correct scope of that appeal was, given the mixture of ATED relief claims, late payment penalties, and late filing penalties potentially in issue (paragraphs 1 to 3).
HMRC accepted that six of the eight late filing penalties should be withdrawn if the original returns were found to have been filed on time, but the Appellant argued this position was internally inconsistent and incomplete because it did not address all eight penalties (paragraphs 31 to 32, 40).
In relation to late payment penalties, HMRC argued the appeals were between roughly seven and eleven years late, applying Martland v HMRC [2018] UKUT 178 (TCC) principles, that no good reason for delay had been shown, and that the Appellant's case was 'exceptionally weak' (paragraph 36). The Appellant argued that time should run from later correspondence, particularly the 10 November 2023 letter, that HMRC's correspondence had been ambiguous and contradictory, and that personal circumstances including deaths of the director and external accountant caused disruption (paragraphs 37 to 38).
On the ATED relief claims, HMRC submitted the Tribunal lacked jurisdiction because HMRC was not liable to give effect to the claim under 'case A' within paragraph 30 of Schedule 33 to FA 2013 (paragraph 72). The Appellant argued that a letter of 22 December 2022 had led it reasonably to believe relief had been granted, and that the true starting point for lateness was the 10 November 2023 letter (paragraph 39).
Court findings
The Tribunal criticised HMRC's presentation on late filing penalties as 'shambolic', noting inconsistencies, incomplete submissions, and a conditional and confused approach to withdrawal (paragraphs 40 to 43). It found that the original ATED returns had all been filed within the applicable deadlines, so the penalty notices issued following the 2021 duplicate returns had been issued on an incorrect basis, and allowed the appeals against all eight late filing penalties (paragraphs 44 to 48).
On late payment penalties, the Tribunal accepted HMRC's post-hearing concession that three penalties relating to 2015/16 and 2016/17 had been cancelled in 2017, and allowed the appeals against those three penalties, directing HMRC to give credit for any sums already paid (paragraphs 50 to 56).
For the remaining three late payment penalties from 2014, the Tribunal found as a fact that the notices were more likely than not received by the Appellant in 2014 (paragraph 59). Applying the three-stage Martland test, it found the delay of several years was serious and significant, that the reasons given (illness and death of the director and adviser, and the director's inexperience) did not adequately explain the whole period of delay, and that although the Appellant's case was not 'exceptionally weak', the balance of prejudice and the need to respect statutory time limits meant permission should be refused (paragraphs 62 to 71).
On the ATED relief claims, the Tribunal found no evidence that a decision refusing relief, whether on grounds of being out of time or under 'case A', had ever actually been communicated to the Appellant. The letter of 28 September 2022 was found to be a complaint response, not a decision on the claim, and HMRC could point to no other document constituting a communicated decision (paragraphs 73 to 82). The Tribunal therefore held there could be no question of lateness because no appealable decision had been issued, and expressed a note of caution, without deciding, on whether a decision applying case A would in any event be appealable (paragraph 83).
Outcome
The Tribunal allowed the appeals against the eight late filing penalties. It allowed the appeals against the three late payment penalties relating to 2015/16 and 2016/17, which HMRC accepted had been cancelled. It refused the application for permission to bring a late appeal against the remaining three late payment penalties relating to 2014/15. It refused the application for permission to bring a late appeal regarding the refusal of relief from ATED, on the basis that no decision had been issued to the Appellant against which an appeal could be brought (paragraph 84).
Major issues / areas of contention
- Whether the Tribunal should grant permission for a very late appeal against ATED-related decisions to proceed.
- The correct scope of the appeal, spanning relief refusal, late payment penalties and late filing penalties.
- Whether eight late filing penalties issued following duplicate 2021 returns were validly issued given the original returns had been filed on time.
- Whether three late payment penalties, said by HMRC to have been cancelled in 2017, remained enforceable despite appearing on a 2018 debt statement.
- Application of the Martland three-stage test to the remaining three late payment penalties from 2014, including length of delay, reasons for delay, and balance of prejudice.
- Whether a decision refusing ATED overpayment relief, whether on timing grounds or under 'case A' in paragraph 30 of Schedule 33 FA 2013, had ever been communicated to the Appellant so as to found an appealable decision.
- The adequacy and clarity of HMRC's evidence and submissions, including the completeness of the hearing bundle and post-hearing clarifications.