Judgment summary
This is a decision on an application for permission to bring a late appeal to the First-tier Tribunal (Tax Chamber). Mr Scott Waterhouse sought to appeal a closure notice issued by HMRC disallowing deductions claimed in respect of payments made to his wife, described as 'commission to PA' (1).
The appeal deadline following HMRC's view of the matter letter of 17 March 2021 was 16 April 2021 (4, 6). The notice of appeal was not accepted by the Tribunal until 11 November 2024, a delay of 1306 days (7).
Applying the three-stage test from Martland [2018] UKUT 178 (TCC), the Tribunal found the delay to be serious and significant, found no good reason for the delay at any stage, and concluded that the balance of prejudice and the importance of respecting statutory time limits weighed against granting permission (5, 8, 32, 54-55). Permission was refused and the appeal was dismissed (55).
Background
HMRC opened enquiries into Mr Waterhouse's tax returns for 2013/14 and 2014/15 on 28 August 2015 and 16 January 2017, concerning deductions claimed from employment income (3(1)). Those enquiries closed in August 2016, allowing an expense for 'commission to PA' (3(2)).
A further enquiry was opened on 31 August 2018 into the 2016/17 return, and HMRC concluded the prior enquiries had erred and the amounts were not deductible (3(3)). A closure notice disallowing the deductions for 2016/17 and 2015/16 was issued on 19 January 2021, with a covering letter confirming no penalties would be charged as reasonable care had been taken (3(4)).
Mr Crompton, as agent, appealed the closure notice to HMRC on 18 February 2021 (3(5)). HMRC issued a view of the matter letter on 17 March 2021 upholding the decision, offering a review, and stating that an appeal to the Tribunal must be made within 30 days, with a copy of the letter to be included (3(6)).
Core dispute
Mr Waterhouse sought permission to bring a late appeal against HMRC's decision refusing the deductions, the appeal having been received by the Tribunal 1306 days after the 16 April 2021 deadline (6, 7).
Mr Waterhouse's case was that his agent, Mr Crompton, had attempted to appeal in April 2021 by writing to HMRC's Solicitors Office rather than to the Tribunal, believing this to be the correct procedure based on a process followed some twenty years earlier under the pre-2009 appeals regime (9, 15). Further delay was attributed to difficulty obtaining a copy of a 2016 review conclusion letter believed to be required for the appeal (11, 21, 24), and to reliance on Mr Crompton to handle matters (12, 33).
HMRC contended that the delay was serious, that there was no good reason for it, and that permission should not be granted having regard to the need for finality and respect for statutory time limits (50-52).
Court findings
The Tribunal found the delay of 1306 days to be serious and significant (7-8). Applying Martland, it assessed the reasons given for each period of delay and found none satisfactory (32).
It held that Mr Crompton's belief that writing to HMRC Solicitors Office constituted a valid method of appeal was not reasonable, given the Tribunal had existed for 12 years by that point and public information indicated otherwise (15-16). It found no explanation for a 25-month gap between April 2021 and May 2023, nor for a further three months before an online appeal form was attempted in August 2023 (18-19).
The Tribunal rejected the contention that the delay from August 2023 to July 2024 was caused by awaiting the 2016 review conclusion letter, finding no evidence that letter had been requested before July 2024 and concluding that belief in its necessity was not reasonably held (21-27, 32(3)-(4)).
On reliance on the adviser, the Tribunal applied Katib [2019] UKUT 189 (TCC), holding that failures by an appellant's adviser are generally treated as failures by the appellant, and that Mr Waterhouse's reliance on Mr Crompton did not displace that starting point, particularly as there was no evidence of chasing between April 2021 and August 2023 (40-44).
On prejudice, the Tribunal found no obvious strength in the substantive appeal, noting the original grounds amounted to a legitimate expectation argument outside its jurisdiction, and that proposed amended grounds regarding the 'wholly, exclusively and necessarily' test were not obviously strong (47-49). The Tribunal rejected the submission that finality could simply be compensated for by interest, citing Medpro [2026] EWCA Civ 14 on the importance of respecting statutory time limits (50-51). It found that granting permission would prejudice HMRC and other taxpayers and Tribunal users through diversion of resources (52).
Outcome
The Tribunal concluded that the serious delay and the lack of good reasons for it outweighed any prejudice to Mr Waterhouse (54). Permission to appeal out of time was refused and the appeal was dismissed (55).
Major issues / areas of contention
- Whether the delay of 1306 days in bringing the appeal was excusable under the Martland test
- Whether reliance on a tax adviser, Mr Crompton, provided a good reason for the delay
- Whether the appellant's belief that a 2016 review conclusion letter was required before appealing was reasonable
- Whether the balance of prejudice favoured granting or refusing permission to appeal late
- Whether the merits of the substantive appeal, including a legitimate expectation argument and a proposed amendment on the 'wholly, exclusively and necessarily' test, supported granting permission