EXCLUSIVE PROMOTIONS LIMITED v Revenue & Customs (INCOME TAX AND NATIONAL INSURANCE - APNs - penalties and surcharges [2022] UKFTT 103 (TC)

“The High Court— (a) must refuse to grant relief on an application for judicial review, and (b) may not make an award under subsection (4) on such an application, if it appears to the court to be highly likely that the outcome for the applicant would not have been substantially different if the conduct complained of had not occurred.”

“Further or alternatively, the ‘payment period’ as defined in s.223(5) FA 2014 had not yet expired at the various dates by reference to which the Penalties have been imposed under s.226, due to HMRC’s failure properly and lawfully to make the determinations required by s.222(4) FA 2014 in response to the Appellant’s representations under s.222.” 133. On 29 April 2020, the Court of Appeal decided Beadle v HMRC [2020] EWCA Civ 562 (“ Beadle ”). The issues in Beadle were: (1) whether the Tribunal had the jurisdiction, when deciding an appeal against a penalty for failure to comply with a APN, to consider whether the APN itself was legally valid; and (2) whether Mr Beadle’s belief in the invalidity of the APN was a reasonable excuse. 134. The Court of Appeal decided both those points in favour of HMRC, holding that the Tribunal did not have the relevant jurisdiction, see [43]-[55], and that belief in the invalidity of the APN was not a reasonable excuse, see [56]-[62]. On 21 December 2020, the Supreme Court refused permission to appeal that judgment. 135. On 3 February 2021, HMRC invited the Tribunal to write to RPC to confirm whether the Appellants were withdrawing their appeals as a result of Beadle . RPC responded objecting to HMRC “using the Tribunal as proxy in this manner”. 136. On 11 February 2021, a letter was issued by the Tribunal in accordance with instructions given by Judge Poole, which included this passage: “…the Appellants’ representatives are requested to confirm that the lead Appellants intend to continue with their appeals notwithstanding the final decision in Beadle (as appears, implicitly from the correspondence, to be the case).” 137. On 15 February 2021, RPC replied as follows: “,…the Appellants confirm that they have no intention of withdrawing their appeals in light of the Court of Appeal's decision in Beadle . To the extent it is necessary to do so, the Appellants submit that the Respondents' reliance on Beadle and consequent categorisation of the Appellants' case is misplaced and/or misguided. The Appellants do not seek to challenge the validity of the APNs issued to them in the context of these statutory 'reasonable excuse' appeals (as was the case in Beadle ). The Appellants' case is confined to establishing that they had a reasonable excuse for non-payment of their APNs at the relevant payment due dates, because they had received professional advice that the APNs issued to them were unlawful and accordingly challenged the decision to issue the APNs through judicial review proceedings in the High Court.” 138. RPC then referred to Shieling Properties v HMRC [2020] UKUT 175 (TCC) (“ Sheiling ”), in which the UT had distinguished Mr Sheiling’s position from that of Mr Beadle, and then said “for the reason given above, the Appellants' case is not affected by the Court of Appeal's decision in Beadle ”. 139. In the same letter of 11 February 2021, Judge Poole had directed that the parties seek to agree a Statement of Facts and Issues (“SOAFI”), with the Appellants to prepare the first draft. On 20 March 2021, RPC served that draft SOAFI. Under “Issues”, the SOAFI includes the following as point (3): “Whether, in any case and in particular in Mr Fox’s case, the taxpayer made statutory representations under FA 2014, s.222 and HMRC have failed to provide the required statutory response (including, without limitation, any case where the purported response is ultra vires ), this means that no penalties are due on the basis that the ‘payment period’ in s.223(5) has not yet expired.” 140. On 12 April 2021, Mr Hall responded, saying that “ the issues as presented by RPC in their draft are not necessarily those which are ultimately relevant”, and setting out HMRC’s “legal analysis” in seven numbered points, of which point 1 was: “What is the period of default to which the penalty/surcharge relates? This will include consideration of what representations were made, and whether they were valid as representations.” 141. Later in the same letter, Mr Hall said that “it is also noted that some of the points in the RPC list of issues are indeed part of the analysis above: for example at RPC#3-4 are part of point 1 above”. 142. On 19 May 2021, Mr Hall applied for further time to respond to the draft SOAFI; his application included this passage “The Respondents concur with the issues put forward by the Appellant, but hold that before those issues are able to be considered, further issues are at point [sic].” 143. Judge Poole had previously issued case management directions on 22 January 2021 which required HMRC to file and serve their skeleton arguments 21 days before the hearing, with the Appellant responding 14 days before the hearing. 144. In compliance with those directions, on 15 September 2021 HMRC filed and served their skeleton, drafted by Mr Hall and Mr Cowley. On 22 September 2021, the Appellants filed and served their skeleton, drafted by Mr McDonnell and Mr Brodsky. That skeleton was structured under three headings, namely Reasonable Excuse 1, Reasonable Excuse 2, and “Alternative ground: no expiry of the payment period”; this third section begins by saying: “Further or alternatively, the Appellants appeal on the basis that the statutory payment period for the APNs in each case has not expired. Accordingly, payment is not in fact late and no penalties/surcharges are payable pursuant to the relevant statutory provisions.” 145. The skeleton goes on to expand that ground in the context of the facts of Exclusive and Mr Fox. Although the Mrs Archer case was referred to elsewhere in the Appellant’s skeleton, it was not cited in the context of this ground of appeal. 146. On 28 September 2021, RPC filed and served the authorities bundle. Instead of Mrs Archer the bundle included Archer v HMRC [2020] UKFTT 288 (TC) , a judgment about surcharges issued to Mrs Archer’s husband, William Archer. The inclusion of that case in the bundle was a mistake, and RPC emailed the correct judgment to HMRC and the Tribunal on the evening of the first day of the hearing, 6 October 2021. 147. When proceedings resumed on 7 October 2021, Mr Hall said that having considered Mrs Archer , HMRC were withdrawing the surcharges issued to Mr Fox. There was then an adjournment for Mr Hall to take instructions as to “the precise words” to explain HMRC’s position: the full text of that statement is set out at §287. So far as relevant to this procedural challenge, it included the following passage, where “we” is HMRC: “we accept that the broad challenges of the judicial review to matters such as condition C (DOTAS notifiability point) would need to be considered in order to confirm his APNs correctly. This broader approach in considering representations under section 222 FA14 comes from Archer [2019] EWCA Civ 1021 in the context of a costs claim.” 148. Mr Hall then clarified that there was no change to their arguments on Exclusive’s case. At the end of that second hearing day, Mr McDonnell made detailed submissions as to how Mrs Archer applied in the context of Exclusive’s appeal. 149. Mr McDonnell continued on the third day, but Mr Hall intervened to object on the basis that Mr McDonnell was making submissions different from “the grounds of appeal as presented to us on 4 February 2021”

“The Appellants' case is confined to establishing that they had a reasonable excuse for non-payment of their APNs at the relevant payment due dates…” 152. Mr Hall submitted that the Tribunal should therefore not admit Mr McDonnell’s submissions on Issue One, as the Tribunal was restricted to considering points within the Appellants’ grounds of appeal, and it was clear from the passage above that the Appellants were only relying on reasonable excuse arguments, and not on the time limit point which formed the basis of Issue One. Mr McDonnell’s submissions 153. Mr McDonnell responded by saying that this was plainly wrong. Issue One had been within the Appellants’ original grounds of appeal as an alternative argument to “reasonable excuse”

“There is a venerable principle of tax law to the general effect that there is a public interest in taxpayers paying the correct amount of tax, and it is one of the duties of the commissioners in exercise of their statutory functions to have regard to that public interest…For present purposes, however, it is enough to say that the principle still has at least some residual vitality in the context of s 50, and if the commissioners are to fulfil their statutory duty under that section they must in my judgment be free in principle to entertain legal arguments which played no part in reaching the conclusions set out in the closure notice. Subject always to the requirements of fairness and proper case management, such fresh arguments may be advanced by either side, or may be introduced by the commissioners on their own initiative.” 159. Although the subject matter of Tower was closure notices in the context of the Tribunal’s jurisdiction to decide appeals under TMA s 50, the principle that a party may introduce new legal arguments subject to the requirements of proper case management is not confined to that situation. For example, in Ritchie v HMRC [2019] UKUT 71 (TCC) at [36] the UT (Nugee J and Judge Hellier) first considered the citation above from Tower together with the Tribunal Rules, and then said: “These sources make clear that in determining what arguments the tribunal may permit to affect its decision the guiding principle must be fairness in the circumstances of the case. Fairness does not require formality, and Rule 2(2)(b) expressly requires formality to be avoided. Fairness does not require, for example, that to advance an argument not present in its statement of case or the notice of appeal a party must always formally apply to amend its earlier pleading. On the other hand it does require that the other party is given adequate opportunity in the circumstances to meet the point, whether by argument or with evidence. 38. If a new argument is a pure point of law it might be addressed, as the case may be, after: a few minutes' thought; an evening's consideration; or one or more days' research. Provided that the other party has an appropriate opportunity to meet the point, it would generally not be unfair for the tribunal to take that argument into account. 39. …. 40. On the other hand, there will be circumstances where it is simply too late for a point to be raised. Where it is not reasonably possible in the circumstances of the case - having regard in particular to the resources of the parties and the need to avoid delay - for the other party to have a fair opportunity to rebut a new point, that is likely to mean that it would be unfair for a new point to be taken.” 160. Mr Hall did not submit it was “simply too late” for Mrs Archer to be relied on in the context of this Issue. Instead, after “an evening's consideration” of that judgment, HMRC decided to withdraw Mr Fox’s surcharges. It was not until the following day that Mr Hall raised any objection to this Issue, and then for reasons which focused on the scope of the grounds of appeal rather than on the late provision of Mrs Archer . 161. Despite HMRC’s failure to raise the point, we nevertheless considered whether it was fair as a matter of case management to allow the Appellants to rely on Mrs Archer , despite both the case itself, and the related submissions, having been provided late. We decided that there was no procedural unfairness. HMRC had not only considered the case overnight and taken action in response, but there had also been a five week gap between the first three days of the hearing and the final day. During that time, HMRC had considered Mrs Archer in detail, and Mr Hall provided detailed submissions. It was therefore clear that HMRC had had time to consider the case, and also “a fair opportunity to rebut” the arguments put by Mr McDonnell in relation to Mrs Archer. Whether the time limit had started to run 162. We move on to considering the parties’ submissions as to whether, as Mr McDonnell submitted, no penalties were due because HMRC’s Response was not a “determination”

“HMRC considers itself always under an obligation to consider formal submissions from a taxpayer about the liability to tax. HMRC is subject to a number of internal and external standards of conduct. HMRC has to act with integrity, fairly, objectively, promptly, and to rectify mistakes. HMRC operates an internal complaints-handling process and is subject to supervision by several external bodies. HMRC accepts its duty to fulfil its statutory functions to a high standard. This duty exists regardless of whether on a particular occasion a person may have an actionable claim for judicial review. HMRC cannot simply ignore correspondence. The answer to the Court's question is therefore Yes, HMRC would be under a duty at least to give consideration to the formal submission mentioned.”

“the designated officer issuing the notices is required to determine the amount which is correctly payable ‘to the best of that officer’s information and belief’ and in the circumstances the officer cannot have reached such a determination in these cases.” (3) Mr and Mrs Archer subsequently filed representations challenging the APNs on the basis that the Conditions were not met, and the “amount” charged by the APNs was incorrect. They stated that the representations were made “on the same basis as the application for the judicial review”. (4) HMRC subsequently withdrew Mrs Archer’s APN. Mr Archer was given permission to bring his JR claim, but he later paid the tax in dispute and the claim was withdrawn. (5) Mrs Archer applied for the costs of both JR claims to be paid, but HMRC refused, essentially on the ground that Mr and Mrs Archer had acted prematurely, and should instead have made representations under FA 2014, s 222, and waited for responses to those representations before deciding whether to commence a JR. (6) Mrs Archer’s application for costs was refused on the papers by Master Gidden, and Mrs Archer appealed to the High Court. 166. Her appeal came before Green J. Mr McDonnell represented Mrs Archer and Mr David Yates represented HMRC. Under the heading “the scope of representations”, Green J said at [49] that “it is also relevant to place the statutory right of representation into the more general context of how HMRC perceives its common law duty to respond to submissions and representations made to it”

“[50] I would observe that in any event under section 222 the taxpayer can submit “ representations to HMRC … objecting to the amount specified in the notice”

“Bearing in mind the well-established principles…that judicial review is a remedy of last resort, to which recourse should normally be had only where there is no available alternative remedy, Parliament is likely to have intended that a taxpayer who wished to challenge an APN should (where possible) first exercise his right to make representations under section 222…the practical importance of the section 222 procedure should encourage the court to adopt a broad and non-technical approach to the permitted grounds of objection, with the object of ensuring as far as reasonably possible that all objections relating to the applicability of Conditions A, B or C, or to the amount of the understated tax, should be capable of resolution under the section.” 168. At [61]-[62] he summarised Green J’s judgment on the scope of representations, and set out paragraph [51] in full. He identified at [86] the “central issue raised by the appeal” as being: “Does the section 222 machinery provide a suitable alternative remedy, which the taxpayer should normally be expected to pursue before beginning judicial review proceedings to challenge an APN.” 169. He continued at [87] by saying that, having heard the parties’ submissions, he saw no reason to depart from the provisional views he had expressed at [17], and then said: “The APN legislation must be construed and applied as a whole, in the light of its general purpose and underlying principles of tax law and procedure. So viewed, section 222 forms an integral part of the primary legislative scheme contained in sections 219 to 229 (Chapter 3 of Part 4) of FA 2014. The right thus conferred on the taxpayer to send written representations to HMRC is unqualified, so long as the representations fall within the scope of the section,…” 170. He developed that point as follows: [89] …it seems clear to me that Parliament must have intended taxpayers to take advantage of the machinery in section 222 in all cases where it was available, before having resort to judicial review proceedings. The principle that judicial review is a last resort is of long standing, and has been reiterated in judicial pronouncements at the highest level. Having decided not to provide a statutory right of appeal, Parliament must have appreciated that the lawfulness of an APN could only be tested in the courts by means of judicial review (or perhaps as a public law defence to penalty or other enforcement proceedings arising from the APN). Parliament must also have realised that very many taxpayers in receipt of APNs would be likely to wish to challenge them, given their novel and unusual features, and the change in the economic benefits of tax avoidance which they were designed to bring about. Against that background, the representations machinery in section 222 fulfils an obvious purpose, by providing a relatively cheap and simple way for a taxpayer to challenge an APN, without incurring the cost of court proceedings or adding to the already very heavy burdens on the resources and expertise of the Administrative Court. [90] Indeed, it seems to me all but self-evident that section 222, read in its context, was intended by Parliament to provide the primary recourse for a taxpayer dissatisfied with an APN, which should normally be exhausted before judicial review proceedings are set in motion.” 171. He continued by saying: “[94] …The duties imposed on HMRC by s 222 are heavy ones, particularly in the absence of any statutory appeal to the FTT, and it would be quite wrong for us to assume that HMRC would be likely to treat the exercise as a formality. Clearly, it is their duty to give serious and careful consideration to the representations which are made, supplemented if necessary by HMRC's acknowledged duty to deal in good faith with proper representations made to them by taxpayers, whether or not falling strictly within the scope of the APN. [95] As to the proper scope of objections which may be raised under s 222, I have already made it clear that the section should in my view be given a broad and non-technical construction, with the aim of enabling all objections to the application of the three conditions, or to the amount of the accelerated payment, to be covered if at all possible by the representations. Thus, for example, I see no reason why representations made on behalf of Mr and Mrs Archer could not refer to their joint involvement in the tax avoidance scheme, or the alleged reasons why it was unfair for HMRC to seek to recover an accelerated payment of approximately £6m from both of them. I accept that there will be some high level public law challenges to the APN regime which, even on the most benevolent construction, fall outside the scope of s 222, including for example most of the challenges on human rights grounds which this court considered in Rowe . Now that the general lawfulness of the APN regime has been established, however, I would expect such challenges to be relatively rare; and I am certainly unconvinced that any of the grounds relied on by the Archers were of such a nature as to render them incapable of resolution under the s 222 procedure. [96] For these reasons, it will be seen that I am in broad agreement with the conclusion reached by both courts below that section 222 does in general provide an alternative means of redress for the taxpayer in receipt of an APN which should normally be exhausted before the commencement of judicial review proceedings.”

“the court is entitled to investigate…with a view to seeing whether [the public body] has taken into account matters which it ought not to take into account, or, conversely, has refused to take into account or neglected to take into account matters which it ought to take into account.” 183. Thus, the next step would be for there to be a judicial investigation as to whether HMRC’s determination was vitiated by unreasonableness. If that were found to be the position, the APN would be set aside and there would thus be no penalty. However, that investigation can only be carried out by a court or tribunal which has a judicial review jurisdiction, or a supervisory jurisdiction of a similar nature. 184. In Birkett v HMRC [2017] UKUT 89 (TCC) at [30] the UT considered whether this Tribunal has a judicial review jurisdiction. The UT set out five points, of which the first two were that the Tribunal is a creature of statute and has no inherent JR jurisdiction; the passage then continued: “(3) But this does not mean that the FTT never has any jurisdiction to consider public law questions. A court or tribunal that has no judicial review jurisdiction may nevertheless have to decide questions of public law in the course of exercising the jurisdiction which it does have… (4) In each case therefore when assessing whether a particular public law point is one that the FTT can consider, it is necessary to consider the specific jurisdiction that the FTT is exercising, and whether the particular point that is sought to be raised is one that falls to the FTT to consider in either exercising that jurisdiction, or deciding whether it has jurisdiction. (5) Since the FTT's jurisdiction is statutory, this is ultimately a question of statutory construction.” 185. We must therefore consider the relevant statutory provisions in order to decide whether this Tribunal has the JR jurisdiction necessary to decide whether or not HMRC’s determination should be set aside for unreasonableness. However, we are not approaching that question in a vacuum. A number of earlier judgments have already considered whether the Tribunal’s statutory jurisdiction when deciding an appeal against an APN penalty includes the right to challenge the basis for imposing the APN. 186. The Court of Appeal judgement in Beadle, to which we made reference earlier in our decision, is particularly relevant. In summary, Mr Beadle been issued with a PPN, to which he had responded by making representations challenging its validity, one of which was that the amount of “understated tax” specified in the PPN was not due as a matter of law. HMRC rejected the representations; Mr Beadle failed to pay the PPN and was issued with penalties. One of his grounds of appeal was that HMRC had been wrong to reject his representation as to the amount payable under the PPN: in his submission it should have been zero, and the penalty should also have been zero. 187. At the Court of Appeal Simler LJ gave the only judgment with which Moylan LJ and Sir Ernest Ryder both agreed. She endorsed the following passage from the UT’s judgment below, see [33] and [43] of her decision: “Parliament has provided rights of appeal against the underlying tax assessment and against a penalty notice, but not against a PPN. In the case of a PPN, Parliament has only provided a right to make representations (within a specified time limit) which HMRC are required to consider. In our view, the absence of a right of appeal against PPNs is a clear indication that Parliament does not intend taxpayers to be able to challenge PPNs on appeal to the FTT. If taxpayers cannot do so directly, then it would be very odd to permit them to do so indirectly by way of an appeal against a penalty. The second reason, which reinforces the first, is that permitting such a challenge would be contrary to the design and purpose of the PPN regime.” 188. At [48] she said: “…it is a clear and necessary implication of the FA 2014 scheme for PPN (and APN) notices, construed as a whole and in light of its statutory purpose, that the ability to raise a collateral public law challenge to the validity of the underlying PPN is excluded at the penalty and enforcement stages.” 189. She concluded at [55] that “the FTT has no jurisdiction to entertain a public law challenge to the validity of a PPN given pursuant to the FA 2014, in the course of an appeal against a penalty notice”, 190. Thus, in summary (1) Mr Beadle made representations to HMRC as to the “amount” of tax; those representations were considered and rejected by HMRC; (2) Mr Beadle subsequently submitted that there could be no penalty, because HMRC had been wrong on the “amount”, and so the PPN was invalid; and (3) the Court of Appeal found that the Tribunal had no jurisdiction to decide on the validity of a PPN as part of a taxpayer’s appeal against the penalty; instead, those challenges must be decided by the UT or the courts as part of their normal JR jurisdiction. 191. Exclusive’s letter of representation set out a number of points which relate to the “amount”, when that term is given a “broad and non-technical” construction”

“…the t ask fac i ng the F TT w hen c onsider i ng a reaso nable e x cuse d e fe nce is to determ ine whether f ac t s e xist whi c h , when j ud ged objec tiv ely , a mount t o a r ea son a b le exc use for the d ef a ult a nd ac cord ingly give rise to a valid defence. The burden of establishi ng the e xis tence o f those facts , on a balance o f prob abil it ies, lies on the t a xp ayer .” 196. The UT then said: “[71] In dec idi ng wh e ther the excuse put f orward i s , viewed o b je c ti v e ly , suf fic ie n t to a m ount toa reason able e xc u se, the t ribu nal s hou l d bear in mind a ll releva nt c i rcu mstanc es; because the i s su e is whe ther the particular t a xp ayer has a reasona ble excuse , the e xp erie nc e , k no wledge a nd other att r ib utes of th e pa rt icular tax payer should be taken into a cc oun t , a s well a s the situati on i n wh ich th a t taxpay er was at t he releva nt time or times ( i n acc orda nce with the d ec i s ions i n The Cle an Car Co an d C oa les . [72] Wh ere the facts u pon w hi c h the t a xp ayer rel ies inc lude asse rtions a s t o s ome ind i vi du a l ’s state o f mi n d (e . g . “ I t h ou g ht I had fil ed the required ret ur n ” , or “ I did notbelieve i t was n ece ssa ry to f i le a r e turn in these circ um stances ” ), the que stion o f wh e th e r that state of mind a c tu a l ly e xi sted must b e decided by the F T T j ust a s much a s a ny other f ac ts relied o n . In d oi n g s o , the F TT, as the pr im a ry fact- f i nd i ng t ribun a l , is enti tl e d to m ake an assessme nt of the c redi bility of th e releva nt witne ss u s ing all the us u al tools available to it , and one o f those t oo l s is t he i nh e re n t probabi l i ty (or oth erwise ) that the bel ief which is bei ng asserted was in fact h e ld; as Lord Hof fmansa id i n In r e B (Child ren) [ 2008] U K HL 35, [ 200 9 ] 1 A C 1 1 at [ 1 5 ] : “There is only o ne r ule of law, namely t hat t he o c curre n ce of t he fa c t ini ss ue must be p r ov ed to h a ve been more pr o ba b le t h an not. Com mon sen se, not la w , requires t hat i n decid ing th i s question , r e gard should behad , to w ha t e ver exte n t app ro p r iate, t o inher e nt prob ab i litie s. ” [73] On c e i t has made itsfi ndin g s of a ll the re leva nt facts , th e n the FTT must as s e ss wh e th e r t hose f ac ts (inc l ud ing , w he r e re leva nt, the state o f m ind o f a ny re leva nt witn ess ) are s uf ficie nt t o a mount to a r eason a b le exc use, j ud ged o b je c ti vely . [74] Wh ere ata xp ayer’s beli ef is in issue , i t is often put f orw a rd a s e ith e r the sole ormain fact which is b e in g rel ied o n – e . g . ‘ I did not t hink it w as necessa ry to file a re t urn ” , or “ I g e nuinely a nd hon estly be lieved th a t I had sub m itt e d a return’. In su c h cases , the FTT may a ccept th a t the t axp ayer di d ind ee d g e nu in ely a nd ho nest ly hold thebelief that h e /she as serts; how ever that fa c t on i ts own i s not e nou g h. The F T T mu s t sti l l r e ach a d ec i s ion a s t o whether that b e li e f, in all t he circumstances , was e nou g h to a m ount toa r ea s o nab l e ex cu s e .” 197. At [81] the UT set out a recommended process for this Tribunal when considering whether a person has a reasonable excuse: (1) First , e st ablish what fa cts the t axp ayer asserts give rise to a reasonable excuse (th i s may include th e belief, ac t s or o mi s s ions of t he taxpayer or anyother pers on, the t ax payer ’ s own e xp erience or releva nt at tri bu tes , the sit uat ion of the taxpayer a t a ny releva nt time a nd a ny oth er releva nt e xt ernal fac ts ) . (2) Sec on d , de cide whi c h o f those fac ts a re pro ven. (3) Th i rd, decide whe th e r , vi ew ed obj ec tive ly, t h ose pr ov e n facts do i ndeed a mount t o a n objectively reason ab l e exc use f or the default a nd the t i me when that o b je c ti vely r e as on able e xc u se ce ase d . In do i ng s o , the Tribunal shou l d t a ke into a cc o u nt the e xper i e nce a nd ot her relev an t at t r ib ut e s o f the taxpayer a nd t he si tuation in which the t axp ayer f ound him self at the re l e vant t i me or t imes. It mig ht a s sist the Tribunal, in this c on text , to as k itself t he que stion “ was what the t a xpa yer did (or omitted to do or believed) o bj ec t iv e ly reas on a b le f or t his t a xpa yer in t hose c i rc u m st ances ? ” (4) F our t h, havi ng d ec ided when a ny reas onable excuse ceased , dec i de whether t he taxpayer remedied t he failure without unr e a son ab l e delay after that t i me. In doi ng s o, the Tribunal should aga in deci de the matter obj ec tively , but taki ng into acc ount t he e xper ience a nd oth e r re leva nt attri but e s o f the taxpayer a nd the si tu a tion i n w h ich the t a xp ayer f ound h im se l f a t the releva nt time or times . 198. The fourth stage of Perrin is relevant to APN penalties, because FA 2009, Sch 56, para 16(2)(b) provides: “where P had a reasonable excuse for the failure but the excuse has ceased, P is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.” 199. Before considering the steps set out in Perrin, we first set out the parties’ submissions on the related law, in particular that in Beadle and Sheiling. Beadle and Sheiling 200. Exclusive’s case was that Mr Jones had an objectively reasonable belief that the JR would succeed because of HMRC’s failure to consider the Designated Officer points in the representations. 201. Mr Hall submitted that it was clear from Beadle that a person’s belief in the merits of his legal challenge to an APN did not provide a reasonable excuse. Mr Beadle had appealed against two FTT judgments, one concerning jurisdiction and one concerning reasonable excuse; we considered the Court of Appeal’s judgment on the first of those issues earlier in this decision, see §186ff. In relation to the second, the Court of Appeal at [59] upheld Judge Rupert Jones’s analysis in Beadle v HMRC [2017] UKFTT 829 (TC) : “202. …Even if the appellant had a reasonable belief, subjectively, objectively or both, and based upon professional advice, that he was not liable to pay the understated partner tax liability, this could not form a reasonable excuse for the failure to pay the PPN within the payment period. 203. Applying the test in the Clean Car Company , a reasonable taxpayer in the appellant’s position would make payment of the sum under the PPN within the payment period and make whatever challenges (whether statutory or extra statutory) to the underlying liability he or she chose to do in the mean-time. This would be the case, whatever his or her reasonable belief as to the merits of his substantive challenge. If such a challenge were successful then the appellant would receive a refund or repayment but this cannot reasonably excuse [not] making a payment [of] the sum due under the PPN that Parliament has required should be made in the interim. … 209. The appellant’s reasoning, if accepted, would permit any taxpayer to circumvent the evident intention of Parliament as to who should hold the tax pending the final determination of the tax liability by allowing taxpayers to institute multiple proceedings in different fora. It would also result in the Tribunal entertaining collateral challenges to the underlying tax liability in penalty proceedings which cannot have been the Parliamentary intention. The statute requires that the taxpayer [pay the tax] in the interim while the underlying liability, if challenged, can be resolved. If the taxpayer is successful in their challenge to the liability they will receive the appropriate rebate from HMRC.” 202. The Court of Appeal concluded at [57] that: “…the FTT was correct to hold that the invalidity or alleged invalidity of PPNs are not matters that could properly be considered in the context of a reasonable excuse defence to penalties for non-compliance.” 203. Mr Hall invited the Tribunal to conclude that Issue Two should therefore be decided in HMRC’s favour. Mr McDonnell responded by relying on Sheiling, in which the UT had distinguished “procedural” invalidity from “substantive invalidity”, saying at [69]: “It must be noted at the outset that (real or perceived) 'invalidity' can arise in two situations. The first is where the taxpayer believes that the tax payment accelerated by the notice is not owed by him, either because he does not owe it at all or because it has been wrongly calculated. We call that 'substantive invalidity'. The second is where the taxpayer believes that, regardless of whether he owes the tax, the APN has not been issued in compliance with one or more of the statutory conditions imposed by FA 2014. We call that 'procedural invalidity'.” 204. The UT then held at [78] that: “…it would be unduly restrictive to determine that a belief as to procedural invalidity could never be a reasonable excuse in respect of a penalty for non-payment of the APN. In our opinion, there is a difference between substantive invalidity and procedural invalidity, because in relation to procedural invalidity the policy considerations considered in Beadle and in other cases cannot simply be assumed to apply in undiluted form. Where the taxpayer's belief is essentially that what purports to be on its face an APN is not an APN at all, because it does not satisfy the statutory conditions, the policy considerations driving the APN code are necessarily less persuasive in determining the objective reasonableness of that belief.” 205. The UT went on to give the following guidance at [81]: “…in assessing the objective reasonableness of a belief which a taxpayer had been found to hold that the APN issued to him is procedurally invalid, the FTT's assessment should take into account the following points: (1) In line with Perrin , it should consider all the surrounding facts and circumstances, including the foundation for the taxpayer's belief, any advice on which he has relied, and whether that advice is specific to his APN. (2) It should identify precisely what the taxpayer does believe; is it that the APN is obviously procedurally invalid, or merely that it is arguable (however strongly) that it is? (3) It should take into account the reason for the alleged procedural invalidity. We observe that in Chapman , to which the FTT referred in this case in forming its view, the FTT referred at [72] to 'an obvious or gross error' in the notice, such as where the decimal point had slipped in the statement of the amount to be paid. One can postulate other similar errors. One would hope that in practice such errors would be corrected through the process of representations. In any event, the assessment of objective reasonableness in such a situation will be much more straightforward than one where the determination of validity turns on detailed legal arguments and the outcome of a judicial review. (4) In view of the concerns we have set out above, it would not be desirable or appropriate for the FTT to conduct a 'mini-trial' of the arguments which a taxpayer asserts mean that his judicial review into procedural invalidity will or is likely to be successful. (5) It must be borne in mind that substantive invalidity cannot form the basis for a reasonable excuse. While the dividing line between substantive and procedural invalidity is clear in principle, there may be instances where the taxpayer's excuse is really the former dressed up as the latter.” 206. The UT added at [84] that: “if the alleged ground of procedural invalidity requires detailed submissions by the parties on competing legal arguments, it is by definition not a gross or obvious error, and, as such, is considerably less likely to be objectively reasonable in this context.” 207. Mr McDonnell drew attention to the UT’s definition of a “procedural error” at [69], namely one where an APN has not been issued in compliance with one or more of the statutory conditions imposed by FA 2014. He submitted that HMRC’s failure to consider the Designated Officer representations was a “procedural error” and so could provide the basis for a reasonable excuse defence. 208. Mr Hall expressed some unease about the Sheiling distinction between a procedural and a substantive error, saying that in Beadle the Court of Appeal had made no such distinction. However, he accepted that when Sheiling was itself appealed, HMRC did not file a respondent’s notice, so the dicta in Sheiling have not been considered by a higher court. On the basis that Sheiling was right to distinguish between the procedural and a substantive errors, he said: (1) at [81(3)] the UT had referred to “an obvious or gross error” in the APN, such as where the amount to be paid was plainly incorrect because the decimal point was in the wrong place. In his submission, the Designated Officer points were not “obvious or gross” errors; and (2) at [84] the UT had contrasted “obvious or gross” procedural errors with those where the determination of the APN’s validity “turns on detailed legal arguments and the outcome of a judicial review”, and the Designated Officer points fell into the latter category. The Tribunal’s view 209. Before deciding whether or not Exclusive (acting through Mr Jones) believed that the JR would succeed because of HMRC’s failure to consider the Designated Officer points in the representations, we first considered the case law. We note as follows: (1) there is no suggestion in Beadle that belief in a procedural error could provide the basis for a reasonable excuse when appealing a penalty; (2) in Sheiling there is a contrast between: (a) the wide definition of procedural error at [69] as being one which occurs where the APN has not been issued in compliance with one or more of the statutory conditions imposed by FA 2014; and (b) the UT’s later statements that it is more likely to be objectively reasonable for a person to rely on a procedural error if it is “obvious or gross” and does not turn “on detailed legal arguments”; (3) the parts of the judgment in Sheiling on which Mr McDonnell relied were obiter , because the UT went on to confirm the judgment below that: (a) the taxpayer’s belief at the relevant time “was not that the APNs were without doubt invalid, as he would likely have believed in the case of an obvious or gross error…Rather, it was that there was a ‘good prospect’ that the judicial review proceedings would show the APNs to have been issued unlawfully, although he was not certain that they were unlawful…In relation to such a belief, in principle it is reasonable to conclude that a reasonable and responsible taxpayer would be likely to pay the APNs and argue his case in the judicial review”; and (b) the predominant reason for his non-payment of the APN was the financial consequences, not his belief. 210. We accept that Sheiling provides support for the view that a gross or obvious procedural error in an APN can provide the basis for a reasonable excuse defence. However, we agree with Mr Hall that a genuine belief in the success of a JR based on the failure by the Designated Officer to form a view on the effectiveness of the scheme is not “gross or obvious” error, but instead one which requires “detailed legal submissions”: this is evident from the Rowe litigation as well as from the length and complexity of the relevant parts of this Decision. 211. It therefore follows that a person’s belief that a JR would succeed because of the failure by the Designated Officer to form a view on the effectiveness of the scheme cannot form an objectively reasonable excuse for the purposes of an appeal against an APN penalty. That is sufficient to decide Issue Two in HMRC’s favour, but in case we are wrong in our analysis we have also considered Perrin. Perrin and Mr Jones’s belief 212. The first and second steps in Perrin, further informed by the guidance in Sheiling at [81], require us to establish “precisely what”

“In essence it is an approach of a modified 'balance of convenience'. It is modified to take into account the wider public interest that arises in public law cases. What is required is, firstly, an arguable case for the grant of judicial review and, secondly, the avoidance of the greater risk of injustice. The court will consider the overall case, taking into account the strength of the claim, the importance of maintaining the status quo, the wider public interest and, if relevant, which will be rare in public law cases, the prospect of any monetary order providing an adequate ultimate remedy. Where a public authority is involved 'the balance of convenience has to be looked at more widely and take into account the interests of the public in general to whom these duties are owed [ Smith v ILEA [1978] 1 All ER 411].” 220. The public interest where a public authority is involved was explained by Lord Goff in R v Secretary of State for Transport, ex parte Factortame Ltd. (No. 2) [1991] 1 AC 603 (“ Factortame ”) at page 673 as follows: “It is necessary in cases in which a party is a public authority performing duties to the public that one must look at the balance of convenience more widely and take into account the interests of the public in general to whom these duties are owed. In this context particular stress should be placed upon the importance of upholding the law of the land in the public interest, bearing in mind the need for stability in our society and the duty placed upon certain authorities to enforce the law in the public interest. This is of itself an important factor to be weighed in the balance when assessing the balance of convenience. So if a public authority seeks to enforce what is on its face the law of the land and a person against whom action is taken challenges the validity of that law, matters of considerable weight are to be put into the balance to outweigh the desirability of enforcing in the public interest what is on its face the law and so to justify the refusal of interim injunction in favour of the authority or to render it just or convenient to restrain the authority for the time being for enforcing the law." Rowe Interim Relief 221. As noted earlier in this decision, the appellants in the Rowe JR applied for interim relief. This was originally granted on the papers by Haydn J on an ex parte basis, ie without HMRC having been given notice of the application. Haydn J’s order was that: "The Defendants [HMRC] will refrain from enforcing the partner payment notices in this case until the Claimants' applications have been determined by the court." 222. There was then a dispute between HMRC and the claimants as to what Haydn J’s order meant, and a hearing took place before Simler J on 26 March 2015, see R(oao Rowe) v HMRC [2015] EWHC 1511 (Admin) (“ Rowe Interim Relief ”). Mr Southern QC, on behalf of the claimants, asked Simler J to confirm that, until the determination of the JR: (1) HMRC would consider representations, but would not determine the PPNs; and (2) HMRC were inhibited from issuing penalty notices if a JR claimant failed to comply with a PPN. 223. Having considered Factortame and the parties’ submissions, Simler J disagreed with Mr Southern, saying at [35] that “what Mr Southern seeks to do is to obtain a positive advantage rather than simply preserving the status quo and holding the ring”, and continuing: “[36] In my judgment, for the reasons I shall come to in a moment, the balance of injustice here strongly favours allowing the statutory scheme to operate up to the point of enforcement of payment. It is in the public interest that until set aside, HMRC's decision in relation to the operation of this legislation should be respected and should be permitted to take effect. To prevent HMRC from continuing to consider and ultimately from publicly promulgating decisions on written representations received in relation to PPNs will mean that no sum will become payable because only after such representations have been determined by HMRC does any sum become due under paragraph 6, subparagraph 5 of Schedule 32. Moreover, no penalty for late payment can become due until the requisite time after the sum becomes payable has expired. [37] This goes well beyond holding the ring. If the Claimants' claims for judicial review are successful the relevant PPNs will fall to be quashed and there would be no sum payable under the PPNs, and to the extent that a penalty notice has also been issued, this too would fall away. Provided that the Claimants do not have to pay anything under the PPNs or the penalty notices in the interim, the status quo is preserved and the injunction has effect and substance. [38] If the Claimants' claims for judicial review are unsuccessful ultimately that will mean that they should all along have paid the sums under the PPNs as and when they fell due under the primary legislation. In that scenario there would have been no justification for delaying the date when such payment fell due or preventing HMRC from confirming the PPNs following consideration of the written representations. Similarly, there would have been no justification for preventing the other consequences of failure to pay or late payment, in application of the penalties regime. [39] The balance of injustice accordingly strongly favours allowing the statutory scheme to operate up to the point of enforcement in those circumstances.” 224. One of the reasons given by Simler J for those conclusions was that: “there is a statutory scheme for challenging any penalty notice that is issued. That scheme operates by reference to paragraph 16 of Schedule 56 of the Finance Act 2009 and enables a tax payer who is issued with a penalty for late payment of sums otherwise due, to appeal to the First Tier Tribunal on the basis that there is a reasonable excuse preventing liability from arising in the first place. That affords an avenue for addressing the question of penalties and no compelling reason has been advanced by Mr Southern for effectively inviting this court to determine the question in favour of the Claimants in a manner that would prevent the FTT from exercising this jurisdiction.” 225. Simler J concluded at [67] by saying that in relation to existing claimants she was qualifying Haydn J’s order by adding that the order “does not inhibit either the issuing of further PPNs or the continuing reconsideration and conclusion of further representations or the issuing of penalty notices”

“Insofar as any Claimant in this case has filed and served a witness statement providing evidence of hardship in paying any sum due under a Partnership Payment Notice, HMRC shall not (without first applying to the court in relation to the cogency of such evidence) take steps against that Claimant to enforce any sum due and payable under the PPN or any associated penalty until the current Claimant's judicial review claim is determined by this court or otherwise disposed of.” 229. Picken J decided that the existing order was to be maintained until after the final determination of the Rowe litigation. It seemed to us likely that the wording of the consent order set out above was the same as, or substantially similar to that issued by Simler J after Rowe Interim Relief. In any event, it is clear from its wording that HMRC were not prevented from issuing penalty notices, but only from enforcing them, pending the conclusion of the Rowe JR. The interim relief granted to Exclusive: findings of fact 230. When Exclusive’s JR claim was filed on 23 September 2016, RPC referred the Court to Sword Services and said they understood HMRC was “not currently resisting interim relief being afforded to the claimants in APN judicial review challenges”

“Until we inform your legal representatives otherwise, HMRC will not enforce payment of the accelerated payment or of any associated penalties until the Court has dealt with your application for an interim relief order. However, the accelerated payment remains due by 30 March 2017 and you will be liable to penalties if you do not pay in full and on time. This is consistent with the terms of the interim relief order for which you and other claimants have applied.” 233. On 28 November 2017, HMRC wrote to RPC, stating that they accepted that Exclusive and certain other claimants met the hardship requirements, and that they would consent to interim relief made in accordance with the draft consent order attached, which read: “1. The Defendants [HMRC] shall not take steps to enforce any sum due and payable by the Claimant under its APNs or associated penalties until the High Court has refused permission to proceed or, if permission to proceed is given, has given judgment on the claim. 2. Nothing in paragraph 1 shall affect the Defendants’ entitlement to: 2.1 issue further APNs to the Claimant 2.2 determine any written representations by the Claimant in respect of any APN it has received (including any further APN) 2.3 issue any notice of penalty to the Claimant in respect of its failure to pay the accelerated payment required of it by any APN (including any further APN).”

“appears to have been an arbitrary process carried out on a bulk basis for administrative ease. The figure shown on the discovery assessment as additional tax due was almost always incorrect where this process was used.” 253. On 15 May 2015, HMRC confirmed to Matt Hall that they were using the process described above, saying: “If the loan values were on the forms P11D, they were not copied over to individual records, so when we realised we would need to protect our position by issuing several thousand assessments for various years, we did not have the time or resource to review each form individually. We used a salary multiplier as advised by the scheme promoter and we would have expected that to produce the right result, but in any cases where it did not, customers were not disadvantaged as they had the right to appeal.” 254. Mr Fox appealed the discovery assessment issued to him on the basis that it was “wrong in law and excessive”, but did not say that HMRC had ignored the P11D figure and had instead used an estimated sum calculated based on the salary paid to him. The APNs 255. HMRC sent Mr Fox three APNs, as follows: (1) On 11 June 2015, HMRC issued an APN for £67,171 in relation to Mr Fox’s use of the Penfolds Scheme in 2009-10 (“the First APN”). The APN states that the conditions in FA 2014, s 219 were met because Mr Fox had made a tax appeal on the basis that a tax advantage resulted from the Penfolds Scheme, and the arrangements were within DoTAS. (2) On 19 June 2015, HMRC issued an APN for £51,939.20 in relation to Mr Fox’s use of the Hamilton Scheme in 2009-10 (“the Second APN”). It states that the conditions in FA 2014, s 219 were met, because Mr Fox had made a tax appeal on the basis that a tax advantage resulted from the Hamilton Scheme, and the arrangements were within DoTAS. (3) On 27 July 2015, HMRC issued an APN for £1,985.60 in relation to Mr Fox’s use of the Hamilton Scheme in 2010-11 (“the Third APN”). It states that the conditions in FA 2014, s 219 were met because there was an open enquiry into a tax return which had been made on the basis that a tax advantage resulted from the Hamilton Scheme, and the arrangements were within DoTAS. 256. The First and Second APNs were thus for 2009-10, the year for which HMRC had already issued a discovery assessment and against which he had appealed, so they were Appeal Cases. The Third APN was for 2010-11, a year which still under enquiry, so this was an Enquiry Case. The total sum HMRC sought to collect by the APNs was £121,095.80. The JR 257. When Matt Hall became aware that HMRC were beginning to issue APNs to users of the Schemes, he contacted RPC to obtain legal advice on their legality. They discussed possible grounds for a JR claim, one of which was the lack of evidence that the Designated Officers had carried out their statutory responsibilities. 258. On 13 March 2015, Matt Hall posted an update on his website informing users of the Schemes that HMRC were about to start issuing APNs, and that the executive members of the litigation associations were liaising with RPC with a view to filing JR claims. 259. During 2015 a number of webinars and a conference were organised by one or more of RPC, Matt Hall and another firm called Peak Performance. Mr Fox listened to the webinars and attended the conference. RPC advised attendees that whilst there could be no guarantee, the JR claim should succeed. 260. In June 2015, Mr Fox instructed RPC to represent him in a JR claim challenging the First APN. On 12 June 2015, RPC filed a JR claim in which Ms Hilary Duggan was the lead claimant; Mr Fox and over 1,000 other claimants were joined in the same claim. Mr Fox subsequently added his Second and Third APN to the claim. 261. The grounds of the JR were that in issuing the APNs HMRC had breached natural justice, legitimate expectations and human rights and had also acted unreasonably. One of the points made under the “unreasonableness” ground was that: “no evidence has been provided to show that the payments demanded by the Defendants have ben determined ‘to the best of the officer’s information and belief’.” 262. Matt Hall also filed a witness statement at the High Court to support the “unreasonableness” ground. He stated that HMRC were using arbitrary multipliers to assess taxpayers, and that the same erroneous figures had been carried across into the APNs . The Rowe JR and the revised grounds 263. As noted earlier in this decision, on 31 July 2015, the Rowe JR was decided in HMRC’s favour by Simler J at the High Court. On 9 October 2015, RPC filed amended grounds in the Duggan JR, which took into account the Rowe judgment. The first ground was now HMRC’s failure to comply with the Designated Officer requirements, and reads: “The APNs have been issued in breach of the strict requirements of the legislation, namely the designated officer issuing the notices is required to determine the amount which is correctly payable ‘to the best of that officer’s information and belief’, and in the circumstances the officer cannot have reached such a determination in the case of the Claimants.” 264. The amended grounds also set out the same points (a)-(f) as were included in Exclusive’s representations, see §98(1). The document continues by saying that all the claimants are “Enquiry Cases” (although this is incorrect, as Mr Fox’s First and Second APNs were Appeal Cases) and that as a result: “…it is difficult to identify how any designated officer has been able to reach the determination required of that officer…in order for a designated officer to reach the quantification of the amount identified in section 220(2)(b)/220(3) it is clear that the discretion must be carefully exercised, and therefore that the designated officer must fully and properly consider the Arrangements to identify whether it achieves its tax saving purpose. There is no evidence from the Defendants or on the face of the APNs that the Defendants have met this obligation.” 265. Under a newly separate ground of “unreasonableness”, the document says: “…there is nothing in the APNs to indicate that any individual has undertaken any individual consideration to the sums expressed in the APNs. Quite the contrary, in the absence of any information to the contrary, on the face of the APNs or otherwise, it appears evident that HMRC is producing APNs mechanically and on an industrial scale. In so doing HMRC is neglecting the individual consideration which forms a critical requirement of the machinery of the statute.”

“Should the judicial review be unsuccessful, HMRC will seek to recover any penalties they have issued for non-payment of the sums demanded in the APNs.” 267. On the same date, Mr Fox signed a witness statement in support of his application for interim relief; this was later filed by RPC at the High Court. On 30 July 2015, the Court granted interim relief; the wording of the Order was identical to that set out at §228, in relation to Sword Services, and thus stated that HMRC could not recover the APN amount or any associated penalty until the JR claim was “finally determined or otherwise disposed of.”

“You should use this suggested form of wording in order to make written representations to HMRC. This is something you must do yourself. Neither we, nor RPC, will be making these representations on your behalf.” 269. In response to the First APN, Mr Fox downloaded the template from Matt Hall’s website. amended it to reflect his own position and sent it to HMRC. The letter was undated, but a chronology provided by HMRC for the hearing records the date as 29 July 2015, and we have taken that to be correct. 270. Mr Fox’s letter: (1) sets out the address of the recipient HMRC office as being Glasgow, although the First APN was in fact issued from HMRC’s office in Newcastle; (2) included the HMRC reference number used on the First APN; was marked “By Recorded Delivery”; (3) was headed “Representations regarding the accelerated payments notice (‘APN’) issued to me in relation to scheme reference number 71676485”, being the DoTAS number for the Penfolds Scheme; (4) was signed by Mr Fox; and (5) includes the following text: “I refer to the APN dated 11 June 2015 which you have issued to me (‘the APN’) a copy of which I attach for ease of reference. This letter should be treated as containing representations in respect of the APN for the purpose of section 222(2), Finance Act 2014… I assume that the amount referred to in the APN has been calculated by the designated HMRC officer pursuant to the provisions of section 220, Finance Act 2014. Please let me know if that is not the case. I, together with others participants to the above referenced arrangements, have instructed solicitors to commence judicial review proceedings to challenge the legality of the APNs which you have issued against me and others. The basis of my challenge to the APN is set out at length in the Grounds for Judicial Review which accompany the judicial review claim form and have been provided to HMRC through the Solicitor's Office (South West Bush House, Strand, London). For the purposes of these representations, and specifically section 222(2) Finance Act 2014, you are to take it that those submissions are repeated here in their entirety…” 271. On 12 August 2015, HMRC replied; the letter was sent from HMRC’s Newcastle office and reads as follows: “Thank you for your recent letter. I have notified Solicitors Office of your intention to commence Judicial Review proceedings and they will inform me of any action I need to take in relation to this. You have also requested that your letter be treated as containing representations. HMRC must consider any representations made in accordance with Section 222(2) of the Finance Act 2014. To be in accordance with that subsection, a representation is required to be made in writing within 90 days of the date the APN was given and must object on the grounds that one or more of Conditions A, B or C has not been met and/or to the amount specified in the notice. As the contents of your letter do not meet those requirements, I am unable to treat your letter as containing a valid representation. The APN charge remains due by 14 September 2015 unless you make a valid representation. Please note that our new address is HM Revenue & Customs, Counter Avoidance AP Teams, S0694, NEWCASTLE, NE98 1ZZ. If you write to us but do not use this address then we may not get your post.” 272. It is clear from the wording of this letter, and we so find, that (a) HMRC refused to accept that Mr Fox’s letter contained valid representations, and (b) for that reason said that the APN payment date continued to be set by reference to that on the APN, rather than by reference to the date on which HMRC’s determination of the representations was received. 273. HMRC accepted that this was the purpose and effect of their letter: the detailed chronology provided for the hearing said that: “As the Appellant had not made representations in accordance with s. 222 (2) FA14 by 14 September 2015, the due date for payment remained 14 September 2015 (being 90 days after the date the Appellant was notified of the APN).” 274. Mr Fox wrote a similar letter in response to the Second APN. This too was signed but undated, addressed to HMRC’s Glasgow office, and marked “Recorded delivery”

“I do recall, however, that it was mentioned to me that the claims were being brought on human rights grounds and that the retrospectivity of the APNs was an important consideration. There were also questions about whether HMRC had followed correct processes.” 278. Under cross-examination, he said RPC had advised him there was a “reasonable chance” of the JR succeeding, and that the percentage chance of success was “somewhere in the middle”

“Hamilton APN - sent 27 July.pdf”; “witness statement 3 pdf” and “HMRC reply 3 pdf”

“As discussed earlier, I have received a third APN from HMRC, this time in relation to Hamilton for tax year 2010/2011. I have enclosed a copy of the APN, as well as the witness statement required for when you have already received a previous APN and a copy of the reply letter to HMRC. Please confirm that all is in order.” 299. In written submissions provided shortly before the hearing resumed on 22 November, Mr Hall submitted that the Tribunal should find that the Third Letter had not been sent to HMRC, and he repeated those submissions orally. Mr McDonnell asked the Tribunal to find that the Third Letter had been both sent and delivered to HMRC. We next consider the evidence together with both parties’ submissions. Whether the Third Letter was sent 300. The Third Letter refers to the Third APN, both in the text and indirectly by use of the DoTAS reference number, and it was signed by Mr Fox. However, we agree with Mr Hall that on the balance of probabilities it was prepared by Mr Fox but not actually posted. That is because: (1) Mr Fox’s witness statement said “I made written representations to HMRC in response to the first two APNs, dated 29 and 31 July 2015”, and he exhibited copies of those two letters to his witness statement, along with HMRC’s replies. His witness statement thus did not refer to the Third Letter, and it was not exhibited. (2) Mr Fox gave no oral evidence about the Third Letter. In particular he was not recalled to the witness box (a) after he had located it during the break on the second day of the hearing; (b) when Mr Hall set out HMRC’s difficulties with the Third Letter on the third day, or (c) on the final day, after Mr Hall had provided written submissions confirming that HMRC would be asking the Tribunal to find that the Third Letter had not been sent. (3) Although the Third Letter is marked “recorded delivery”, no evidence was provided as to the record of the delivery. (4) HMRC have no copy of the Third Letter. (5) HMRC replied to Mr Fox’s letters on the First and Second APNs, but did not reply to the Third Letter. (6) There is no evidence that any follow-up letter was sent either by Mr Fox, or by any of his advisers, as might have been expected if the Third Letter had been sent but not acknowledged. (7) Mr Fox’s email of 12 August 2015 to Emma states that he is attaching a “copy of the reply letter”, and Mr McDonnell encouraged us to infer from the use of the word “copy”, that the original had been sent to HMRC. However, we agree with Mr Hall that the word “copy” simply means that Mr Fox was attaching an electronic copy of a physical document; there is no necessary inference that the hard copy letter was sent to HMRC. . (8) The email to Emma does not say the Third Letter was sent to HMRC, or (if sent) when it was sent. (9) There was no evidence from Emma, and no explanation as to her role, or in what sense she was Mr Fox’s “agent”, as RPC said was the position. (10) There was also no evidence as to how the email to Emma had reached RPC, or as to why they had the email but not the attachments. 301. We therefore find as a fact that the Third Letter was not sent to HMRC. Whether the Third Letter was delivered 302. Even if that finding were to be incorrect, so that the Third Letter had been sent by Mr Fox, we would have found that it was not delivered to HMRC. That is because the Interpretation Act 1978, s 7 provides that a letter is only deemed to have been delivered if the conditions there set out are met. 303. The section applies where “an Act authorises or requires any document to be served by post (whether the expression ‘serve’ or the expression ‘give’ or ‘send’ or any other expression is used)”

“…unless the contrary intention appears, the service is deemed to be effected by properly addressing, pre-paying and posting a letter containing the document and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post”. 305. HMRC’s position is that the “contrary intention” is proved, because they have no evidence of receipt. However, it is also clear that the Third Letter was not properly addressed. It was sent to HMRC’s office in Glasgow, despite both HMRC’s previous letters having informed Mr Fox that the correct address was in Newcastle, and warning him that “If you write to us but do not use this address then we may not get your post”

“We acknowledge that a concession was made on day two of the hearing. At the time of the last hearing, HMRC considered that as a result of Archer (which was not part of the authorities bundle, nor a major part of the skeleton arguments made by the appellants) that HMRC would have to consider Judicial Review grounds, where the taxpayer was party to those JR proceedings, that parts of that JR claim met the statutory conditions for being representations (i.e. covering conditions A-C or quantum), where they were relevant to the individual taxpayers case and where notification was received before the end of the 90 day period for making representations. Further to the previous hearing HMRC have changed our view on the position and we do not believe that the letter submitted by Mr Fox would constitute representations, as it does not clearly specify the Judicial Review claim to which Mr Fox states he is a party, nor identifies the relevant grounds that apply to him that HMRC should consider. The submissions this morning set out HMRC’s revised position. As stated this morning, HMRC will not resile from the concession we made in Mr Fox’s case. In line with HMRC’s submissions made to the Tribunal this morning, we no longer consider that those who sent highly similar letters to Mr Fox will have made valid representations. We would be prepared to work with those appellants who believe they have submitted representations in line with HMRC’s position as outlined this morning.” 308. The references in this statement to “HMRC’s revised position” and “HMRC’s position as outlined this morning” are to the submissions of Mr Hall which are summarised below. The Tribunal next considers whether that revised position is correct, in other words, whether Mr Fox’s letters did constitute representations within the meaning of s 222. ISSUE ONE (Mr Fox): WHETHER TIME LIMIT HAD STARTED TO RUN 309. As explained at §59, a penalty (or surcharge) is payable where an APN has not been paid by the later of 90 days after it has been given to the taxpayer and 30 days after the date on which “HMRC's determination in respect of those representations is notified” to the taxpayer, see s 223(5) above in relation to Enquiry Cases and TMA s 55(8D) inserted by s 224, in relation to Appeal Cases. 310. Mr McDonnell’s position was that Mr Fox’s letters contained representations which HMRC had failed to consider; that as a result there had been no “determination”, and in consequence the payment date for the APNs had not begun to run, and so no penalties/surcharges were due. 311. However, we have found as a fact that Mr Fox only sent HMRC two letters. HMRC had withdrawn the related surcharges, and Mr Fox had withdrawn his appeals. Therefore the only appeal remaining to be determined by the Tribunal was Mr Fox’s appeal against the penalties for the Third APN, and we have found that he did not send a letter to HMRC about that APN. 312. It follows that Issue One is not relevant to Mr Fox’s remaining appeal. However, because it will be relevant to other appellants, and because it was fully argued, both parties asked the Tribunal to set out our conclusions. 313. We first considered whether Mr Fox’s letters were representations within the meaning of s 222, before going on to decide Issue One. Whether Mr Fox’s letters were “representations”