Lewis Grove Limited v The Commissioners for HMRC [2024] UKFTT 1114 (TC)

[2024] UKFTT 001114 (TC)Case No TC09380
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 2 July 2024Date Judgment date: 21 November 2024
By remote video hearing
Appeal reference: TC/202023/08445
Application for permission to appeal out of time, Martland principles applied, permission granted
Before
TRIBUNAL JUDGE GETHINGMEMBER PATRICIA GORDON
Between
LEWIS GROVE LIMITEDAppellantTHE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMSRespondentMr Muneeb Malida of Arif Malida for AppellantMr Arshad Khan, litigator of HM Revenue and Customs’ Solicitor’s Office for RespondentsDECISION

Introduction

[1]With the consent of the parties, the form of the hearing was V (video). All the parties attended remotely using the Tribunal video hearing system. The documents to which we were referred are a Hearing bundle of 273 pages, nd two bundles prepared by the appellant of 8 pages and three annexes comprising the notice of appeal, case report of North Berwick Golf Course v HMRC 2015 and the correspondence with the Tribunal. I also received correspondence between the Appellant of the former adviser.[2]Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.[3]Lewis Grove seeks permission to appeal out of time against a Stamp Duty Land Tax assessment in the sum of £18,379.72 issued by Officer Courchee on 9 April 2021 (“the purported assessment”). Section 49 of the Taxes Management Act 1970 (“TMA”) requires an appeal against an assessment to be made within 30 days, i.e. by 8 May 2021. HMRC extended the period by three months. The appeal had to be made by 9 August 2021. Mr Muneed Malida of Arif Malida, Chartered Accountants (“Mr Malida”) made an appeal on 18 April 2023, one year 8 months and 8 days after the expiration of the statutory time limit. HMRC did not accept the late appeal.[4]The Tribunal may give permission to appeal late under section 40(2)(b) TMA if HMRC refuse to do so. The principles in Martland v HMRC [2018] UKUT 178 (TCC) (“Martland”) apply.

THE FACTS

[5]Mr Salim Jetha (“Mr Jetha”) is a pharmacist. He has conducted a pharmacy business as a sole trader since 2000.[6]Mr Jehta conducted the pharmacy business from the ground floor shop at 1 Lewis Grove, London, SE13 since 2007 when he acquired a 26 year lease at a rent of £34,000 per annum from Cray Fashions, the head lessor in 2007.[7]Mr Jetha established the company Lewis Grove Limited (“Lewis Grove”) of which he was the sole director and shareholder. On 1 July 2018 Mr Jetha transferred to Lewis Grove, as a going concern, his pharmacy business, its assets and liabilities including the lease of the ground floor shop at 1 Lewis Grove. The lease had an unexpired term of 15 years on 1 July 2018.[8]Lewis Grove’s solicitors, Bowling & Co, filed two SDLT returns in connection with the transaction. The following information was provided by them: (1) SDLT1. Guidance Notes are provided by HM Land Registry and answers that are given to simple questions must be given using the codes. I indicate the codes below. Question 1 – Type of Property – Answer - commercial property only (Code 03) Q2 Description of Transaction -Answer - A conveyance (as opposed to grant of a lease) (Code F) Q3 Estate of Interest Transferred – Answer - leasehold interest at a nominal rent (Code LG) [Other options included FP – meaning freeholder or FT freehold subject to a lease or tenancy. Also available was LP which was code for a lease at a rent] Q10 Consideration – Answer- £1 and payable in cash (Code 30) and the tax as zero. Qs26-33 relate to the premises. Answer Ground Floor Shop, 1 Lewis Groove. Q36 Vendor – Answer Mr Jehta was specified as the sole vendor and his address is stated to be 1 Lewis Grove. Qs39-44 Concern the appointment of Agent. Bowling & Co was appointed as agent of Mr Jetha and Bowling’s telephone number and address were included in the LT. Q60-66 Concern the purchaser. Answer -Lewis Grove Limited and its address was specified as Argyll Street which was the address of Mr Jetha’s accountant at the time and the registered office of Lewis Grove. Q59 Concerns the connection between the Vendor and Purchaser. Answer- Lewis Grove was stated to be connected with Mr Jetha. (2). SDLT 4 This form must be completed where the land being transferred is part of a sale of a business. The other assets listed as being included in the sale were stock, goodwill, chattels and movables. Q2 requested the type of premises. Instead of putting the cross by the term “shop” the solicitor put the cross by “other”.[9]On 10 July 2019 Officer Courchee sought advice from the Valuation Office in relation to two properties: Ground Floor Shop at 1 Lewis Grove, SE13 and one at Ground Floor Premises at 101 Turnpike Lane N8. The request for advice was based on the proposition that the parties were connected and if market value is substituted for the consideration and it exceeded £155,000, which he considered likely as the properties were in London, SDLT would be payable.[10]The Valuation Office replied on 9 September 2019 by email and attached a very short report. In the email the valuation office reported in relation to 1 Lewis Grove that:
“According to our records, the taxpayer had bought the freehold of the ground floor retail unit from Grantree Estates Ltd for £120,000 in July 2003. However, it wasn’t clear from the transaction data we hold whether the freehold also includes the first and second floor which was occupied as an educational centre. Our data also shows that the taxpayer had taken a 26 year lease at a rent of £34,000 pa in July 2007 from Cray Fashions.”
When considering the valuation, I have made an assumption based on our data that the taxpayer is the freeholder and the leaseholder of the retail unit. I have provided two capital values: Freehold - £550,000 Leasehold - £0. Please do not hesitate to contact me if you have any further queries.” The associated report does not mention that there is any question of whether what was transferred was freehold or leasehold. It simply states that the freehold has a value of £550,000.[11]Despite Lewis Grove specifically authorising Bowling & Co to handle all correspondence on its behalf in relation to the returns SDLT1, and SDLT4, on 18 September 2019 HMRC wrote to Lewis Grove at Argyll Street concerning the SDLT returns. The letter is headed “Enquiry into your SDLT return” and goes on to state Lewis Grove’s SDLT return in relation to premises at 101 Turnpike Lane, London, N8 was inaccurate. HMRC state that market value ought to have been substituted for the price paid for land transferred. The letter goes on to say:
“If you have an adviser who acts on your behalf, please let them see this letter. If you would like us to deal direct with them, we will need your written authority. Your adviser will give you the relevant form to complete so that you can authorise us to deal direct with them.”
[12]The address in Argyll Street belonged to Blick Rothenberg a firm of accountants who had merged with Mr Jetha’s former accounting adviser. HMRC did not receive a reply to this letter which Mr Jetha suspected was because Lewis Grove did not own any premises at 101 Turnpike Lane.[13]Mr Jetha recalled a conversation following receipt of this letter.HMRC rang him on his business line. Mr Jetha believes he advised HMRC that the address of the premises was incorrect and HMRC must have sent it to the wrong person. The officer agreed to look into it and revert. HMRC never contacted Mr Jetha again by phone. Mr Jetha threw away the letter as it did not refer to his property.[14]On 30 October 2019, HMRC wrote again to Lewis Grove at Argyll Street stating the SDLT return was inaccurate, and that the transaction was between connected parties and requested further information by 30 November 2019.[15]Mr Jetha informed the Tribunal that he believes he failed to recognise the address had been corrected, but it related to a freehold and Mr Jetha had not transferred the freehold to Lewis Grove. The September letter was still fresh in his mind and the telephone call and he failed to give it due regard. HMRC never telephoned Mr Jetha in connection with this letter.[16]On 23 January 2020 Officer Courchee issued a Schedule 36 notice to Lewis Grove and again sent it to Argyll Street, requesting information relating to the transfer of the shop and ground floor at 1 Lewis Grove. This notice was not in the bundle handed over to Arif Malida when they were appointed in late 2021.[17]A follow-up letter was sent on 17 June 2020. HMRC indicated that they were not imposing penalties for failure to provide information requested in the schedule 36 notice because of the covid restrictions. This letter was received by Mr Jetha. He took no action as the enquiry seemed to Mr Jetha to be on hold, but it was also issued in the depths of the pandemic in which, as a pharmacist, Mr Jetha was deeply involved. Mr Jetha had received this letter by email from Blick Rothenberg. Mr Jetha believed that his solicitor was in direct contact with HMRC concerning the SDLT and so thought no more about it.[18]On 9 April 2021 a new officer, Officer Le Grange, issued an assessment. The letter records that the SDLT return had stated that the consideration for the transfer of the premises at 1 Lewis Grove was £1 and no SDLT was payable. HMRC had valued the property transferred at £550,000 and had issued an assessment of £18,379.72 comprising SDLT of £17,000 plus interest on late paid tax of £1,379.72. The letter gave the taxpayer 3 months on top of the usual 30 days to appeal, (i.e. by 8 August 2021). This letter was addressed to Lewis Grove at Argyll Street. It was not part of the bundle of documents handed to Arif Malida upon their appointment in late 2021 Mr Jetha never received a copy of this letter and he believes neither did Blick Rothenberg.[19]On 2 March 2023, Mr Jetha received a letter form HMRC Debt Management Unit dated 23 February 2023, seeking payment of £18,379.12. Arif Malida made immediate contact with HMRC advising them that Lewis Grove knew nothing of the assessment and asking for details.[20]Some information was provided by HMRC which enabled Arif Malida to file an appeal to HMRC against assessment on 18 April 2023.[21]On 25 April 2023 Officer Le Grange requested authority from Arif Malida to act for Lewis Grove. This was received by HMRC on 2 May 2023.[22]On 9 May 2023 Officer Le Grange sent the full correspondence to Arif Malida. Mr Malida called Officer Le Grange and left a voice mail message explaining the situation and hoped that the late appeal could be accepted and the facts determined to show no SDLT was payable.[23]On 19 May 2023 Officer Le Grange advised Mr Malida that the late appeal was not accepted[24]On 8 June 2023 Arif Malida filed the notice of appeal with the Tribunal.[25]On 3 July 223 HMRC received a notice of late appeal from the Tribunal.[26]On 25 August 2023 HMRC filed a notice of objection to the late appeal application.[27]On 13 October 2023 Lewis Grove issued a response to HMRC’s objection.[28]I take judicial notice of the following details of the freehold and leasehold titles relating to 1 Lewis Grove which is available at HM Land Registry.[29]The Freehold title No 444535 states:(1) The Property Register refers to the freehold land shown edged red on the plan of the above title filed at the Land Registry being 1 Lewis Grove, London SE13. A revised plan had been filed on 14 August 2003.(2) The Proprietorship Register contains 4 notes: Note 1 states that on 14 August 2003 the proprietors were:
“Salim Jetha, Azmina Jetha and Michael Krieger as Trustees of the Jetha 2003 Trust care of Hazlem Fenton, Palladium House, 1 / 4 Argyll Street, London W1V 2LD.”
Notes 2 and 3 refer to restrictive covenants to which the property is subject. Note 4 states; “RESTRICTION: No disposition by a sole proprietor of the land (not being a trust corporation) under which capital money arises is to be registered except under an order of the registrar of the Court” (3) The Charges register contains 5 entries. Entry No 1 is a covenant not to install any windows in certain walls Entry 2 records certain rights of way. Entry 3 refers to the grant of a lease of part numbered 1 on the filed plan under title number 444349 granted on 1 March 1934 for 99 years from 29 September 1933. Entry 4 refers to the grant of a lease of parts numbered 2 and 3 on the filed plan on 1 March 1934 for 99 years from 29 September 1933 under title number 444350. Entry 5 refers to a licence granted in 1973 which is of no significance.[30]The leasehold title No 444349 is not relevant.[31]The leasehold title No 44350 is a headlease and states:(1) The Property Register has 6 entries but only entry No 2 is material. It records that on 2 March 1934 the lease under which the property is held was granted on 1 March 1934. It has a term of 99 years from 29 September 1933 at a rent of £450 per annum.(2) The Proprietorship Register records that on 19 September 1973 Cray Fashions of 12 Fairclough Street London E1 acquired the leasehold.(3) The Charges Register has five entries. The first two are covenants as to use and are not material to this case. Items 3, 4 and 5 are pertinent: Note 3 states that parts of the land the subject to the title are subject to the leases set out below. Note 4 states: “Registration Date: 02.10.2007 Plan Reference: 1 (part of) Property Description: I Lewis Grove (Ground Floor Shop) Date of lease: 31.07.2007 Term: From 29.9.2006 to 25.9.32. Lessee’s Title: TGL298089 NOTE The lease comprises also other land Note 5 states “Registration Date: 16.06.2015 Plan Reference: 1 (part of) Property Description: 1 Lewis Grove (First and Second Floor) Date of Lease: 19.05.2015 Term: 10 years from and including 25.12.2014 to and including 24.12.2024 Lessee’s Title TGL424983: The lease comprises also other land.[32]Title No TGL298089 states:(1) The Property Register has 6 entries. Notes 1 and 2 are pertinent. Note 1 records that on 2 October 2007 LEWISHAM The leasehold land shown edged red on the plan above Title filed at the Registry and being 1 Lewis Grove London (SE13 6BG). NOTE: Only the ground floor shop is included in the title. Note 2 also dated 2 October 2007, Short particulars of the lease(s) under which the land is held: Date 31 July 2007 Term: From 29 September 2006 to 25 September 2031 Parties (1) Cray fashions(2) Salim Jetha (NOTE No copy of the lease) (2) The Proprietorship Register records Lewis Grove became owner of the lease on 4 July 2018.(3) The Charges Register contains 2 notes, one relates to the prohibition of creating windows in a side of the building and the other contains the prohibition of use as a bakery. The following is the ownership structure of 1 Lewis Grove: 34. Freehold owned by Discretionary Trust I 35. Long Leasehold owned by Cray Fashions I I

Rack Rent lease of ground floor shop Rack Rent lease of 1st and 2nd floor

[33]We also take judicial notice of the financial statements of Lewis Grove for the period ended 30 June 2019 filed at Companies Registry on 26 May 2020 which shows that the company had no fixed assets.

The following is the ownership structure of 1 Lewis Grove:

[34]As a result of directions given by the Tribunal, the appellants provided copies of exchanges between Lewis Grove and its former adviser, received by the Tribunal on 23 September 2024. HMRC was asked to comment on that correspondence. HMRC had not specific comments on the documents but maintained its position that permission to appeal should be refused. Tax Jurisdiction of the Tribunal “Section 49 Taxes Management Act 1970 Late notice of appeal “(1). This section applies in a case where (a). notice of appeal may be given to HMRC, but (b). no notice is given before the relevant time limit. (2). Notice may be given after the relevant time limit if (a). HMRC agree, or (b). where HMRC do not agree, the tribunal gives permission. (3). If the following conditions are met, HMRC shall agree to notice being given after the relevant time limit.” (4). Condition A is that the appellant has made a request in writing to HMRC to agree to the notice being given. (5). Condition B is that HMRC are satisfied that there was reasonable excuse for not giving the notice before the relevant time limit. (6). Condition C is that HMRC are satisfied that request under subsection (4) was made without unreasonable delay after the reasonable excuse ceased.”[35]In Martland at [29] The Upper Tribunal indicated that the presumption should be that the statutory time limit applies unless an applicant can satisfy the FTT that permission for a late appeal should be granted, but there is no requirement that the circumstances must be exceptional before the FTT can grant such permission.[36]The Upper Tribunal set out the principles that this Tribunal must take into account in determining an application for late appeal at [44],[45] and [46]:
“44. When the FTT is considering applications for permission to appeal out of time, therefore, it must be remembered that the starting point is that permission should not be granted unless the FTT is satisfied on balance that it should be. In considering that question, we consider the FTT can usefully follow the three-stage process set out in Denton: (1) Establish the length of the delay. If it was very short (which would, in the absence of unusual circumstances, equate to the breach being “neither serious nor significant”), then the FTT “is unlikely to need to spend much time on the second and third stages” – though this should not be taken to mean that applications can be granted for very short delays without even moving on to a consideration of those stages. (2) The reason (or reasons) why the default occurred should be established. (3) The FTT can then move onto its evaluation of “all the circumstances of the case”
. This will involve a balancing exercise which will essentially assess the merits of the reason(s) given for the delay and the prejudice which would be caused to both parties by granting or refusing permission. 45. That balancing exercise should take into account the particular importance of the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected. By approaching matters in this way, it can readily be seen that, to the extent they are relevant in the circumstances of the particular case, all the factors raised in Aberdeen and Data Select will be covered, without the need to refer back explicitly to those cases and attempt to structure the FTT’s deliberations artificially by reference to those factors 46. In doing so, the FTT can have regard to any obvious strength and weakness of the applicant’s case: this goes to the question of prejudice- there is obviously much greater prejudice for an applicant to lose the opportunity of putting forward a really strong case than a very weak one. It is important however that this should not descend into a detailed analysis of the underlying merits of the appeal….” (1) Establish the length of the delay. If it was very short (which would, in the absence of unusual circumstances, equate to the breach being “neither serious nor significant”), then the FTT “is unlikely to need to spend much time on the second and third stages” – though this should not be taken to mean that applications can be granted for very short delays without even moving on to a consideration of those stages.

Mr Jetha’s position

[37]Mr Jetha owned a rack rental lease of the ground floor shop at 1 Lewis Grove. It was a lease at a rent of £34,000 at the date of the transfer as a going concern of his pharmacy business to Lewis Grove in 2018. He acquired the lease in 2007 from Cray Fashions an independent third party.[38]Mr Jetha does not own the freehold. He is a trustee along with two others of a discretionary trust that owns the freehold.[39]The freehold is subject to long leases owned by Cray Fashions.[40]Mr Jetha accepted that he is connected to Lewis Grove as he is the sole director and shareholder of the company. It was not contested that he was not connected with Cray Fashions.[41]As the lease is at a rent of £34,000 per annum the lease has no inherent value. It is a liability. It was transferred to Lewis Grove for £1 as ste out in the return SDLT1.[42]The conduct of the enquiry by HMRC raises questions:(1) When no reply was received to two letters sent by Officer Courchee why didn’t the Officer pick up the phone?(2) When Officer Le Grange took over the file, and no reply had been received in over a year, why didn’t he telephone Mr Jetha, or write to notify Lewis Grove of the handover of the case. Why didn’t he reach out to ascertain if Lewis Grove had received the correspondence. The first thing he did was to issue an assessment.[43]Mr Jetha did not receive any of the letters save for the letters of 18 September 2019 and the letter dated 17 June 2020. Mr Jetha believed that the enquiry was on hold owing to covid.[44]No other letters were handed over by his former accountants on the appointment of Arif Malida as the accountant of Lewis Grove in late 2021.[45]Mr Jetha was unaware of any correspondence between 17 June 2020 and the debt collection letter dated 23 February 2023 which was received on 2 March 2023. He had not received any payment reminders sent in 2021 or 2022.[46]Mr Jetha acted immediately upon receipt of the letter of 23 February 2023 and found a contact in the June 2020 letter. He contacted Arif Malida who reached out to HMRC to obtain all the correspondence from HMRC.[47]Mr Malida receicved some information on 18 April 2023 which enabled him to file an appeal to HMRC on 18 April 2023 (albeit that he was unaware of the status of the enquiry and exactly on what basis an assessment had been issued which is clear from the written notice of appeal).[48]Mr Malida received all the former correspondence from HMRC on 9 May 2023. He filed the appeal with the Tribunal on 8 June 2023.[49]Mr Jetha is a responsible taxpayer. A failure to reply to correspondence and an assessment should have raised eyebrows at HMRC.(1) Lewis Grove’s accounts for the period ended 30 June 2019 were filed on 26 May 2020 which recorded the assets and liabilities of the company as a result of the transfer of the trade.(2) All of his self-assessment returns were up to date. They would have shown rent of £34,000 per annum in respect of the ground floor shop at 1 Lewis Grove.(3) Lewis Grove’s corporation tax, PAYE, and VAT returns were up to date. The corporation tax return would have shown rent payable of £34,000 per annum.(4) The 10 yearly returns of the discretionary trust of which he is a trustee were up to date. They would have shown that the freehold is owned by a discretionary trust of which Mr Jetha was only one of three trustees.[50]Mr Jetha only became aware of the assessment to SDLT on 2 March 2023 when he received a collection notice. Mr Jetha had not received the assessment, did not understand exactly what the SDLT was or exactly what it related to. As he had not received the assessment he was unaware of his rights.[51]HMRC eventually released the correspondence on 9 May 2023. Any delay between 2 March and 9 May 2023 is HMRC’s responsibility. The Appeal to the Tribunal was made on 8 June 2023, within 30 days of receiving the correspondence from HMRC.[52]Lewis Grove do not accept that Lewis Grove’s former adviser failed to forward correspondence. The adviser handed over all correspondence when Arif Salim was appointed in late 2021. There was no SDLT assessment in the hand over materials. The former accountant had provided correspondence from other third parties for Lewis Grove so it is not a case of a delinquent adviser whose failures should be attributed to the taxpayer.[53]Mr Jetha did have the letter of 17 June 2020 requesting information, but it was received during covid, and he believed the enquiry was on hold because of covid. He was burdened by responsibilities during that period, because as a pharmacist, it was logistically important to keep his business open for the distribution of Covid tests and masks and other services.[54]Lewis Grove considers that each of the conditions in section 49 TMA is satisfied.[55]Condition A is satisfied because an appeal was made in writing to the Tribunal on 8 June 2023. This was made within 6 weeks of Lewis Grove first becoming aware of an assessment and within 30 days of receiving all the information from HMRC. This delay was reasonable having regard to the fact that HMRC had failed to provide the correspondence requested on 2 March until 9 May 2023. Neither Arif Malid nor Mr Jetha/Lewis Grove had any knowledge of what the assessment related to before 9 May 2023.[56]Condition B was satisfied because Mr Jetha had a reasonable excuse for the delay, namely that he was unaware of the correspondence issued by HMRC save for the letter of September 2019 which had an incorrect property address and the letter issued in June 2020 which he believed placed the enquiry on hold. He was under pressure during covid as a pharmacist.[57]Condition C is satisfied as the appeal was made as soon as the reasonable excuse ceased, in that Mr Jetha instructed Arif Malida as soon as he received a letter for HMRC collection agency on 2 March 2023. Arif Malida contacted HMRC to ask for details of the assessments and correpondence. Some information was received in April and a notice of appeal was sent to HMRC on 18 April 2023. All the correspondence was produced by HMRC on 9 May 2023. The appeal to the Tribunal was made on 8 June, within 30 days of receipt of the correspondence.[58]Following the Martland principles the Tribunal must take into account all material circumstances in determining whether to allow an appeal out of time:(1) The length of the delay. Mr Jetha accepts that the delay in the making a written appeal is significant and serious. One year 8 months and 8 days.(2) The reason for the delay in making a written appeal. As set out above, Mr Jetha did not receive any correspondence or other communication from HMRC concerning SDLT other than the June 2020 information request letter which Mr Jetha considered meant the enquiry was on hold due to covid. He received no other correspondence from HMRC until 2 March 2023 when he received a notice of collection of a debt. All correspondence was handed over by his former advisers in late 2021 to Arif Malida when Arif Malida was appointed as the new accounting adviser. Mr Jetha and Lewis Grove have no reason to suspect that the former adviser withheld correspondence received. There was no reason for them to do so. Other correspondence from third parties had been received from them. Lewis Grove notes that much mail went undelivered during covid and suspects that the notice of assessment suffered the same fate. The written appeal was made within 30 days of Mr Malida receiving from HMRC the correspondence that had not been received including the notice of assessment. Mr Jetha is a responsible taxpayer as can be seen from his history of tax compliance and as required by his professional obligations. As director of Lewis Grove, he would not have ignored an assessment.(3) Lewis Grove rely on the decision in North Berwick Golf Club v HMRC [2015] FTT (TC) 04289 (“North Berwick Golf Club”) at [35] to [37]. The delay in that case was 5 years. The FTT concluded that all HMRC say is there is no evidence that letters were returned. The FTT note that in addition to the addressee being incorrectly identified the Tribunal had received no details of the procedures adopted by HMRC during covid. The Tribunal concluded that there must be a reasonable possibility that the usual systems were under significant pressure. Permission was granted to bring a late appeal.(4) There was a delay but the reasons for the delay are understandable, and in the circumstances, reasonable per HMRC v Perrin [2018] UKUT 0156 (TC) at [81] (“Perrin”). Mr Jetha says that this is a reasonable excuse but if not, the delay should not be attributed to Mr Jetha. Following the guidance given in Perrin on the issue of reasonable excuse the tribunal must ascertain the facts, whether the facts are proven and whether in all the circumstances including the attributes of the taxpayer the excuse is reasonable. Mr Jetha’s self-assessments of income tax from his pharmacy business were up to date, as were the corporation tax, PAYE and VAT returns of Lewis Grove. The ten yearly filing of returns in respect of the discretionary trust of which he was a trustee were also up to date. He is a responsible and diligent taxpayer. There is no reason to doubt Mr Jetha’s testimony. Mr Jetha received correspondence from other third parties from his former accountant and there is no reason why, if the letters had been delivered to them, which Mr Jetha says they were not, they would have been handed over to Arif Salima in late 2021. There was no reason for them to fail to hand over the correspondence. He had received correspondence from other third parties. Mr Jetha could not understand why HMRC had not tried to make contact by phone or in a different manner before issuing the assessment. In the circumstances there was a reasonable excuse for each delay in filing an appeal. And the position was corrected as soon as reasonably possible after the delay was identified and within 30 days of receiving the correspondence to enable a written appeal to be made to the Tribunal.[59]In relation to the balancing of the merits of the reasons for the delay, the prejudice caused to the parties of permitting and refusing a late appeal and all the circumstances, Mr Jetha says that the balance points to permission being granted.(1) HMRC failed to make contact with Lewis Grove by sending letters to its registered office. HMRC never once picked up the phone or contacted Mr Jetha directly or sought alternative means of contact before proceeding to issue the assessment and begin debt collection.(2) Mr Jetha does not own the freehold. He was a trustee only along with two other trustees of a discretionary trust. He had no authority to transfer the freehold to Lewis Grove. Mr Jetha did not transfer a freehold. He transferred a lease at a rack rent of £34,000 which has no capital value. No value could be attributed to the transaction under section 55 FA 2003. No SDLT was due. The freehold was subject to long leases.(3) As there is no liability to SDLT HMRC would suffer no prejudice in terms of cost and time to deal with the issues. No Tribunal hearing is needed. In consequence the appeal should be allowed. HMRC’s Position.[60]HMRC state that following Martland the presumption should be that the statutory time limits should be adhered to unless the applicant can persuade the Tribunal that permission to appeal late should be granted. There is no need for the case to be exceptional. The Tribunal must however adopt a three-stage approach:(1) stablish the length of the delay. Even if the delay is short, if the taxpayer’s appeal is unlikely to succeed other taxpayers will be prejudiced by HMRC diverting resources. In this case HMRC say the appeal ought to have been made by 10 July 2021 – 3 months additional time to appeal was given due to covid. The delay in this case is 1 year 9 months and 8 days. HMRC conclude that the delay is serious and significant.(2) Establish the reasons for the delay. HMRC say that Mr Jetha was a pharmacist and did not respond to the letter received in June 2020 as he was in the thick of handling the pandemic. He did not receive the assessments etc due to letters not being delivered during covid and due to takeovers. He believed the cases were on hold during covid. He only became aware of the assessments after he appointed a new accountant, and the debt collection unit contacted him. HMRC consider the taxpayer ought not to rely on blanket treatments during covid but ought to have contacted HMRC to explain his position. HMRC say Mr Jetha had not explained the issues he faced as a pharmacist during covid. HMRC say there is no good reason for the delay. HMRC say Mr Jetha was advised he had to make an appeal to the Tribunal on 25 April 2023. The appeal to the Tribunal was made on 8 June 2023. There was no excuse for the additional delay of 1 month 15 days and the delay should be considered serious. HMRC say the assessments say exactly what must be done and by when. The assessment describes the appeal rights and by when they must be exercised. HMRC rejects the assertion that correspondence was not delivered during covid. A reasonable person in Mr Jetha’s position ought to have been in close contact with their advisers. If the delay is due to a previous adviser’s conduct a full explanation will be required. A failure by an adviser will be regarded as a failure by the appellant. (3). Evaluate all of the circumstances of the case. HMRC cite from Martland at [45] and [46]. This involves a balancing exercise: 75. “which will assess the need to conduct all litigation efficiently and at proportionate cost and for statutory time limits to be respected. The FTT's role is to exercise judicial discretion taking account of all relevant factors, not to follow a checklist.” 76. “In doing so the FTT can have regard to any obvious strengths or weaknesses of the applicant’s case: this goes to the question of prejudice- there is obviously a much greater prejudice for an applicant to lose the opportunity of putting forward a really strong case than a very weak one. It is important that this does not descend into a detailed analysis of the underlying merits of the appeal.”[61]Taking the elements in turn HMRC say:(1) The importance of finality is well established by the Tribunal, to bring finality, and that is a matter of public interest, both from the point of the taxpayer and the wider body of taxpayers. And that compliance ought to be expected unless there is good reason to the contrary. HMRC say the taxpayer has not explained the delay. The notice of assessment issued by Officer Le Grange explained the time limits and appeal process. Mr Jetha has not given a clear explanation.(2) The need for litigation to be conducted efficiently and at proportionate cost. HMRC say they will be prejudiced if the appeal is allowed as they would need to divert resources that would otherwise have been used in respect of those who have made appeals in time. The correspondence set out what needed to be done and by when. Allowing the appeal in this case would be inconsistent with the principles of good administration of justice which require litigation to be conducted efficiently and at proportionate cost.(3) All other circumstances- HMRC say they should be entitled to rely on the time limits set out in legislation for the purpose of allocating resource in administering the tax system and should not have to defend appeal after an excessive gap between the time limit and the appeal. HMRC acknowledge if permission is denied Mr Jetha cannot defend his position. This alone is not sufficient for the Tribunal to give permission to appeal late. The prejudice to the taxpayer was not sufficient to save the taxpayer in De Silva v HMRC [2021] UKUT 275 (TCC). HMRC acknowledge that a detailed evaluation of the merits is not required but the Tribunal ought to allow the taxpayer the ability to explain its case so the Tribunal can form a general impression of the strength of the case to weigh in the balance. In assessing the strengths, the Tribunal should be wary of taking into account any contested evidence. HMRC submit that Mr Jetha’s case is weak and has no reasonable prospect of success. Officer Le Grange found the premises at 1 Lewis Grove were commercial. Mr Jetha was a pharmacist as can be seen from his website. The price paid was £1. The parties were connected. Mr Jetha was the main vendor on the SDLT return. Therefore section 53 Finance Act 2003 is capable of applying to substitute market value. At Para 51(e) of HMRC’s Notice of Objection to the application for late appeal states:
“The information made available by the Purchaser to HMRC in respect of this transaction (contained in the SDLT return submitted by the company) referred to the transaction as a transfer of a freehold. Respondents attempted to clarify the circumstances of the transaction as part of the enquiry, but no response was received, and no other external information was available to the contrary.”
[62]HMRC conclude that:(1) Lewis Grove did not cooperate in the investigation, was given opportunities to comment on the assessment and penalties but decided to ignore it.(2) Lewis Grove was aware of the rights of appeal and cannot blame his former adviser for the delay.(3) In the absence of a good reason for the delay any hardship suffered by the Appellant is not sufficient to permit a late appeal.(4) The delay is serious and significant and there is no good reason for it. The application should be dismissed. Discussion[63]The Tribunal must follow the three-stage process set out in the guidance of the Upper Tribunal in Martland when considering whether to exercise the discretion to grant permission to make a late appeal late.

Stage One- identify the Delay

[64]The notice of assessment was dated 9 April 2021. The notice gave an extra 3 months to appeal. The normal appeal date would be 8 May 2021. The appeal period expired on 8 August 2021 (and not 8 July as suggested by HMRC).[65]An appeal against the assessment was made to HMRC on 8 April 2023 and the notification to the Tribunal was made on 8 June 2023.[66]That is one year 8 months. The delay is serious and significant.

Stage Two- ascertain the reason for the delay

[67]The delay in appealing against the assessment was because Lewis Grove Limited did not receive any correspondence after October 2020 (and certainly never received the notice of appeal in 2021) until Mr Jetha received an HMRC Debt Department notice of liability on 2 March 2023. This is a delay of 20 months.[68]HMRC state they sent the notice of assessment to Lewis Grove in Aryll Street, the address of a former adviser. But when the papers were handed over on the appointment of Arif Malida in late 2021 neither the notice of assessment nor any subsequent item of correspondence was in the documents handed over by the former adviser to Arif Malida. Other correspondence form other third parties was provided to Mr Malida on the handover by the former adviser. There would be no reason for the former adviser to retain correspondence. Mr Jetha considers the former adviser never received the correspondence.[69]The assessment was an assessment to SDLT on the assignment of a lease of the ground floor shop at 1 Lewis Grove. The SDLT returns SDLT1 and SDLT4 were filed by solicitors Bowling & Co on behalf of Lewis Grove and they were appointed to act as agent for both Mr Jetha and Lewis Grove in connection with the return. The address and telephone number of Bowling & Co were provided.[70]Despite the appointment of lawyers to deal with enquiries into the SDLT returns, Officer Courchee sent correspondence to Lewis Grove at the registered office to make such an enquiry. Further despite sending 3 letters and receiving no reply, Officer Courchee did not review the SDLT return to find the person with whom HMRC was authorised to correspond in connection with the SDLT return. Officer Courchee would have identified Bowling & Co. Nor did Officer Couchee consider making a telephone call to be sure the letters were arriving.[71]It is evident that following Officer Le Grange taking over the file, he did not look at the SDLT returns to discover to whom he should issue the notice of assessment. Nor did he review the SDLT return to see what was being transferred was a lease. At para 51e of HMRC’s Notice of Objection, HMRC state that the property transferred was referred to in the SDLT return as a freehold. It also says at para 51 that Mr Jetha was the “main vendor”. The SDLT return says Mr Jetha was the only vendor and the interest transferred was a lease. This indicates that Officer Le Grange had not even checked the SDLT return before contesting the application for late appeal. Nor did he lift the telephone to ensure that the correspondence and notice of assessment had been received.[72]The valuation office also made errors. The officer assumed that:(1) the freehold of 1 Lewis Grove and the leasehold at a rack rent of the ground floor at 1 Lewis Grove had been acquired by the same person in the same capacity, and(2) the acquisition of the freehold of 1 Lewis Grove caused a later acquired leasehold of the ground floor at a rack rent to merge, whereas legally merger is impossible where there are intervening long leases between the freehold and a rack rental lease.[73]Further if Mr Jetha owned the freehold and there were no intervening long leases, how could he acquire the rack rental lease in 2007 from a third party?[74]Following the guidance of the UT in Perrin, in considering whether the excuse for the delay is reasonable the Tribunal must take into account the attributes of the taxpayer.[75]We consider Mr Jetha was an honest witness and we accept his evidence. We accept Mr Jetha was a diligent, and responsible professional and diligent and responsible taxpayer who was up to date with his personal and business tax affairs and the returns associated with the discretionary trust of which he was one of three trustees were also up to date. We take judicial notice of the fact that Lewis Grove had also filed its accounts for the period ended 30 June 2019. It would be totally out of character for him to disregard receipt of a notice of appeal. Indeed, the swift steps taken by him and Mr Malida upon receiving a notice of debt collection on 2 March 2023 confirms his character and those of his advisers. Mr Malida immediately contacted HMRC for copies of the correspondence and upon receipt of the correspondence filed a notice of appeal with the Tribunal within 30 days.[76]We consider that Mr Jetha was a truthful witness, there was no reason to believe that the former adviser had failed to provide correspondence to Lewis Grove because there was no such correspondence provided to Mr Malida in late 2021 on the formal handover of the documents and files on Lewis Grove’ appointment of Arif Malida as the accounting advisor. There would be no reason for the former adviser to retain the correspondence. And correspondence with other third parties received by the former adviser had been handed over in 2021. It seems to us more likely that the correspondence was not received by the former adviser. We note the comments of the Upper Tribunal in the case of HMRC v Lafeez Katib [2019] UKUT (TCC) at [49] and [54] that where a taxpayer relies on the failure of a previous adviser it will be an uphill struggle for the taxpayer and copies of the correspondence between the parties will be required. This is not a case of Lewis Grove blaming a former adviser. The former adviser provided all correspondence to Arif Malida in 2021 on the hand over to Arif Malida. The former adviser had no reason to withhold any letter from HMRC. The notice of assessment was only issued in 2021 and Lewis Grove had until 8 August to respond. I accept Mr Jetha and Arif Malida’s account in all of the circumstances.[77]However, the Tribunal asked the Appellants to provide copies of correspondence with former advisers and we received the correspondence. HMRC was asked to respond to the documents produced. HMRC maintained their position that permission should be denied. The correspondence between the former adviser and current adviser is very straight forward. Request is made for documents, Companies House codes and clearances. The emails are short and straight forward. A set of documents were forwarded. There is no reference to the HMRC correspondence or lack of it.[78]In consequence, we consider it inappropriate to assume there was failure by an adviser and therefore inappropriate to attribute failure of an advisor to Lewis Grove. We also accept that Mr Jetha would have been under considerable pressure as a pharmacist during the pandemic and that his reading of the letters of June 2020 and October 2020 were understandable.[79]In all the circumstances we consider there was a reasonable excuse for the delay in appealing against the assessment:(1) The delay between the date the appeal which ought to have been made (8 August 2021) and the date of receipt by Lewis Grove of the letter from HMRC 3 March 2023 –a period five days short of 20 months was due to non-receipt of correspondence by Lewis Grove and its appointed agent. Mr Jetha’s failure to reply to the information request was understandable as he read it to mean the enquiry was suspended due to covid and he was under pressure as a pharmacist in the pandemic.(2) The delay of two months and six-days between 3 March 2023 when Lewis Grove asked for copies of the correspondence and 9 May 2023 when HMRC provided the correspondence, was attributable to HMRC.(3) The period of just under thirty days it took Lewis Grove to file a written appeal that was notified to the Tribunal on 8 June 2023 was reasonable. They needed to review the correspondence and understand the appeal to prepare the documents, agree them and file them with the Tribunal. Stage Three - consider all the circumstances of the case including the prejudice to both parties and the merit of the reason for the delay.[80]The adherence to statutory time limits is of course important not just for HMRC but for the wider public for the efficient handling of the tax system and the efficient management of tax disputes. Allowing appeals late means HMRC may need to reallocate resources from current cases to deal with cases HMRC had thought were closed. Officers may have to reacquaint themselves with the facts of the case of the late appeal which can be time consuming and burdensome for the officers concerned. Costs of appointing counsel may be incurred. HMRC are most certainly prejudiced by allowing a late appeal in most cases.[81]The prejudice to Lewis Grove, if its late appeal is not allowed, is that it is unable to present his case which is in short:(1) Mr Jetha transferred to Lewis Grove a rack rental lease with an annual rent of £34,000 per annum together with all the assets of his pharmacy business in 2018.(2) Mr Jetha did not own the freehold. As the Land Registry entries show, he was merely one of three trustees of a Discretionary Trust which owned the freehold and sale of the freehold for any capital sum is only permitted with the consent of the Court.(3) The Land Registry shows that the freehold was subject to two long leases owned by Cray Fashions Limited and that Cray Fashions granted a rack rental lease to Mr Jetha in 2007. Mr Jetha confirmed that he and Cray Fashions are not connected. And that was not contested by HMRC.(4) The Valuation Office advised Officer Courchee that if what was being transferred is a lease at a rent the valuation is nil. If it is a freehold the value is £500,000. SDLT would be £17,000 and interest on unpaid tax and potential penalties would be large. The prejudice to Lewis Grove would be serious indeed.[82]There should be little prejudice to HMRC if the appeal is allowed. We suspect they have access to HM Land Registry without payment, but if not, it will cost £3 per title document. We consider they need access to 4 titles identified above. A total cost of £12.00 must be incurred to verify that:(1) Mr Jetha did not own the freehold in his personal capacity.(2) Mr Jetha did own the rack rental lease of the ground floor shop at 1 Lewis Grove which was acquired from Cray fashions in 2007 and which formed part of the business assets and liabilities transferred as a going concern to Lewis Grove in 2018.(3) There were long leases in place between the freehold and the rack rent lease owned by Mr Jetha so that there could be no merger of the freehold and rack rental lease of the ground floor shop even if Mr Jetha had owned the freehold in his personal capacity. In view of the advice given by the Valuation Office as to the SDLT payable being nil if the property transferred was a rack rental lease no further investigation would be needed apart from a review of the titles referred to above.[83]I accept Mr Jetha’s evidence of the reason for the delay. But if there was a fault on his side, HMRC was not faultless:(1) HMRC failed to communicate with the designated agent to deal with SDLT as specified in the return SDLT1 that was being enquired into.(2) HMRC failed to take the reasonable step before pressing on with the issue of the notice of assessment, to check the earlier correspondence had been received and to check the SDLT Return to verify who was the stated vendor, what was being assigned was a leasehold and identify the appointed agent for the purpose of SDLT enquiries.(3) In disregard of the facts as set out in the SDLT return, Officer Le Grange stated in HMRC’s Notice of Objection that the SDLT return specified that the freehold had been transferred and that Mr Jetha was the main vendor. It did not. Although the delay in this case was very significant, having regard to all of the circumstances I consider it in the interests of justice that the late appeal be allowed. Decision 100. The permission to appeal be granted. Right to apply for permission to appeal This document contains full findings of fact and reasons for the preliminary decision. Any party dissatisfied with this preliminary decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The Tribunal hereby directs that the 56 days within which a party may send or deliver an application for permission to appeal against a decision that disposes of a preliminary issue shall run from the date of the decision that disposes of all issues in the proceedings. The parties are referred to "Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)" which accompanies and forms part of this decision notice. The parties are referred to "Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)" which accompanies and forms part of this decision notice. HEATHER GETHING TRIBUNAL JUDGE Release Date: 21st NOVEMBER 2024