Jonathan Batten v The Commissioners for HMRC [2025] UKFTT 1538 (TC)

[2025] UKFTT 01538 (TC)Case No TC09717
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 10 October 2025Date Judgment date: 11 December 2025
By remote video hearing
Appeal reference: TC/2024/06494
LATE APPEAL – former partner in a construction partnership – appeal by a partner who was not the nominated partner for tax purposes – assessed to tax on proceeds of disposal of properties acquired by the partnership – notices of consequential amendments to appellant partner’s tax returns stated no right of appeal – HMRC subsequently decided appellant had right to appeal amendments to partnership returns – whether good reason for delay – yes for periods covered by the consequential amendments – three-stage approach in Martland applied –Medpro followed – application granted
Before
TRIBUNAL JUDGE RACHEL GAUKEJANE CUMMINS
Between
JONATHAN BATTENAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentPhilip Ridgway of Counsel, instructed by Moore Barlow LLP for AppellantSam Dingley, litigator of HM Revenue and Customs’ Solicitor’s Office for RespondentsDECISION

Introduction

[1]Mr Batten applies for permission to bring a late appeal against:(1) amendments to his tax returns for the tax years 2015-16 and 2016-17 issued on 15 March 2022, and(2) a discovery assessment dated 28 November 2023 and a related penalty issued on 6 February 2024.

Hearing and evidence

[2]The hearing was conducted by video link on Microsoft Teams. 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 to observe the proceedings. As such, the hearing was held in public.[3]We had a 1,279-page document and authorities bundle that included Mr Batten’s response to HMRC’s objection to the application for a late appeal, correspondence, tax returns, legislation and case law. We had, in addition, two completion statements from property sales, two notices of consequential amendments sent to Mr Robbins, a note of a telephone call on 9 November 2021, HMRC’s notice of objection to this application, Mr Batten’s notice of appeal, some further case law, Tribunal directions, and both parties’ skeleton arguments. We also had an email containing a screenshot from Rightmove, which was sent to the Tribunal the evening before the hearing.[4]Mr Batten attended the hearing and gave oral evidence. He was cross examined by Mr Dingley. His oral evidence, which we accept, forms the basis of some of our findings of fact below.

Findings of fact

[5]Mr Batten was a partner in a partnership called Fairway Construction. There was one other partner, a Mr Jason Robbins. The partnership commenced on 1 October 2009. The date of cessation of the partnership is disputed but it is common ground that it had ceased, at the latest, by 6 April 2017.[6]Mr Robbins and his wife owned a separate company called Fairway Construction Dorset Ltd (“FCDL”).[7]Mr Batten is a carpenter and a sub-contractor in the construction industry. Fairway Construction acquired and developed properties so that they could be resold at a profit. Mr Robbins provided some of the finance for the property acquisitions, with the rest coming from third party lenders. Mr Batten’s role was to work in the properties; he did not provide finance. He is not sophisticated in tax or financial matters.[8]There was no written partnership agreement, but Mr Robbins and Mr Batten shared partnership profits 50:50. Mr Robbins dealt with all financial matters and was the nominated partner for tax purposes. Mr Batten has never been the nominated partner.[9]In July 2015, Mr Robbins and Mr Batten were registered by the Land Registry as joint owners of a property in Dorchester Road, Poole. This property was subsequently divided into four plots, that were intended to be developed and then sold separately.[10]On 30 November 2015, Fairway Construction sold a property in Highmore Road, Wimborne for £310,000. Mr Robbins continued to submit partnership returns after this date although, as noted below, Mr Batten’s position is that the partnership ceased shortly after this property was sold.[11]On 4 January 2017, a property known as Plot 2 in Dorchester Road was sold. The solicitors’ completion statement for the sale of this property states “Client name: Mr J Robbins and Mr J Batten”. Another, undated solicitors’ completion statement relates to the sale of a further property known as Plot 4 in Dorchester Gardens, Poole. This also states “Client name: Mr J Robbins and Mr J Batten”.[12]We find on the balance of probabilities that these properties were two of the four plots into which the property in Dorchester Road was divided.[13]The combined total of the sale proceeds for these two properties, as shown in the completion statements, was £629,500. The accounts for FCDL (Mr Robbins’ company) for the year ended 31 January 2017 show that company’s turnover for that year as £629,500. Although these accounts are for the year ended 31 January 2017, in the version we were shown, a column in the accounts is headed “2023”. The version we were shown was also unsigned.[14]Mr Robbins continued to submit partnership returns for Fairway Construction for subsequent tax years, until at least 2017-18.[15]Mr Batten did not have his own tax agent until 2023. The tax agent for the partnership was a Mr Michael Dean of Neville Dean & Co Ltd.[16]On 7 May 2019, HMRC informed Mr Batten and Mr Dean that they were commencing a check of Mr Batten’s tax position for the tax year 2016-17. The check was about undeclared property disposals in that year. At around the same time HMRC sent a similar letter to Mr Robbins.[17]On 4 June 2019, Mr Dean wrote to HMRC in response to those letters. He said he assumed HMRC wanted to know why “the properties” had not been included in the capital gains section of their tax returns. He said the reason was that “the properties have been dealt with as a property business trading through a partnership between both of the above named clients” (ie Mr Robbins and Mr Batten).[18]On 4 July 2019, HMRC opened a check into the partnership in respect of the tax year 2016-17 by writing to Mr Dean and to the nominated partner (Mr Robbins). The check was later extended to include the tax year 2015-16.[19]On 19 November 2019, HMRC sent Mr Batten an information notice under Schedule 36 of the Finance Act 2008 (“FA 2008”), seeking information and documents in relation to his capital gains tax position in respect of property disposals in 2016-17. The same officer wrote to Mr Batten again on 9 December 2019 to vacate that information notice, because in the meantime he had received a reply from the partnership’s agent.[20]On 9 November 2021, a different HMRC officer, Ms Shaw, phoned and spoke to Mr Dean. Mr Dean told Ms Shaw that his clients, Fairway Construction, were not engaging with him. She asked him to confirm her understanding that only one property sale had been included in the partnership accounts for 2016-17, and two had been omitted, as had the rental income from a fourth property. Mr Dean confirmed this to be correct. Ms Shaw told Mr Dean that HMRC had also discovered potentially omitted sales income for 2015-16.[21]Mr Dean did not contact Mr Batten about this phonecall and Mr Batten was not aware it had taken place.[22]On 18 November 2021, Ms Shaw wrote to Mr Batten to inform him that she had recently taken over the checks relating to the partnership aspects of his returns for 2015-16 and 2016-17. The officer informed Mr Batten that she had requested certain information and documents from Mr Robbins, and asked him to liaise with Mr Robbins to ensure she received this information by the due date.[23]On 23 February 2022, HMRC sent notices to the nominated partner, Mr Robbins, notifying him that amendments would be made to the partnership returns for 2015-16 and 2016-17. Mr Dingley, who appeared before us representing HMRC, confirmed in the hearing that, despite the hearing bundle being over a thousand pages long, we had not been provided with copies of these notices.[24]On 15 March 2022, HMRC sent Mr Batten notices informing him of consequential amendments to the partnership statements in his tax returns for 2015-16 and 2016-17, as HMRC had concluded that proceeds from sales of properties had been omitted. The amendments resulted in increases in the amount of tax due for 2015-16 in the amount of £8,550.15, and for 2016-17 in the amount of £74,971.72.[25]The notices sent to Mr Batten included the following paragraph. “What to do if you disagree You cannot appeal against this notice if you disagree with it. If you have any questions about the amendment to the Partnership Tax Return, you should contact the nominated partner for that tax return (or their successor).”[26]A further letter sent to Mr Batten by HMRC on 30 May 2022 stated that no appeal had been received within the 30 day appeal period and that therefore the amendments were final and conclusive.[27]Also on 30 May 2022, HMRC commenced a check to establish whether Mr Batten had failed to notify capital gains or income from property for the tax year 2019-20. The HMRC officer who wrote to Mr Batten informing him of the check requested various information and documents. Mr Batten did not reply so the officer sent further letters on 23 August 2022 and 28 November 2022, repeating the request. As Mr Batten continued not to reply, HMRC issued an information notice under FA 2008, Sch 36 on 10 February 2023. Mr Batten still did not reply and was issued with penalties under Schedule 36 on 30 March 2023.[28]Around this time (in March or April 2023) Mr Batten appointed his own agent, Terry Macartney of One 2 One Accountancy. Mr Macartney wrote to HMRC on 11 April 2023 to request an extension of time, but as the requested information and documents were not forthcoming, HMRC issued further penalties on 11 May 2023. A further information notice was issued to Mr Batten on 27 July 2023, with penalties for non-compliance with that notice issued on 7 September 2023 and 23 October 2023.[29]On 28 November 2023, HMRC issued Mr Batten with a notice of assessment for 2019-20 in the amount of £22,344.25. A copy of the notice was sent to One 2 One Accountancy. The notice concluded that Mr Batten should have notified this liability by 5 October 2020, but that he had failed to do so. According to HMRC, this liability related to the following income and gains for 2019-20:(1) Pay from J Batten Services Ltd: £8,628(2) Self-employed income: £27,007(3) Chargeable gain on half of the proceeds of sale of a property in Dorchester Road, Poole: £62,500[30]HMRC’s view that Mr Batten was entitled to half the proceeds of sale of the property in Dorchester Road was based on Land Registry records showing that he was the joint owner of that property.[31]We find, on the balance of probabilities, that the property in Dorchester Road that was sold in 2019-20 was one of the four plots into which the property in Dorchester Road acquired by Mr Batten and Mr Robbins in July 2015 was divided.[32]The notice of assessment issued on 28 November 2023 informed Mr Batten that he had the right to appeal, and that he had to do this within 30 days of the date of the assessment. A related penalty of £6,368.11 was issued on 7 February 2024.[33]We were not provided with a copy of the penalty assessment itself, only a letter sent by HMRC on 7 February 2024 informing Mr Batten that they had issued him with a penalty on that date and that the penalty assessment had been sent separately. However, as we had no submissions to the contrary, we find that the penalty assessment would (in line with HMRC’s usual practice) have informed Mr Batten of his right to appeal, and of the 30-day appeal deadline.[34]At various times between 2019 and 2024 Mr Batten contacted Mr Robbins about the communications he was receiving from HMRC. Mr Robbins assured Mr Batten that matters were being sorted. Throughout HMRC’s investigation and the subsequent legal proceedings, Mr Batten has received only very limited assistance and information from Mr Robbins.[35]On 19 April 2024, HMRC filed a petition at the High Court for a bankruptcy order against Mr Batten. On 19 July 2024, the bankruptcy hearing was adjourned so he could discuss his debts with HMRC. We understand that these proceedings have since been adjourned indefinitely pending the outcome of this appeal.[36]Also on 19 July 2024, Mr Batten’s agent (Mr Macartney) emailed HMRC to request a review of Mr Batten’s tax liabilities. HMRC responded to say that as the request was late, Mr Batten would instead need to make a late appeal.[37]On 17 September 2024, Mr Macartney emailed HMRC on behalf of Mr Batten to request a late appeal. HMRC rejected the request on 2 October 2024. The reason given by the HMRC officer for rejecting the request in relation to the amendments to the partnership returns for 2015-16 and 2016-17 was that Mr Robbins, as the nominated partner, had not submitted an appeal, and there was no statutory right of appeal against a consequential amendment to a partner’s individual tax return. As regards the discovery assessment for 2019-20, HMRC rejected the request on the grounds that Mr Batten did not have a reasonable excuse.[38]On 24 December 2024, Mr Batten’s agent sent a notice of appeal to the Tribunal, seeking permission to make a late appeal.

Mr Batten’s case

[39]Mr Batten’s grounds of appeal are, in summary, that HMRC are seeking to tax him on profits from selling properties that belonged solely to Mr Robbins or his company FCDL, and that these property disposals should not have been included in the partnership returns. Mr Batten contends that the properties have also been taxed in the sole name of Mr Robbins, through FCDL, and so would be taxed twice if HMRC also tax Mr Batten on the same proceeds of sale.[40]Mr Batten’s position is that the partnership ceased soon after the disposal of the property in Wimborne on 30 November 2015. He contends that he had no beneficial interest in the properties in Dorchester Road and Dorchester Gardens, and that he did not receive any of the proceeds from their sale. His case is that although he did some work for Mr Robbins in these properties, this was as a sub-contractor and he was paid as such.[41]Although the solicitors’ completion statements for the sales of the properties in Dorchester Road and Dorchester Gardens name both him and Mr Robbins as clients, Mr Batten argues that this is not evidence of title. The only explanation Mr Batten could offer as to why his name appears on the completion statements is that this is what the solicitors had habitually done.

Relevant law

[42]Section 30B of the Taxes Management Act 1970 (“TMA 1970”) relevantly provides as follows. “30B Amendment of partnership statement where loss of tax discovered(1) Where an officer of the Board or the Board discover, as regards a partnership statement made by any person (the representative partner) in respect of any period— (a) that any profits which ought to have been included in the statement have not been so included […] the officer or, as the case may be, the Board may, subject to subsections (3) and (4) below, by notice to that partner so amend the partnership return (including anything included in the return by virtue of section 12ABZB(7)(b) (amendment of partnership return following reference to tribunal)) as to make good the omission or deficiency or eliminate the excess.(2) Where a partnership return is amended under subsection (1) above, the officer shall by notice to each of the relevant partners amend— (a) the partner's return under section 8 or 8A of this Act, or (b) the partner's company tax return, so as to give effect to the amendments of the partnership return.” so as to give effect to the amendments of the partnership return.”[43]TMA 1970, s 31(1) provides that “an appeal may be brought against…any amendment of a partnership return under section 30B(1)”. TMA 1970, s 31A provides that any such appeal must be made within 30 days after the date on which the notice of amendment was issued.[44]The Tribunal has a broad discretion to permit late appeals. TMA 1970, s 49 relevantly provides as follows. “49 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.” (a) notice of appeal may be given to HMRC, but (b) no notice is given before the relevant time limit. (a) HMRC agree, or (b) where HMRC do not agree, the tribunal gives permission.”[45]In William Martland v HMRC [2018] UKUT 178 (TCC) (“Martland”), the Upper Tribunal provided guidance to the First-tier Tribunal (FTT) on the approach to adopt when considering whether to admit a late appeal. The Upper Tribunal said:
“[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 v TH White [2014] EWCA Civ 906]: (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. […] [46] In doing so, the FTT can have regard to any obvious strength or 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. (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.[46]In HMRC v Katib [2019] UKUT 189 (TCC), the Upper Tribunal found at [17] that the FTT made an error of law in that case “in failing to…give proper force to the position that, as a matter of principle, the need for statutory time limits to be respected was a matter of particular importance to the exercise of its discretion”.[47]In Medpro v HMRC [2025] UKUT 255 (TCC) (“Medpro”) at [88], the Upper Tribunal (Smith J and Judge Cannan) endorsed the three-stage test set out in Martland at [44], describing it as “an unimpeachable approach”. The Upper Tribunal then went on to consider the comments in Martland at [45] about “the particular importance of the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected”. Smith J found that it was not permissible to accord these factors particular weight. Judge Cannan disagreed, but as Smith J was the senior of the two judges, he had the casting vote.[48]We note that Medpro concerned the Tribunal’s discretion to grant an extension of time under section 83G(6) of the Value Added Tax Act 1994 (“VATA 1994”), but we consider Smith J’s comments to be equally applicable to Mr Batten’s appeal, as TMA 1970, s 49 is in similar terms to VATA 1994, s 83G(6): both state simply that an appeal may be made late if “the tribunal gives permission”.[49]In Pawar v HMRC [2025] UKUT 309 (TCC) at [91] (“Pawar”), it was noted that there are now conflicting Upper Tribunal decisions on whether “compliance with time limits” is a factor that must be given particular weight in the balancing exercise at Stage 3 of Martland. The Upper Tribunal said in Pawar at [93]:
“We find ourselves unable to conclude that either decision is clearly wrong or, conversely, clearly right. We note that HMRC are contemplating an appeal so it is possible the conflict may be resolved at a higher level, but we cannot delay this decision on that account. In the circumstances, we consider that we should follow Medpro UT on the grounds that it is the more recent decision and expressly considers the correctness of the earlier decision.”
[50]Lands Luo Ltd v HMRC [2025] UKFTT 1207 (TC) (“Lands Luo”) is a decision of the First-tier Tribunal, released after Medpro and Pawar, which included Lord Justice Dingemans, the Senior President of Tribunals as member of the panel. The First-tier Tribunal at [53] - [71] agreed with the approach in Martland. Lands Luo considered Medpro but not Pawar. Medpro, Pawar and Lands Luo all confirm that the three-stage test in Martland should be applied.[51]In reaching our decision, we have followed the guidance in Pawar and have adopted the approach set out in Medpro. In light of the decision in Lands Luo, we have also considered whether we would have reached a different conclusion if we had adopted the stricter approach set out in Martland, and had given particular weight to the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected.

Discussion

[52]At the start of the hearing there was a discussion about whether Mr Robbins intended to appeal, or had already appealed, as the nominated partner against the amendments to Fairway Construction’s partnership returns. The application before us was by Mr Batten in his own capacity, not by the Fairway Construction partnership. Mr Ridgway said that Mr Batten’s advisers had received little information or assistance from Mr Robbins and so were content to proceed with this application by Mr Batten on his own.[53]We have carefully considered the submissions and evidence of both parties, but have not found it necessary to refer to every argument and authority that was put to us, nor to describe every part of the evidence.

Stage 1: Length of delay

[54]The notices of the amendments to the partnership returns for the tax years 2015-16 and 2016-17 were issued on 23 February 2022. The relevant appeal deadline was 30 days later, on 25 March 2022. The appeal to HMRC was made on 17 September 2024, over two years late.[55]The discovery assessment in relation to the tax year 2019-20 was made on 28 November 2023, and the 30-day appeal deadline was on 28 December 2023. The appeal on 17 September 2024 was therefore over 8 months late. For the penalty assessment issued on 7 February 2024, the 30-day appeal deadline was 8 March 2024, so the appeal on 17 September 2024 was over 6 months late.[56]We find that the length of the delay is, in each case, serious and significant. We note that Mr Battens accepts this to be the case.

Stage 2: Reason for delay

[57]We remind ourselves that TMA 1970, s 31(1) provides a right of appeal against an amendment of a partnership return, not against a consequential amendment under TMA 1970, s 30B(2) to a partner’s individual return. The question we must therefore answer in relation to the tax years 2015-16 and 2016-17, at Stage 2 of the Martland test, is why Mr Batten was late in appealing the amendment to the partnership return.[58]The question in relation to the tax year 2019-20 is, more straightforwardly, why Mr Batten was late in appealing the discovery assessment, and related penalty assessment, for that year.[59]We have noted that Mr Batten is a carpenter who is not sophisticated in tax or financial matters. We have also noted that he did not have his own tax adviser until 2023. Mr Dean was the adviser for the partnership, but we had no evidence that Mr Dean was in direct communication with Mr Batten at the times when he was still in time to appeal.[60]We accept Mr Batten’s oral evidence that the reason he failed to appeal, or indeed to respond to HMRC at all, before 17 September 2024 was that he relied entirely on Mr Robbins, and that he believed Mr Robbins when he assured him that he would sort out the issues with HMRC. Mr Batten had, in his own words, put his “head in the sand” and failed to read properly the communications being sent to him by HMRC. He was aware of the tax that HMRC said he owed, but considered that these liabilities were nothing to do with him. He believed that in these circumstances he did not need to respond, because he trusted Mr Robbins to give HMRC the necessary information to put matters right.

Stage 3: Evaluation of all the circumstances

[61]In relation to Stage 3 of the Martland test, HMRC submitted as follows.(1) If the application for a late appeal were to be allowed, HMRC would be prejudiced in that they would have to divert resources to defend an appeal which they were entitled to consider closed, especially given the serious and significant length of the delay.(2) There would also be prejudice to other taxpayers as HMRC’s and the Tribunal’s resources, which would otherwise have been used in respect of those who have made appeals in accordance with statutory time limits, would be diverted to consider Mr Batten’s appeal.(3) Mr Batten and his agent were notified of amendments, the assessment, penalties and relevant appeal deadlines and did not appeal on time. It was only following the commencement of debt collection and insolvency proceedings that Mr Batten sought to challenge the assessments made and provide evidence that was repeatedly sought by HMRC during the enquiries. Mr Batten was aware of the issues and had multiple opportunities to assist with establishing the correct liabilities, or appeal if they were incorrect. He demonstrated a continued failure to comply with HMRC’s requests for information, as well as statutory deadlines.(4) Allowing a late appeal in this instance is inconsistent with the principles of good administration of justice which require litigation to be conducted efficiently and at proportionate cost. Mr Batten was not unaware of the check into the partnership return and was notified of all outcomes.(5) HMRC 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 normally be required to defend appeals after an excessive gap between the expiration of the time limit and the appeal.(6) To the limited extent that the merits of the underlying appeal should be considered, Mr Batten’s appeal is weak. He has failed to provide evidence that the properties in question did not belong to him. The Dorchester Road property was registered at the Land Registry as being owned jointly by Mr Batten and Mr Robbins, it was not disputed that Mr Batten had failed to disclose income for 2019-20, and Mr Dean had informed HMRC that properties had been omitted from the partnership accounts.(7) While Mr Batten would be prejudiced by the bankruptcy proceedings that have been adjourned pending the outcome of this appeal, it is to be expected that HMRC would take action to recover debts that are owing, particularly in light of Mr Batten’s failure to respond to HMRC’s requests for information. If Mr Batten was unable to provide the information and documents requested by HMRC, he could have appealed the Schedule 36 notices.[62]As we have noted above, Stage 3 of the Martland test requires us to conduct a balancing exercise to assess the merits of the reasons for the delay and the prejudice which would be caused to both parties by granting or refusing permission.[63]It is relevant to note here that HMRC have changed their position in relation to Mr Batten’s appeal rights. As recently as March 2025 (in their notice of objection to the application for a late appeal), HMRC’s position was that Mr Batten had no right to appeal either against the consequential amendments to his own tax returns for 2015-16 and 2016-17, or against the amendments to the partnership returns for those years. As regards the amendments to the partnership returns, HMRC’s position was that only Mr Robbins, as the nominated partner, had the right to appeal.[64]HMRC’s new position is set out in their skeleton argument dated 26 September 2025. This refers to two previous decisions of this Tribunal. The first is Phillips v HMRC [2009] UKFTT 335 (TC) (“Phillips”), in which it was said at [106]:
“In my view a partner does have a sufficient legal interest in an amendment to a partnership return under s30B as it leads automatically to an amendment to his personal tax return. He can therefore exercise the right of appeal under s31 against assessments of the partnership or amendments to partnership returns.”
[65]The second decision is Gibbs v HMRC [2013] UKFTT 236 (TC) (“Gibbs”), in which it was said at [56]:
“It seems to me that a proper interpretation of s 31 and one that is consistent with logic is that only the partnership returns can be appealed. But as I said in Phillips, any partner can bring the appeal. The effect of succeeding in the appeal would be a reduction in the partnerships' taxable profits and this would flow through to benefit all partners under s 50(9).”
[66]HMRC’s current view is that while these decisions are not binding, they accept this interpretation. This means they now accept that Mr Batten does have the right to appeal against the amendments to the partnership returns.[67]We first consider the merits of the reason for the delay in appealing the amendments to the partnership returns for the tax years 2015-16 and 2016-17.[68]We do not consider that, taken on its own, Mr Batten’s “head in the sand” approach, combined with his reliance on Mr Robbins, constitutes a good reason for the delay. We consider that even an unsophisticated taxpayer, upon receiving letters from HMRC about tax that he thought he did not owe, could be expected to take advice or contact HMRC, rather than taking no action.[69]However, as part of our assessment of the merits of this reason, we have considered what Mr Batten would or should have done, if he had fully engaged with the correspondence he received. He received an information notice on 19 November 2019, but this was withdrawn shortly afterwards, on 9 December 2019. He received a letter from HMRC on 18 November 2021, informing him that information and documents had been requested from Mr Robbins, but not asking for a direct response from Mr Batten.[70]The notice of amendment of the partnership return was issued on 23 February 2022. We were not provided with a copy of this notice, and we do not know whether a copy was sent to Mr Batten. However, at that stage HMRC did not consider Mr Batten could appeal this notice. We therefore find that the notice would not have told Mr Batten that he had a right to appeal. The notice of consequential amendment, issued on 15 March 2022, stated expressly that Mr Batten could not appeal against that notice.[71]Therefore, even if Mr Batten had carefully studied the documentation sent to him before the expiry of the appeal deadline on 25 March 2022, we find that he would have concluded that he had no right of appeal. We think it would have been reasonable for him to take HMRC at their word when they said he could not appeal, and would not have expected him to seek advice as to whether he might have a separate line of appeal against the amendments to the partnership returns. Even if he had done so, it is not clear to us that a reasonably competent tax adviser would have been fully appraised of the decisions in Phillips and Gibbs and so would have known that Mr Batten could have challenged HMRC’s position.[72]We also note that although HMRC highlighted Mr Batten’s repeated failures to provide requested information, nearly all the evidence we were shown of these failures related to the check into his tax position for the tax year 2019-20. This check commenced on 30 May 2022, so after the expiry of the appeal deadline for the amendments to the partnership returns for 2015-16 and 2016-17. The correspondence we referred to above, sent to Mr Batten on 19 November 2019 and 18 November 2021, was either withdrawn or did not request a direct response from Mr Batten to HMRC.[73]In these circumstances we find that Mr Batten had a good reason for his delay in appealing the amendments to the partnership returns for 2015-16 and 2016-17.[74]We next consider the prejudice which would be caused to both parties by granting or refusing permission to appeal against the amendments to the partnership returns for 2015-16 and 2016-17. In doing so we note that we may have regard to any obvious strength or weakness of Mr Batten’s case, but should not descend into a detailed analysis of the underlying merits of the appeal.[75]As regards the prejudice to Mr Batten, he is facing bankruptcy proceedings that have been stayed pending the outcome of this appeal. The prejudice to Mr Batten if we refuse permission is therefore severe. However, this on its own is not a determining factor. Parliament has empowered HMRC to collect tax that is due, and has also determined the time limits within which appeal rights should be exercised. It is not for the Tribunal routinely to overturn these time limits on any occasion when a taxpayer faces bankruptcy.[76]As regards the prejudice to HMRC, they would need to devote time and resource to defend the appeal. There would also be a cost in terms of Tribunal resources.[77]We would not, though, accept HMRC’s submission that this was a matter HMRC had considered closed. The check and subsequent discovery assessment for 2019-20 was very much a continuation of the amendments to Mr Batten’s tax returns for 2015-16 and 2016-17: these all concerned Mr Batten’s profits from the Fairway Construction partnership and specifically, the nature of his interest in the four plots in Dorchester Road and Dorchester Gardens. As may be seen from our findings of facts above, HMRC’s compliance activity in relation to 2019-20 has been ongoing since the check was opened in May 2022, which in turn followed shortly after the amendments to Mr Batten’s tax returns for 2015-16 and 2016-17. This is not therefore a case in which HMRC would need to turn their attention to a matter that has long been quiet.[78]We next consider whether there is any obvious strength or weakness in Mr Batten’s case. As the case was presented to us, the crux of the dispute for all three tax years in question concerned the nature of Mr Batten’s interest in the properties on the four plots in Dorchester Road and Dorchester Gardens. Central to this was his profit-sharing arrangement with Mr Robbins, and when and how this arrangement had come to an end.[79]HMRC’s case that Mr Batten was entitled to half of the sale proceeds of all these properties was largely based on the Land Registry entries and the solicitors’ completion accounts. However, we agree with Mr Ridgway that these are not proof of Mr Batten’s beneficial entitlement. The undivided plot in Dorchester Road was acquired by Mr Batten and Mr Robbins in 2015 when they were in partnership. Mr Batten’s case is that when the partnership ceased in early 2016, any remaining properties should have been transferred to FCDL (Mr Robbins’ company). We do not know what form these transfers are alleged to have taken, but Land Registry entries from 2015 do not prove they did not take place. The reference in the solicitors’ completion accounts to both Mr Batten and Mr Robbins may have been simply because they were both named on the legal title.[80]We also do not regard either Mr Dean’s letter of 4 June 2019, or the note of the call between Mr Dean and Ms Shaw (HMRC’s caseworker) on 9 November 2021, as conclusive. The letter refers to “properties” without specifying the properties in question. In the phone call, Mr Dean referred to properties being “omitted” from the partnership return, but if those properties had been transferred to FCDL, it would be correct for them not to appear in the partnership return. It may also be that, some two or three years after the events, Mr Dean’s recollection of the timing of the cessation of the partnership and of the property disposals was not entirely accurate. We also only had a brief note of this call, and not a transcript.[81]There are aspects of the documentary evidence that appear curious or contradictory. We have mentioned that FCDL’s accounts for the year ended 31 January 2017 include a column headed “2023”. We were not provided with an explanation as to how this had come about. We were also provided with a version of Fairway Construction’s partnership tax return for 2016-17 which gave the date of cessation of the partnership as 30 June 2016, but also a version of the return for the following year in which the cessation date is given as 6 April 2017. It may be that these inconsistencies could be resolved in a substantive hearing.[82]Overall, we would describe Mr Batten’s case as neither obviously strong nor obviously weak. His case seemed to us to include significant unexplained elements, but HMRC’s case also appeared far from conclusive. We therefore view the strength of Mr Batten’s case as a neutral factor in the balancing exercise which we must conduct at the third stage of the Martland approach. This means we must rely on other factors to tip the balance.[83]As regards the application to bring a late appeal against the amendments to the partnership returns for 2015-16 and 2016-17, on the one hand we have the serious and significant delay, and the need for both HMRC and the Tribunal to expend resources. On the other hand, we have the good reason for the delay, and the prejudice to Mr Batten in the form of the bankruptcy proceedings. Among these factors, we place relatively more weight on the good reason for the delay, because we do not consider it to be in the interests of justice to deny Mr Batten the right to bring an appeal in circumstances where correspondence sent to him by HMRC would have led him reasonably to conclude that he had no such right.[84]Weighing all of these factors, we have decided to allow Mr Batten’s application in relation to the amendments to the partnership returns for 2015-16 and 2016-17.[85]We mention for completeness that we are giving permission to appeal against the amendments to the partnership returns, not the consequential amendments to Mr Batten’s tax returns, because TMA 1970, s 31 provides a right of appeal against the former, but not the latter. In the hearing, Mr Ridgway highlighted a possible tension here, in that Mr Batten’s case is that he was not a partner at all in 2016-17. However, applying the reasoning in Phillips and Gibbs, we consider that Mr Batten would have a right of appeal as a former partner, in circumstances where (as here) an amendment to a partnership return led automatically to an amendment to his personal tax return.[86]We next conduct the balancing exercise in respect of the application to make a late appeal against the discovery assessment for 2019-20 and the related penalty assessment.[87]By contrast with the amendments to the partnership returns for the earlier years, HMRC had informed Mr Batten of his appeal rights, and the 30-day deadline, in relation to the discovery assessment and the penalty. Moreover, by the time he received the notices of those assessments, he was represented by his own tax agent. We do not know whether Mr Batten’s agent advised him to make an appeal within the deadline. In these circumstances we are unable to conclude that there was a good reason for the delay.[88]As regards the prejudice which would be caused to both parties by granting or refusing permission to appeal the discovery assessment for 2019-20 and the related penalty, for Mr Batten it remains as before: he is facing bankruptcy proceedings.[89]For HMRC however, given our ruling in relation to 2015-16 and 2016-17, the incremental prejudice caused by our granting permission to appeal in relation to 2019-20 is small. As noted above, the factual background to the dispute for all three years is the same: all concern the nature of Mr Batten’s interest in the plots in Dorchester Road and Dorchester Gardens, and his profit-sharing arrangement with Mr Robbins. Given that our decision to allow the application in relation to the earlier periods will require this factual dispute to be resolved, our expectation would be that this resolution will also determine the correct outcome in relation to 2019-20. The additional effort and resource that will be required from HMRC would therefore, we consider, not be great.[90]We have in mind the possibility that the dispute in relation to the factual circumstances in 2015-16 and 2016-17 may be resolved in Mr Batten’s favour, in such a way that it would then be apparent that the dispute in relation to 2019-20 should likewise have been resolved in his favour. In this situation, it would in our view be arbitrary and unjust for him to remain liable to pay tax that should not have been due, as a result of a decision by us to refuse him permission to appeal for that year only.[91]It follows that we also grant Mr Batten permission to bring a late appeal against the discovery assessment for 2019-20 and the related penalty. We have taken account both of the serious and significant delay and of the lack of a good reason for this delay, but nonetheless reach this decision having evaluated all the circumstances of this case, as described above.[92]In reaching our decision (for all three tax years under dispute) we have considered the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected. We have adopted the approach set out in Medpro, and have therefore not given these factors particular weight. However, we would have reached the same decision even if we had adopted the stricter approach set out in Martland, and had given particular weight to the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected.[93]For all the reasons above the application for permission to make a late appeal pursuant to TMA 1970, s 49(2) is granted.

Directions

[94]HMRC shall provide to Mr Batten within 14 days after the date of this decision copies of the notices sent to Mr Robbins on 23 February 2022 notifying him that amendments would be made to the partnership returns for 2015-16 and 2016-17.[95]Mr Batten shall provide to HMRC and the Tribunal, no later than 28 days after HMRC’s compliance with the previous direction, his amended grounds of appeal detailing the reasons that he disagrees with the amendments to the partnership returns for 2015-16 and 2016-17, the discovery assessment for 2019-20, and the penalty assessment for 2019-20.[96]HMRC shall provide their Statement of Case to Mr Batten and the Tribunal no later than 28 days after Mr Batten’s compliance with the direction at paragraph 95 above.

Right to apply for permission to appeal

[97]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this 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 application must be received by this Tribunal not later than 56 days after this decision is sent to that party. 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. Release date: 11th December 2025