Nissi N Nissi Limited & Anor v The Commissioners for HMRC [2025] UKFTT 567 (TC)

[2025] UKFTT 00567 (TC)Case No TC09531
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 23 April 2025Date Judgment date: 22 May 2025
By remote video hearing
Appeal reference: TC/2024/03130
TC/2024/03128
Application for permission to appeal late – Martland - whether late penalty appeal intrinsically connected to substantive in-time appeal so requiring more lenient approach – no
Before
TRIBUNAL JUDGE IAN HYDEMICHAEL BELL
Between
NISSI N NISSI LIMITED (1)AppellantCHRISTINE OLUBUKOLA ADEOSUN (2)AppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentMartin Kaney, accountant for AppellantFaria Hanif, litigator of HM Revenue and Customs’ Solicitor’s Office for RespondentsDECISION

Introduction

[1]This decision is concerned with whether the appellants are entitled to appeal late in respect of penalty assessments (raised on Ms Adeosun) and a personal liability notice (“PLN”) (raised on Nissi N Nissi Ltd (“NNN”)) in circumstances where the underlying VAT assessments are the subject of an in-time appeal to the Tribunal.[2]We were referred in the hearing to a hearing bundle.Ms Adeosun, for herself and as a director of NNN provided a short witness statement and gave evidence in the hearing. Mr Auchterlonie, an officer of HMRC, also provided a witness statement and gave evidence. Mr Auchterlonie investigated the VAT repayment claims which led to the VAT assessments, penalties and PLN.[3]The burden of proof in this matter is on the appellants.

the facts

[4]We find the facts in this appeal as set out below.

The appellants

[5]NNN is a company that is or was engaged in the redevelopment of a property at Tower Bridge Road, London with a view to letting it. NNN made an application for registration for VAT on 7 December 2016. The VAT 1 application form listed the directors of NNN as a Samson Olatunji and Ms Adeosun. The business address given was 45 Strathnairn Street, London.[6]Ms Adeosun is a director of NNN and, separately, runs a number of childrens’ nurseries, one of which was at Strathnairn Street.

The VAT investigation

[7]On 29 March 2019 HMRC received a VAT repayment claim from NNN for £69,888 in respect of the VAT period 1 December 2018 to 28 February 2019. Mr Auchterlonie started a check on the claim. There then followed some engagement with NNN, including with Mr Olatunji and the provision of information by NNN to HMRC.[8]On 22 February 2021 HMRC issued an assessment for the period 02/17 to 08/18 for £606,164 (“the VAT Assessments”). As enquiries were continuing, HMRC suspended the time limit to appeal.[9]On 12 April 2022 Mr Auchterlonie wrote to NNN explaining that HMRC remained of the view set out in the 22 February 2021 letter which was their preferred view but, in addition, HMRC had an alternative view, which would apply if HMRC’s preferred view was incorrect. The letter stated that NNN had 30 days from the date of the letter in which to request an independent review or appeal the assessments to the Tribunal.[10]NNN made an in-time appeal of the VAT Assessments to the Tribunal (“the VAT Appeals”).[11]On 10 November 2022 Mr Auchterlonie wrote by e mail to NNN’s adviser, Ashaf Pervez of ABC Accountants, advising him that HMRC intended to raise penalties as follows;(1) On HMRC’s preferred view, for failure to take reasonable care(2) On HMRC’s alternative view, for some accounting periods, penalties for deliberate behaviour and for other accounting periods, penalties for failure to take reasonable care(3) HMRC were considering whether a PLN should be issued to Ms Adeosun in respect of the deliberate and concealed behaviour(4) Mr Auchterlonie explained that whether any penalty applied depended on whether HMRC’s preferred or alternative view in the VAT Assessments was determined to be correct.[12]On 11 November 2022 Mr Auchterlonie telephoned Mr Pervez about Mr Aucherlonie’s e mail of 10 November. Mr Pervez said he intended to discuss it with his clients.[13]On 7 March 2023 HMRC issued a penalty explanation letter to NNN on the basis of HMRC’s preferred view and in the amount of £168,210.49.[14]On 21 March 2023 Mr Auchterlonie telephoned Mr Pervez. Mr Pervez said he had not been in contact with his client for a couple of months and he was not sure whether he was still instructed.[15]On 21 April 2023, HMRC issued a penalty assessment notice for £168,210.49 to NNN on HMRC’s preferred view. The notice advised NNN of its right to request a statutory review or make an appeal to the Tribunal within 30 days of the date of the notice.[16]On 23 May 2023, HMRC issued a penalty explanation letter to NNN in respect of the HMRC’s alternative view.[17]On 26 June 2023, HMRC issued a penalty assessment notice for £246,532.36 in respect of the HMRC’s alternative view. The notice advised NNN of its right to request a statutory review or make an appeal to the Tribunal within 30 days of the date of the notice.[18]On 29 June 2023, HMRC issued a PLN to Ms Adeosun as a director of NNN being some 93% of the penalty charged to NNN on HMRC’s alternative view. The notice advised Ms Adeosun of her right to request a statutory review or make an appeal to the Tribunal within 30 days of the date of the notice.[19]On 17 April 2024, NNN entered into an alternative dispute resolution process with HMRC in respect of the VAT Appeals. On or about this time NNN had appointed Mr Kaney of X-VAT Limited as its adviser on the ADR process but Mr Pervez remained in the background. During the ADR meeting Mr Kaney realised that the penalty notices and the PLN had not been appealed and said that he intended to rectify this.[20]On 07 May 2024, Mr Kaney on behalf of NNN and Ms Adeosun appealed to the Tribunal in respect of the penalty notices and the PLN respectively (“the Penalty/PLN Appeals”). In the notices of appeal it was stated that the appeals were late due to “a technical oversight by the taxpayer’s accountant”.

Awareness of HMRC’s correspondence

[21]It was Ms Adeosun’s evidence that she never saw or was aware of the penalty notices or the PLN. Ms Adeosun said that Mr Pervez submitted the VAT Appeals on behalf of the company and, so far as she was concerned, was dealing with the matter on their behalf. She was not aware of the appeal deadlines for the penalties issued by HMRC. Her understanding was that it was all part of the same ongoing process.[22]All the letters addressed to NNN that we have seen were sent to Strathnairn Street, the place of business indicated by NNN on its VAT registration form. Mr Auchterlonie in his oral evidence advised that, whilst there may have been numerous addresses for Ms Adeosun, as far as NNN was concerned, HMRC were obliged to send correspondence to the registered address. NNN had never requested that the address held by HMRC be changed from Strathnairn Street. In response to questions in the hearing Mr Auchterlonie confirmed, having consulted the files on HMRC’s records, that all letters except the penalty and PLN notices were also copied to Mr Pervez. The penalty and PLN notices were issued by a central team and they did not tend to copy in advisers and he could not see evidence that they had done so. We note that the email of 10 November 2022 from Mr Auchterlonie to Mr Pervez outlined HMRC’s position on penalties but did not amount to appealable penalty notices.[23]In support of HMRC’s argument that Ms Adeosun must have seen some or all of the 6 letters relevant to the penalties and PLN, Mr Auchterlonie noted that none of the letters had been returned. Further, from Google maps images it was clear that the property at Strathnairn Street was standing in March 2023 but had been demolished by July 2024. It was possible that the letters had all been sent to that address whilst it was standing and, indeed, it would be odd for the Post Office (presumably Mr Auchterlonie means the Royal Mail) not to return letters which had been delivered to a demolished building. It was Ms Adeosun’s oral evidence that the property was demolished in April 2023 and therefore she could not have received the penalty notices. However, Ms Adeosun proffered no evidential support for this assertion and could not explain why no changes were made to update the company’s place of business for VAT purposes.[24]As to the PLN notice of 29 June 2023, this was sent to Ms Adeosun at an address in Sheridan Place, London. Ms Adeosun in her oral evidence was not entirely clear as to the precise dates but she had moved in the relevant periods and so at times she was not living at Sheridan Place. Mr Auchterlonie gave evidence that Sheridan Place was the address on Ms Adeosun’s records and again HMRC could only send letters and notices to the address they had been given.[25]During the hearing we questioned Ms Adeosun on whether she had ever received any letters sent by HMRC. Ms Adeosun denied receiving any.

HMRC’s preferred and alternative views on the substantive VAT issues

[26]It is not necessary to consider in any detail the underlying VAT Assessments or VAT Appeals but a short summary is appropriate. NNN owned and had been redeveloping a property at Tower Bridge Road and sought to recover the development input tax on the basis that it had opted to tax and would charge taxable rent.[27]HMRC’s preferred approach to the proper VAT treatment of the redevelopment is to argue that the option to tax was ineffective because NNN intended to let the property to a connected company that is unable to recover VAT, namely a nursery of which Ms Adeosun was a director. Accordingly, none of the £606,164 of VAT sought to be reclaimed could be recovered.[28]HMRC’s alternative view is that, even if the option to tax is valid, the invoices supplied to HMRC to justify the VAT recovery were false and, further, some of the bank statements supplied to HMRC to support the input tax recovery had been altered. On that basis £450,341 of the VAT reclaimed should be denied.[29]Whether any penalty or the PLN might be payable – and which one - therefore depends at least initially on which, if any, of HMRC’s views prevail. Even if that were the case, whether the penalty is ultimately payable would also depend on whether that penalty or PLN is properly chargeable under the relevant penalty legislation but it must be the case that they are in any event contingent on the VAT Appeals. For HMRC, it was accepted that there are three permutations as to the impact on the Penalty Notices and the PLN, namely:(1) HMRC succeeds in its preferred view: the penalty notice of 21 April 2023 for £168,210.49 is in point and the June 2023 penalty notice and the PLN fall away;(2) HMRC fails in its preferred view but succeeds in its alternative view: the penalty notice of 26 June 2023 for £246,532.36 and the PLN are in point and the April 2023 penalty notice falls away;(3) NNN succeeds in the VAT Appeals: both penalty notices and the PLN fall away.

legislation and authorities

[30]Paragraph 19(1) Schedule 26 Finance Act 2021 provides that a person may appeal against decision by HMRC that the person is liable to a penalty and under paragraph 19(2), as to the amount of that penalty:
“19(1) A person may appeal against a decision of HMRC that the person is liable to a penalty under this Schedule. (2) A person liable to a penalty under this Schedule may appeal against a decision of HMRC as to the amount of the penalty.”
[31]Paragraph 20 provides that an appeal is to be treated the same as appeal of the underlying tax:
“20(1) An appeal under paragraph 19 is to be treated in the same way as an appeal against an assessment to the tax concerned (including by the application of any provision about bringing the appeal by notice to HMRC, about HMRC's review of the decision or about determination of the appeal by the First-tier Tribunal or Upper Tribunal).”
[32]The provisions of the Value Added Tax Act 1994 governing VAT appeals therefore apply. HMRC must offer a review of the decision under section 83A and section 83G(3) then provides that an appeal to the Tribunal from the conclusion of that review should be made within 30 days of the date of that conclusion:
“(3) In a case where HMRC are required to undertake a review under section 83C— (a) an appeal may not be made until the conclusion date, and (b) any appeal is to be made within the period of 30 days beginning with the conclusion date.”
[33]Where an appeal is made late section 83G(6) provides that the appeal may not be made unless the Tribunal gives permission:
“(6) An appeal may be made after the end of the period specified in subsection (1), (3)(b), (4)(b) or (5) if the tribunal gives permission to do so.”
[34]We also note Rule 20 of The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 “20(1) Where an enactment provides for a person to make or notify an appeal to the Tribunal, the appellant must start proceedings by sending or delivering a notice of appeal to the Tribunal within any time limit imposed by that enactment. … (4) If the appellant provides the notice of appeal to the Tribunal later than the time required by paragraph (1) or by an extension of time allowed under rule 5(3)(a) (power to extend time)— (a)the notice of appeal must include a request for an extension of time and the reason why the notice of appeal was not provided in time; and (b)unless the Tribunal extends time for the notice of appeal under rule 5(3)(a) (power to extend time) the Tribunal must not admit the notice of appeal.”[35]Where an appeal is made late the principles to be considered by the Tribunal have been set out in William Martland v The Commissioners for HM Revenue and Customs [2018] UKUT 0178 (TCC): “29…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… 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. …The FTT's role is to exercise judicial discretion taking account of all relevant factors, not to follow a checklist. 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.

applying martland

[36]We have applied the guidance in Martland to the facts of this appeal.

Length of delay

[37]The appeal to the Tribunal on 7 May 2024 was over 11 months after the expiry of the 30 day appeal time limit for the 21 April 2023 penalty notice and 9 months for both the 26 June 2023 penalty notice and the PLN notice of 29 June 2023.[38]HMRC say this is a serious and significant delay and we agree.

Reasons for the delay

[39]Mr Kaney for the appellants argued that the appeals were delayed because the taxpayers were not aware of the penalty and PLN notices. He argued that HMRC cannot assume that Ms Adeosun for herself and as a director of NNN saw any of the relevant letters and they have no evidence to that effect.[40]Mr Kaney said that he had not been involved until the ADR. He had included the wording in the grounds of appeal as it was perhaps a polite way of explaining the position at a time when he did not know entirely what had happened and nothing should be read into the wording.[41]Further, even if Ms Adeosun was aware of the notices, what is clear is that the appellants relied upon their accountant to resolve the position with HMRC. Ms Adeosun, as director and in her personal capacity as regards the PLN, could not be expected to understand the difference between the penalty notices and the substantive VAT dispute. It is unreasonable for HMRC to expect Ms Adeosun and NNN to have submitted the penalty and PLN appeals themselves.[42]Ms Hanif for HMRC argued that Ms Adeosun (and therefore also NNN) received the letters and that there was no good reason for the delay. There were a number of facts that point towards her being aware of the notices:(1) The argument that the notices had never been received had not previously been made before the hearing; it was not mentioned in the grounds of appeal nor in Ms Adeosun’s witness statement.(2) The grounds for being late in the notice of appeal, that there was a “technical oversight” by the accountants, infers the notices had been received but not acted upon.(3) In her witness statement Ms Adeosun said that the notices were all part of the same process. Again, that inferred that she knew about the notices.(4) The final letter in respect of the substantive VAT issues was sent to Strathcairn Street on 12 April 2022 and appealed within 30 days. The taxpayer must therefore be taken to be aware of correspondence going to that address.(5) The penalty and PLN notices of appeal in 2024 gave Strathnairn Street as the address for both NNN and Ms Adeosun.[43]Ms Harif noted that there had been a three-week delay between the date of the ADR meeting and the appeals being submitted. That was a further delay.[44]In our view, had either Ms Adeosun or Mr Pervez been aware of the notices then there could have been no good reason for the delay. The notices clearly stated what the recipient should do next and we do not accept Ms Adeosun’s argument that she thought they were part of the same matter as the VAT Appeals. The argument is therefore whether they received the notices and, if so, whether that amounted to a good reason for the delay.[45]Ms Adeosun’s evidence was that she did not receive the penalty and PLN notices. However, we find this to be at odds with other evidence. We accept HMRC’s evidence that they sent the notices to the correct addresses. Neither of the appellants have argued that they sought to change those addresses with HMRC. There was no evidence either directly or indirectly as to what Mr Pervez received or knew about the issue of the penalties. However, by virtue of Mr Auchterlonie’s e mail of 10 November 2022 and the conversation with Mr Auchterlonie the following day, he was on notice that HMRC were considering issuing penalties and a PLN.[46]Overall, we find that that the cause of the delay is a collective failure by NNN, Ms Adeosun and their accountant Mr Pervez to manage the tax investigation. Ms Adeosun and Mr Pervez were aware of the investigation and Mr Pervez was aware from 10 November 2022 that penalties and an APN were being considered by HMRC. Ms Adeosun and Mr Pervez should have put in measures to ensure that all correspondence, whether sent to Mr Pervez or the appellants, was received and acted on. However, that does not seem to have happened, indeed in March 2023 Mr Pervez told Mr Autherlonie that he has not heard from his client for a couple of months and was not sure he was still instructed. We find there is no good reason for the delay.

Evaluation of all the circumstances

[47]Mr Kaney argued that being able to defend the Penalty/PLN appeals was a very serious matter for the appellants. Further, there was a heavy burden on HMRC to show the appellants were liable, in particular showing deliberate behaviour by the appellants. Not being able to require HMRC to show that was the case would be extremely prejudicial to the appellants.[48]Mr Kaney also argued that the current circumstances were very unusual. The VAT Appeals were made in time and the appeals are proceeding. The issues in the Penalty/PLN appeals are intrinsically connected with the complex issues in the VAT Appeals such that any consideration of the penalty position would be a marginal additional effort on the parties’ part. Therefore,the Tribunal, in circumstances, where the substantive assessments are subject to in time appeals, should consider the stage 3 test in Martland with less rigidity that would be the case for a late appeal against a substantive matter. We take Mr Kaney to mean by this argument that, for example, under HMRC’s alternative view, the Tribunal would need to consider whether the invoices were false and the bank statements had been altered. That is substantially the same issue as in the PLN appeal as to whether NNN deliberately underpaid its VAT and whether Ms Adeosun was responsible for that underpayment. There can therefore, according to Mr Kaney, be little if any prejudice to HMRC if the Penalty/PLN appeals proceeded.[49]HMRC argued that from Martland it is clear that time limits need to be respected. HMRC should be entitled to treat the matter as closed and not divert resources to manage this appeal. The appellants were clearly notified of its appeal rights and the time limit to do so. The notices were sent to the right addresses and not returned, Mr Pervez, their accountant, was aware that HMRC were considering issuing penalties and a PLN. The delay of 9 and 11 months is clearly substantial. There was no established principle that where a late appeal is “intrinsically connected” with in-time appeals, the Tribunal should take a more relaxed attitude to compliance with time limits.[50]In evaluating all the circumstances, we accept on the limited information before us that, given the burden of proof, the appellant may have grounds in the Penalty/PLN appeals. As to whether being denied the opportunity to appeal would cause real prejudice, we note the seriousness of the issue for the appellants and the risk of prejudice. However, we note in accordance with Mr Kaney’s “intrinsically connected” argument, that there is a substantial overlap of issues in the VAT Appeals and the Penalty/PLN Appeals, for example on deliberate behaviour. On that basis, some of the issues that the appellants would want to argue in the Penalty/PLN Appeals will be argued before the Tribunal in the VAT Appeals anyway. For example, we would expect the issue as to whether the invoices and/or bank statements were falsified would encompass Ms Adeosun’s behaviour. Necessarily if NNN wins the VAT Appeals, then as accepted by HMRC, the penalties and PLN fall away. In making these observations we do not deny that there would be prejudice to the appellants in not being able to proceed with the Penalty/PLN Appeals but we find the overlap of issues reduces that prejudice.[51]In conclusion, the appellants have not provided good reasons why there was the very long delay of 9 and 11 months. The starting point in these matters must be that time limits should be complied with. We are not persuaded that, given there has been a very long delay of 9 and 11 months, any of the circumstances we have been shown justifies a departure from that position.

Decision

[52]We therefore dismiss the appellants’ applications.

Right to apply for permission to appeal

[53]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: 22nd MAY 2025