Abbey Healthcare (East Kilbride) Limited & Ors v The Commissioners for HMRC [2025] UKFTT 822 (TC)

“As you rightly observe, the annual returns of the above claimant companies and the surrendering companies seem to indicate that their shares are held by either the P Sodhi Overseas Settlement or by Mr Sodhi himself. It appears, however, that the returns have been prepared erroneously on the basis of the original shareholdings that prevailed at the point of incorporation without taking into account the group ownership which is shown in the attached diagram. As you will see from the diagram, both the claimant and the surrendering companies are ultimately owned by Lansbury Ltd, a Gibraltar company which is in turned owned by the Prabhdyal Sodhi Overseas Settlement.” (5) On 4 March 2015, Officer Charles advised that he had decided to include the group relief enquiry within his COP9 enquiry. (6) During the relevant period Prabhdyal Sodhi (Mr Sodhi) was a director of each of the Applicants and their tax affairs were handled by MHA MacIntyre Hudson. (7) Group relief claims had been made but the Applicants were not within the same group because they were all owned by a trust, rather than a company. (8) HMRC pursued a criminal prosecution against Mr Sodhi and certain others, including Rakesh Shaunak of MHA MacIntyre Hudson, for false representations. (9) In March 2017, Mr Taylor was appointed as the Group Finance Director of the Abbey Healthcare Group. He did not attend Mr Sodhi’s trial, nor was he fully aware of all the legal arguments being made by the parties. (10) The case advanced successfully by the prosecution in the criminal trial was that the structure of the Applicants that had been put in place was one that for many years the Applicants had erroneously but honestly believed qualified for group relief, but that belief was mistaken. The criminality arose when HMRC identified the mistake and attempts were made by Mr Sodhi and/or his advisers to put it right with retrospective effect. (11) On 3 November 2020, following a jury trial, Mr Sodhi was convicted and on 6 November 2020 he was sentenced to a three year custodial term. (12) On 23 November 2020 HMRC issued letters to the Applicants stating that discovery assessments would be issued to the Applicants in the amounts set out in Schedule 1 and Schedule 2 to this decision for the years ending 30 June 2007 to 31 December 2013. (13) The 23 November 2020 letters also made the following statements: “In accordance with Paragraph 46(2A) Schedule 18 FA 1998 an assessment for a loss of tax brought about deliberately by the company (or a related person) can be made at any time not more than 20 years after the end of the accounting period to which it relates. It is HMRC’s view that when the company submitted its tax return, the director, Mr P S Sodhi knew that the shares in the claimant and surrendering company were not owned by Lansbury Limited and therefore [X Ltd] was not entitled to use the losses of [£x] against its profits.” (14) At this time Mr Taylor’s understanding was that because Mr Sodhi had been found guilty of deliberate behaviour at the criminal trial, that meant that HMRC were entitled to rely on that deliberate behaviour to go back 20 years in relation to the assessments and to recover taxes due from the group relief issue. Having not attended the trial and not knowing the details of the case against Mr Sodhi, Mr Taylor had assumed that the deliberate behaviour that HMRC referred to in the 23 November 2020 letter and relied upon to raise the Extended Time Limit Assessments was the same deliberate behaviour that Mr Sodhi had been found guilty of at the trial. (15) On 7 December 2020 HMRC issued further letters to the Applicants setting out HMRC’s conclusions with respect to the enquiries that it had opened into the Applicants company tax returns and informing them that HMRC would be issuing closure notices with respect to those enquiries. (16) I was not provided with copies of any of the assessments or closure notices that were issued to the Applicants, they were not provided in any of the bundles. A letter from HMRC to the Abbey Healthcare Group dated 14 December 2020 states that the discovery assessments issued following the letters issued on 23 November 2020 were issued to the Applicants on 2 December 2020 and the closure notices issued following the letters issued on 7 December 2020 were issued on 11 December 2020. The ETL Assessments were therefore issued between almost 7 years and over 13 years from the end of the accounting period to which they relate. (17) On 9 December 2020 Mr Taylor wrote to HMRC requesting an extension of time until mid-February to verify the amounts assessed. HMRC granted an extension of time by letter dated 14 December 2020, allowing 60 days from the date of the assessments, which would extend the time limit to respond to the ETL Assessments only to 31 January 2021 and to respond to the closure notices only to 9 February 2021. (18) On 10 February 2021 Mr Taylor wrote to HMRC. This was outside of the 60 day time limit but within the extended time limit that Mr Taylor had requested. In this letter Mr Taylor offered a full and final settlement with respect to the closure notices and ETL Assessments issued to the Abbey Healthcare Companies. (19) In relation to Huntingdon, Mr Taylor stated in this letter; “We do however continue to review the additional charge relating to the Abbey Healthcare (Huntingdon) Limited adjustment, as this did not form part of the Group Relief claim. However, we propose to make this as a payment on account, on a without prejudice basis, as well in order to prevent any further interest accruing. Our previous tax advisors have still not provided us with the information to support this adjustment. We will correspond with you on this when we are in a position to do so.” (20) Officer Charles of HMRC responded to that letter on 12 February 2021 as follows: “Subject to you checking the non group relief adjustments for Abbey Healthcare (Huntingdon) Limited your schedule reconciles with the assessments and closure notices issued to the companies on 2 December 2020 and 11 December 2020. As none of the assessments or closure notices have been appealed against these are now final.” (21) However Officer Charles then goes on to say in that letter: “Before I can finalise these matters, I need to consider the penalty position for each company that submitted an incorrect return (old penalties) or a return containing an inaccuracy (new penalties).” (22) Mr Sodhi appealed by notice dated 2 February 2021 against his conviction. In their notice and grounds of opposition to Mr Sodhi’s appeal dated 30 March 2021 the CPS, Specialist Fraud Division, states: “The applicant was not prosecuted for the act of submitting the original group relief claims. The prosecution did not suggest that these original group relief claims were submitted dishonestly. The prosecution case put at trial, in relation to the original claims, was that they were submitted as a result of a misunderstanding or mistake as to the qualification criteria for a group. It was suggested by the Crown that Mr Sodhi and/or his advisers had wrongly assumed that common ownership by a trust was sufficient to meet the group criteria. This was, if anything a mistake as to the law rather than any clerical error.” [bold added] (23) On 9 June 2021 Officer Charles wrote to the Applicants explaining how the penalties would be calculated and then under the heading “What happens next?” stated: “If you wish to make any representations or provide any further information for me to consider you should do this within 30 days of the date of this letter. If I have heard nothing from you within this period, I will arrange for the issue of penalty assessments in the amounts set out above. If you do not agree these penalty assessments, you can either • ask to have all or some of my decisions to be reviewed, or • notify your appeal for all or specific years to an independent tribunal within 30 days of the date of issue of the penalty assessments” • ask to have all or some of my decisions to be reviewed, or • notify your appeal for all or specific years to an independent tribunal (24) On 8 July 2021, the Applicants’ new representative, Grant Summers of Crowe UK LLP, responded requesting an extension of time to make representations on the penalty calculations and requesting that HMRC accept late notices of appeal against all the assessments and closure notices set out in schedules 1 and 2 to this decision on the following grounds: “I note your letter of 14 December provided a 60 day time limit for appeal which has now expired, but given that Mr Taylor only received the Street’s tax report in June and he received my advice this month. then I trust you will agree that Mr Taylor is bringing his appeal to your attention as soon as possible and therefore you will accordingly be able to agree that the conditions of Section 49 TMA 1970 are satisfied in this case.” (25) On 9 July 2021, Officer Charles responded, extending the time for representations on the penalty calculations but refusing to accept late notice of the appeals, stating: “I wrote to Mr Taylor on 14 February 2021 explaining that as no assessments or closure notices had been appealed they were now final. I have received no further communications from the Group until your letter dated 8 July 2021. I consider HMRC allowed sufficient time for the Group to review the figures and agreed the figures after it had completed a review. The Group did not request any additional time to review the Abbey Healthcare (Huntingdon) Ltd assessments and offered no reasons why it might require additional time. There appears to be no reason why a timeous appeal could not have been made. To then ask another person to look at the figures again and wait a further 5 months before asking HMRC if it would accept late appeals is not a reasonable excuse. I am therefore unable to agree to the request.”

“The Group did not request any additional time to review the Abbey Healthcare (Huntingdon) Ltd assessments and offered no reason why it might require additional time.”

“We do however continue to review the additional charges relating to the Abbey Healthcare (Huntingdon) Limited adjustments, as this did not form part of the Group Relief claim…. Our previous tax advisors have still not provided us with the information to support this adjustment.”

“Subject to you checking the non group relief adjustments for Abbey Healthcare (Huntingdon) Limied your schedule reconciles with the assessments and closure notices…”

“[12] It is submitted before me by the taxpayer that s 49, when properly construed, confers upon the General Commissioners, on reference to them of an application to an inspector for permission to lodge an appeal out of time, a wider discretion than that which the Inspector himself had. That discretion is not confined, as the Inspector's discretion is confined, to determining whether there was a reasonable excuse for the failure to lodge the appeal within time but would also embrace such considerations as the lack of any prejudice to the Commissioners as a result of failing to lodge an appeal in time, and demonstrable injustice to the taxpayer if such an appeal is not permitted to be lodged out of time. [13] I accept that submission. It seems to me that this is a proper construction of the Act. It is apparent from sub-s (1) of s 49 that it contemplates two stages, the first stage being an application to the Inspector who can, if he can discern a reasonable excuse, properly allow an appeal to be lodged out of time thus saving the necessity of reference to General Commissioners for that permission to be granted; but that if he does not find that there was reasonable excuse, the second stage then arises, which is a reference of the application by the Inspector to the General Commissioners for them to determine. [14] The section does not purport to guide the General Commissioners in any way as to how that discretion to permit appeals to be lodged out of time should be exercised. It seems to me, therefore, to follow that the General Commissioner's discretion is at large and they can consider the sort of matters which I have referred to which an Inspector of Taxes had no power to take into account.”

“When the [First-tier Tribunal] FTT is considering an 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.” 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 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.”

“that when the company submitted its tax return, the director, Mr P S Sodhi knew that the shares in the claimant and surrendering companies were not owned by Lansbury Limited and therefore [X Limited] was not entitled to use the losses of [£Y] against its profits.”

“…the purpose of the time limit is to bring finality, and that is a matter of public interest, both from the point of view of the taxpayer in question and that of the wider body of taxpayers.”

“The letters re-assess the corporation tax liability for periods ranging from June 2007 to December 2013. Please be aware none of the current management team were with the company at the time of these group relief claims were made. The current senior management team has a duty to ensure that the amounts paid are correct. To do so we need further information and time to verify the amounts assessed and prior to paying the liability due. We therefore request an extension of the time limit to allow proper consideration of the assessments with our advisors. We would request an extension to mid-February to allow this given the number of returns and complexity involved, as well as taking into account the impact of Covid and Christmas.”