JST (UK) Limited v The Commissioners for HMRC [2026] UKFTT 1226 (TC)

[2026] UKFTT 01226 (TC)Case No TC 09995
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 1 June 2026Date Judgment date: 21 August 2026
Taylor House, London
Appeal reference: TC/2020/02111
PROCEDURE – Late Appeal – Martland – Medpro – reliance on advisor – Application Refused
Before
TRIBUNAL JUDGE
Between
JST (UK) LimitedAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentMr Oliver Conolly, instructed by HaysMac LLP for AppellantMr Hutchcraft, litigator of HM Revenue and Customs’ Solicitor’s Office for RespondentsDECISION

Introduction

[1]This is an application for permission to appeal out of time by JST (UK) Limited (“JST”). The appeal relates to a closure notice (the “Closure Notice”), issued on 25 October 2017, that amended JST’s tax return for the accounting period ending 31 March 2013.[2]The Closure Notice denied relief for an exceptional administrative expense of £1,425,000 giving rise to £342,000 of additional corporation tax (“CT”) being due.[3]JST’s appeal was initially heard by a differently constituted First-tier Tribunal on 12 August 2021, with the decision promulgated on 16 August 2022. An application for permission to appeal was made on 10 October 2022 on six grounds. By a decision dated 10 January 2025, the FTT granted permission on three grounds but refused it on the other three. On 7 February 2025 the Appellant applied to the Upper Tribunal for permission to appeal on the remaining three grounds. By a decision dated 27 May 2025, the Upper Tribunal granted permission on the remaining three grounds. Following communications from the Upper Tribunal, the parties agreed a consent order, on or around 25 July 2025, to the effect that the appeal was allowed, and the matter was to be remitted to the First-tier Tribunal. This hearing is to determine the remitted application for permission to appeal out of time.

Law

[4]Law Under the CT regime, it is necessary for a taxpayer challenging a closure notice to bring an appeal against it in writing to the HMRC officer by whom the closure notice was given, within 30 days of the closure notice: para. 34 Schedule 18 FA 1998.[5]If the appeal is lodged after 30 days, then HMRC must decide whether to allow the late appeal, applying the criteria in s. 49 Taxes Management Act 1970 (“TMA 1970”). If HMRC reject the late appeal, the Tribunal then has to exercise its own discretion. The Tribunal’s discretion is “at large”, not applying the criteria in s. 49 TMA 1970: Martland v HMRC [2018] UKUT 178 (TCC) (“Martland”) at [24]. In considering whether to grant permission to appeal out of time, in Martland Judges Berner and Poole held: “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 Limited [2014] EWCA Civ 906; [2014] 1WLR 3926 (‘Denton’)]: 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 Advocate General for Scotland v General Comrs for Aberdeen City [2005] CSOH 135; [2006] STC 1218 Earlier in the decision the particularly relevant paragraphs are indicated to be at [23]-[24] and Data Select Limited v HMRC [2012] UKUT 187 (TCC); [2012] STC 2195will 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. 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. In R (Hysaj) v Secretary of State for the Home Department [2014] EWCA Civ 1633;[2015] 1WLR 2472 (‘Hysaj’) Moore-Bick LJ said this at [46]: 47. Shortage of funds (and consequent inability to instruct a professional adviser) should not, of itself, generally carry any weight in the FTT’s consideration of the reasonableness of the applicant’s explanation of the delay: see the comments of Moore-Bick LJ in Hysaj referred to at [15(2)] above. Nor should the fact that the applicant is self-represented – Moore-Bick LJ went on to say (at [44]) that ‘being a litigant in person with no previous experience of legal proceedings is not a good reason for failing to comply with the rules’; HMRC’s appealable decisions generally include a statement of the relevant appeal rights in reasonably plain English and it is not a complicated process to notify an appeal to the FTT, even for a litigant in person.”(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.’ ‘If applications for extensions of time are allowed to develop into disputes about the merits of the substantive appeal, they will occupy a great deal of time and lead to the parties’ incurring substantial costs. In most cases the merits of the appeal will have little to do with whether it is appropriate to grant an extension of time. Only in those cases where the court can see without much investigation that the grounds of appeal are either very strong or very weak will the merits have a significant part to play when it comes to balancing the various factors that have to be considered at stage three of the process. In most cases the court should decline to embark on an investigation of the merits and firmly discourage argument directed to them.’[6]This was confirmed to be the correct test in HMRC v Medpro Healthcare Ltd [2026] EWCA Civ 14; [2026] STC 253.

Reliance on advisors

[7]Reliance on advisors Caselaw offers guidance on circumstances where a taxpayer’s failure to bring an appeal on time has been caused by reliance on their advisors.[8]In Katib v HMRC [2017] UKFTT 738 (TC) (“Katib-FTT”) the taxpayer made an application for a late appeal to the FTT, before which his application succeeded. The main thrust of the case advanced was that the taxpayer was relying on an adviser who was misleading him that “matters were in hand” and that there was no need for him to be concerned, which was accepted by the FTT: Katib-FTT at [27(3)]. The facts of the case were extraordinary and the taxpayer failed to recognise warning signs that his advisor, Mr Bridger, was incompetent. The FTT found Mr Bridger’s advice was “fabulist” (at [12]) noting (at [11]) that it included:
“that the Appellant should cease to be a man by making a declaration to that effect to enable Mr Bridger to communicate to the world that the Appellant was dead, that there was plenty of time to deal with an enforcement notice as the Bills of Exchange Act governed the counting of the time limit to do so, that the Appellant erect a poster in his home denying access to all persons which was intended to prevent access by officials/bailiffs to avoid loss of personal assets. Mr Bridger refers to himself as ‘Master Bridger’.”
[9]On appeal in the Upper Tribunal, HMRC v Katib [2019] UKUT 189 (TCC); [2019] STC 2106 (“Katib”) the UT held that the FTT had erred in its application of the law by failing to take into account the second part of the Martland guidance, and on that basis it re-made the decision. In so doing, Mann J and Judge Jonathan Richards (as he then was) made the following observations on the issue of reliance on professional advisers: [emphasis in the original] “[49] We accept HMRC’s general point that, in most cases, when the FTT is considering an application for permission to make a late appeal, failings by a litigant’s advisers should be regarded as failings of the litigant and we will return to this issue in the ‘Disposition’ section that follows. Therefore, in most cases, a litigant seeking permission to make a late appeal on the grounds that previous advisers were deficient will face an uphill task and should expect to provide a full account of exchanges and communications with those advisers. It will often be impossible to give the requisite full account without waiving privilege. In this case Mr Katib did provide a reasonably full account of his dealings with Mr Bridger. He put correspondence with him into evidence and, in doing so, waived any privilege that he had in relation to that correspondence. We reject HMRC’s submission that, in the absence of a signed, formal waiver of privilege, this was necessarily insufficient for his application to succeed.”[10]Under the heading “Disposition” the decision continued thus: “[53] The first stage of the Martland examination can be addressed briefly. Mr Katib’s delay in appealing against the PLNs was, at the very least, 13½ months. That was ‘serious and significant’. The real question is how the second and third stages of the evaluation should be performed, having regard to the particular importance of statutory time limits being respected. [54] It is precisely because of the importance of complying with statutory time limits that, when considering applications for permission to make a late appeal, failures by a litigant’s adviser should generally be treated as failures by the litigant. In Hytec Information Systems Ltd v Coventry City Council [1997] 1 WLR 1666, when considering the analogous question of whether a litigant’s case should be struck out for breach of an ‘unless’ order that was said to be the fault of counsel rather than the litigant itself, Ward LJ said, at 1675: [56] Nor do we accept Mr Magee’s submission that the decision of the High Court in Boreh v Republic of Djibouti [2015] EWHC 769 (Comm), [2015] 3 All ER 577 establishes an ‘exception’ to the principle where a representative misleads the client. Rather, we consider that the correct approach in this case is to start with the general rule that the failure of Mr Bridger to advise Mr Katib of the deadlines for making appeals, or to submit timely appeals on Mr Katib’s behalf, is unlikely to amount to a ‘good reason’ for missing those deadlines when considering the second stage of the evaluation required by Martland. However, when considering the third stage of the evaluation required by Martland, we should recognise that exceptions to the general rule are possible and that, if Mr Katib was misled by his advisers, that is a relevant consideration. [57] The FTT concluded at [27](3) of the Decision that the general rule set out in Coventry City Council should not apply because Mr Bridger was ‘on a frolic of his own acting outside the scope of any possible brief that [Mr Katib] could have given’. That conclusion, however, was reached without having regard to the particular importance of statutory time limits being respected and is thus vitiated by the error of law that has led to us setting aside the Decision. More significantly, we do not consider that the FTT’s departure from the general principle is justified by that fact in this case (which we think is probably an additional error of law, though not one relied on in the grounds of appeal). [58] It is clear from the Decision that Mr Bridger did not provide competent advice to Mr Katib, misled him as to what steps were being taken, and needed to be taken, to appeal against the PLNs and failed to appeal against the PLNs on Mr Katib’s behalf (see [7] and [16]). But extraordinary though some of Mr Bridger’s correspondence was, the core of Mr Katib’s complaint is that Mr Bridger was incompetent, did not give proper advice, failed to appeal on time and told Mr Katib that matters were in hand when they were not. In other words, he did not do his job. That core complaint is, unfortunately, not as uncommon as it should be. It may be that the nature of the incompetence is rather more striking, if not spectacular, than one normally sees, but that makes no difference in these circumstances. It cannot be the case that a greater degree of adviser incompetence improves one’s chances of an appeal, either by enabling the client to distance himself from the activity or otherwise. [59] Mr Magee urged us to give particular weight to the FTT’s finding, at [15], that Mr Katib did not have the expertise to deal with the dispute with HMRC himself, but that does not weigh greatly in the balance since most people who instruct a representative to deal with litigation do so because of their own lack of expertise in this arena. We do not consider that, given the particular importance of respecting statutory time limits, Mr Katib’s complaints against Mr Bridger or his own lack of experience in tax matters are sufficient to displace the general rule that Mr Katib should bear the consequences of Mr Bridger’s failings and, if he wishes, pursue a claim in damages against him or Sovereign Associates for any loss he suffers as a result. This conclusion is fortified by the fact that the FTT’s findings demonstrate that there were some warning signs that should have alerted Mr Katib to the fact that Mr Bridger was not equal to the task. Despite Mr Bridger assuring Mr Katib that his appeals were in hand, he was still receiving threats of enforcement action ([9]). Mr Bridger’s advice to ‘cease to be a man by making a declaration to this effect’ should have alerted Mr Katib to the warning signs. Mr Katib is not without responsibility in this story. [60] For the same reasons we do not consider that Mr Bridger’s conduct has any real weight when considering the factors relevant to the final stage of the three-stage approach outlined in Martland. Turning to other factors relevant to that third stage, the FTT concluded that the financial consequences of Mr Katib not being able to appeal were very serious because his means were limited such that he would lose his home. That, the FTT concluded, was too unjust to be allowed to stand. We have considered this factor anxiously for ourselves. However, again, when properly analysed, we do not think that this factor is as weighty as the FTT said it was. The core point is that (on the evidence available to the FTT) Mr Katib would suffer hardship if he (in effect) lost the appeal for procedural reasons. However, that again is a common feature which could be propounded by large numbers of appellants, and in the circumstances we do not give it sufficient weight to overcome the difficulties posed by the fact that the delays were very significant, and there was no good reason for them.” ‘Ordinarily this court should not distinguish between the litigant himself and his advisers. There are good reasons why the court should not: first, if anyone is to suffer for the failure of the solicitor it is better that it be the client than another party to the litigation; secondly, the disgruntled client may in appropriate cases have his remedies in damages or in respect of the wasted costs; thirdly, it seems to me that it would become a charter for the incompetent (as Mr. MacGregor eloquently put it) were this court to allow almost impossible investigations in apportioning blame between solicitor and counsel on the one hand, or between themselves and their client on the other. The basis of the rule is that orders of the court must be observed and the court is entitled to expect that its officers and counsel who appear before it are more observant of that duty even than the litigant himself.’ [Emphasis added by the UT in Katib][11]Therefore reliance on an advisor is unlikely to be relevant at stage 2 of the Martland analysis, but is more likely to be relevant at stage 3.[12]The appellant relies on the extraordinary facts of Katib, noting how Mann J and Judge Richards held (at [59]) that there were “warning signs” that Mr Katib should have picked up upon. However, it is apparent from [57]-[59] that it is not only in such striking or spectacular circumstances where the general rule can apply. At [58] Mann J and Judge Richards held “It cannot be the case that a greater degree of adviser incompetence improves one’s chances of an appeal”. Similarly, at [60] they held “we do not consider that Mr Bridger’s conduct has any real weight when considering the factors relevant to the final stage of the three-stage approach outlined in Martland”.[13]In Medpro v HMRC [2025] UKUT 255 (TCC); [2025] STC 1343 at [69] (which was part of the decision that was not subject of the appeal to the CA) it was noted that, while Katib establishes a general rule, it will always be necessary for a Tribunal to consider whether that general rule should be disapplied on the particular facts before it.[14]Similarly, in Uddin v HMRC [2023] UKUT 99 (TC) Judges Swami Raghavan and Mark Baldwin observed that:
“[30] We are not persuaded the FTT’s reasoning was inadequate so as to constitute an error of law. The reason why Mr Uddin lost, despite his argument that he had been misled, was clear. That was that, even though Mr Uddin may have relied on his accountant (and been misled into believing that everything was in order), the cursory and general enquiries he made were insufficient to displace the general rule that the taxpayer should bear the consequences of the representative’s failings. The FTT’s reasoning was such that it did not need to make express findings of fact on whether Mr Uddin was misled because it would not, in its view, have made a difference to the outcome. The fact the FTT engaged with the particular limitations of the evidence it had on Mr Uddin’s communications tends in any case to suggest, that it did accept Mr Uddin’s account, as far as it went, of what he was told by the adviser. Put another way, a client will always rely on their advisers, but their adviser’s failings are still laid at their door. Why the adviser failed and how they led their client to continue to rely on them is not relevant to the Martland analysis, unless the client can show that they did whatever a reasonable taxpayer in that situation would have done (which would generally be to make sufficient efforts to keep tabs on the adviser and make sure that matters were on track). Mr Uddin lost because he did not demonstrate more than a cursory interest in what was (not) going on, he had not done what a reasonable taxpayer in his position would be expected to do, rather than because the tribunal failed to recognise that such cursory enquiries as he made were met with untruthful answers.”
[15]This suggests that if a taxpayer can show they have done all they reasonably could have done, this is a relevant factor in favour of the taxpayer.

Issues in Dispute

[16]Issues in Dispute It is common ground that:(1) the delay is serious and significant, being of about 8 months (245 days); and(2) the delay is not for a good reason, for the purpose of stage 2 of the Martland test;[17]The core issue in dispute is whether, considering all relevant factors, the late appeal should be allowed.

The Hearing

[18]The Hearing I heard from:(1) Mr Mike Bowen, general manager of JST since 2017. Mr Bowen previously worked at JST between 2002 and 2007;(2) Mr Julian Watts, accounts manager of JST, who joined JST in 2006; and(3) Officer Matthew Skehan.[19]I have also considered:(1) JST’s skeleton argument (13 pages);(2) a chronology prepared by JST (4 pages);(3) HMRC’s skeleton argument (21 pages);(4) a “core” bundle (137 pages);(5) bundle “A” (448 pages); and(6) Authorities Bundle (348 pages).

Findings

[20]I make the following primary findings of fact.[21]I find all the witnesses honestly did their best to assist the Tribunal. Unfortunately the events are now many years ago, accordingly there were several questions that Mr Bowen and Mr Watts were unable to answer, such as whether they had seen certain letters when they were originally sent.

Primary findings of Fact

[22]Primary findings of Fact JST entered into a service arrangement with its Japanese parent JST Mfg Co Ltd (“JST Japan”) in 2002, pursuant to which between 2002 and 2007 JST provided services in connection with market entry, receiving fees in return from JST Japan. Following a tax audit in Japan, the Japanese tax authorities disallowed deductions claimed by JST Japan in respect of payments made to JST for part of that period. In consequence, on 5 December 2012 JST Japan invoiced JST for repayment of £1,425,000 representing those disallowed amounts.[23]On 18 January 2013, after a period of dispute between JST and JST Japan, JST paid that sum. It recorded the payment in its accounts as an exceptional administrative expense and treated it as deductible for corporation tax purposes for the year ended 31 March 2013. The repayment by JST to JST Japan was made under duress, as they were told if the sum was not repaid there would be no future trade. The amount was a large sum for JST, representing 15% of turnover.[24]In advance of filing its corporation tax return, JST engaged with HMRC in relation to a possible claim under the mutual agreement procedure (“MAP”) on the basis of perceived double taxation. At that stage the Japanese parent company was seeking to dispute the disallowance of payments under the service agreement in Japan, so the MAP was not available. On 14 April 2024 JST was informed that its parent company had withdrawn the claim against the Japanese tax authority, at which point JST indicated it wished to pursue a claim under the MAP.[25]HMRC opened an enquiry into the return on 12 November 2014, focusing on whether the £1.425 million payment was deductible and properly reflected in the accounts. There followed an extended period of extensive correspondence between HMRC and JST’s advisers, together with a meeting in July 2016, in which HMRC examined whether the payment had been incurred wholly and exclusively for the purposes of JST’s trade.[26]On 5 February 2016 HMRC wrote to BDO, JST’s advisors, explaining that:
“since May 2014 the UK delegated Competent Authority has held discussions with the Japanese Competent Authority and clarified that the Japanese disallowance of fees paid in earlier years for tax purposes was not a matter covered by the UK’s treaty with Japan. Under MAP it was agreed that the assessment by the Osaka Regional Tax Bureau of Japan did not pertain to a transfer pricing adjustment and hence did not fall under Article 9 of the UK-Japan treaty. Rather, the Japanese tax authorities had disallowed the expenditure by [JST Japan] under their equivalent of the UK’s wholly and exclusively test. As MAP discussions have closed by agreement with the JTA on 07 November 2014, HMRC cannot attempt to allow this adjustment under MAP.”
[27]Although the letter was sent to BDO, Mr Watts was aware of the letter and was aware that the MAP had concluded.[28]By June 2017 HMRC had formed the view that the payment was not deductible.[29]During this time JST had already pursued litigation in Japan to recover the amount paid to JST Japan by way of restitution claim. JST anticipated they would be successful in the restitution claim. JST Japan did not oppose JST pursuing the restitution claim.[30]A letter of 18 July 2017 from HMRC to BDO, contains a proposal from HMRC for settlement, under which no penalties are charged but the tax in dispute is paid by JST.[31]On 6 October 2017 JST, through its advisers, Mr Harrup of BDO, indicated to HMRC that it was prepared to accept the proposed disallowance, subject to an assurance that any subsequent repayment from the parent company would not be taxed again on receipt. Mr Harrup’s email to HMRC stated:
“Further to our recent telephone conversations, and your letter dated 18 July 2017, I have been in contact with our client and they are prepared to accept the disallowance of the £1.425 million in the corporation tax return for the year ended 31 March 2013 on the terms set out in your letter, but this is on the proviso that should part or all of the £1.45million [sic] be received back then said sums would not be taxable. For example, if the company were able to agree that the £1.425 million should be repaid to JST (UK) Limited then this sum would not be taxable in the year of receipt.”
[32]At that point JST say they were not advised by Mr Harrup, or anyone else at BDO, as to the right of JUK to protect its position by appealing the closure notice, whilst also pursuing its restitution claim against JST Japan. JST say had they been advised of this possibility, or the possibility of contesting the position within the enquiry, JST would have pursued it in order to protect the position of JST in the event that its claim against JST Japan failed, as it did in due course.[33]Employees of JST do not recall any advice to enter a protective appeal. JST have no records of receiving any such advice from BDO. JST requested BDO’s client file but a search of it does not reveal any relevant material. JST’s case is not that BDO advised them not to pursue an appeal, but rather that BDO did not offer any advice that an appeal was possible. In cross-examination Mr Bowen stated that JST was focused 100% on the restitution claim from Japan and agreed JST only chose to appeal when they had exhausted other routes. It was put to him that the skeleton argument said that BDO advised JST to accept the closure notice and asked about that advice: he said that such advice was probably in a telephone call. It was put to him that JST agreed to the closure notice: he said in response they did once it was issued. Likewise, in cross-examination, Mr Watts agreed that JST had agreed to the issue of the closure notice[34]On 25 October 2017 HMRC issued the Closure Notice, amending the return and increasing the corporation tax due by £342,000. The notice was sent to JST. The notice included an explanation of JST’s right to appeal within 30 days. Mr Bowen said he could not recall whether he saw the Closure Notice at the time it was issued. Mr Watts recalled seeing the Closure Notice.[35]On 22 November 2017 JST became aware that its appeal to the High Court in Japan had failed. It nevertheless continued to pursue a further appeal to the Japanese Supreme Court, instructing new lawyers and filing appeal documents in February 2018.[36]On 23 April 2018 the Japanese Supreme Court rejected JST’s appeal. This marked the point at which JST’s efforts to recover the sum in Japan were effectively exhausted. Thereafter, JST’s attention shifted to potential remedies in the United Kingdom.[37]In June 2018 JST wrote to various members of the House of Commons and House of Lords, to attempt to have a further review of the position by HMRC. In July 2018, as a result of independent research, JST came to the belief they should have lodged a protective appeal, when represented by BDO.[38]In June 2018 JST made a ministerial complaint to HMRC.[39]On 27 July 2018 JST wrote to HMRC seeking to appeal the closure notice and requesting a review. It is common ground, and I find, that this constituted a notice of appeal made substantially out of time. That letter explains the fact that JST were pursuing the restitution case in Japan, and had anticipated they would be successful, as the reason for not appealing the Closure Notice before. The latter states: It does not mention receiving no advice from BDO. Likewise notes of a meeting on 4 September 2018 between HMRC and JST, which discussed whether there was a reasonable excuse for the late appeal, suggest confidence in the outcome of the restitution claim was why the appeal was not made earlier. The absence of advice from BDO is not mentioned in those notes. Nor is the absence of advice from BDO mentioned in the relevant part of the Notice of Appeal (box 16). “JUK held a reasonable expectation that our appeal case would be accepted thus correcting the UK tax position. For this reason we did not see any need to appeal against the closure notice when it was first issued.”[40]HMRC treated the appeal as late and undertook consideration of whether it should be admitted. That consideration was deferred for a period while HMRC explored, through internal review and engagement with the Japanese competent authority, whether any relief might be available through MAP or otherwise. Those efforts continued through 2018 and into 2019 but did not result in any resolution in JST’s favour. This is evident from the email of 8 September 2019 from HMRC to JST which states:
“In addition to this, in your letter of 27 July you appealed against the Revenue Amendment raised following the outcome of my enquiry into the Company’s CT Self-Assessment for the accounting period ended 31 March 2013. As this appeal was received approximately 7 months after the expiry of the 30 day deadline for appealing the Revenue Amendment (the amount of which had been agreed in correspondence with your agent, Peter Harrup – BDO), I needed to consider whether I could accept this late appeal and that there was a ‘reasonable excuse’ as to why this had been submitted late. As my enquiry was influenced by the Company’s previous discussions with HMRC regarding the MAP process and there was an existing review by BAI into the handling of the application, I deferred my decision on the basis that an alternative may be found for potentially dealing with the matter (particularly as a line had been re-opened between the Competent Authorities). This position was discussed during previous conversations with you and Julian Watts. If the Company wishes to continue with the appeal following your discussions with BAI this can be taken forward as previously explained.”
[41]On 30 October 2019 HMRC concluded its review of JST’s complaint against the MAP process and confirmed that no relief was available.[42]On 4 November 2019 HMRC notified JST that it would not accept the late appeal, concluding that there was no reasonable excuse for the delay.[43]JST subsequently pursued its appeal to the Tribunal, filing a notice of appeal on 5 June 2020.[44]JST has been pressured by JST Japan to find a solution to what it sees as an issue of double taxation. Until a solution is found the investment and strategy for JST have been limited by JST Japan. This presents a threat to the business.

Length of delay

[45]Length of delay The delay in making the Appeal was eight months.[46]HMRC rely on the decision in Romasave (Property Services) Limited v HMRC [2015] UKUT 254 (TCC); [2016] STC 1 (“Romasave”) at [96] where Judges Berner and Falk held, at [96] “a delay of more than three months cannot be described as anything but serious and significant”, in the context of an appeal right which must be exercised within 30 days.[47]The appellant accepts that the delay is serious and significant. It clearly is.

Reasons for the default

[48]Reasons for the default The appellant says that the reason why they did not appeal was that they were not advised to do so by BDO. I accept that in a but-for sense to be the case: their evidence was that they followed the advice of their advisors. If BDO had advised them to appeal, they would have done so. However, the appellant accepts this cannot alone be a good reason for (2) of Martland.[49]However, viewing the facts realistically, for the reasons given at (2) and (3) of paragraph [51] below, I consider the more accurate description of why they did not appeal, in the actual circumstances was that they were focused on the restitution claim that they thought had good prospects of success.

Evaluation of “all the circumstances”

[50]Evaluation of “all the circumstances” JST says that the appeal should be allowed to proceed in light of the following circumstances:(1) the length of delay should be contextualised by the length of the enquiry;(2) properly advised JST would have put in a protective appeal;(3) there were no red flags such as in Katib, that would indicate the behaviour of BDO was not reasonable;(4) there was no prejudice to HMRC as throughout the relevant period they did not regard the matter as closed, as discussion was ongoing regarding the MAP claim;(5) conversely there is strong prejudice to JST. The amount in question is large and JST-Japan are withholding investment until the matter is resolved;(6) the merits of the underlying action are strong. The subsidiaries are quasi-autonomous and the payment was made to protect the business.[51]Considering those matters:(1) The enquiry was long, opening on 12 November 2014 and the closure notice was issued on 25 October 2017 – so almost three years. The late appeal was treated as made on 27 July 2018, so about eight months after the statutory 30 day period for appealing expired. Even set against a three year enquiry, an eight-month delay is very long – especially when it is remembered that an enquiry will involve detailed investigation and analysis. Conversely entering an appeal is a relatively straightforward task – and JST would have been familiar with its grounds of appeal from its extensive correspondence and discussions with HMRC during the enquiry. I do not find this a particularly weighty factor in JST’s favour.(2) I accept that if BDO had advised JST to put in a protective appeal they would have done so – the evidence was they would act on their advisor’s advice. It appears that BDO did not advise against appealing, rather they offered no advice on whether or not to appeal. This is not particularly surprising, as it appears that a settlement was reached from the correspondence of 6 October 2017. That settlement gave the additional assurance to JST that there would be no tax if the refund was returned to JST. JST appear to have agreed to the settlement and to the issuing of the closure notice. It is therefore not altogether unsurprising that BDO did not advise JST to put in a protective appeal. At the time JST were confident that they would likely succeed in their restitution claim in Japan: which will have been a factor in favour of settling on the agreed terms. Mr Bowen stated that JST was focused 100% on the restitution claim from Japan and the letter of 27 July 2018 gives this as the explanation for making the late appeal.(3) I accept that there were no “warning signs” that BDO’s advice was suspect. However, the appeal letter contained a straightforward description of the rights of appeal. A reasonable taxpayer would have understood that. A reasonable taxpayer would also have understood that it was possible to pursue a statutory appeal alongside the restitution claim (and indeed alongside the MAP process). A reasonable taxpayer would, given notice of the 30-day appeal period, have asked their advisor for advice on a protective claim. There is no evidence that JST did this. Accordingly, JST cannot be said to have done all that could be reasonably done for a taxpayer in their position.(4) Whilst HMRC continued to engage with JST following the issue of the closure notice (and the expiry of the 30-day appeal period), the focus of that engagement was the MAP process. However, the evidence of Officer Skehan was that was treated as an entirely different process by HMRC. Furthermore, and in any event, there is prejudice to HMRC if the ways in which the assessment can be challenge are expanded – from just the MAP to include a statutory appeal.(5) I accept there is substantial prejudice to JST if the late appeal is not allowed.(6) The underlying case is not clearcut. Good arguments can potentially be made that the refund of the money paid under the services agreement was not wholly and exclusively for the purposes of JST’s trade. It was not paid under a contractual obligation and was paid to JST’s parent company. It is at least arguable that it could be characterized as a distribution. Without descending into a detailed analysis it would not be possible to say that JST’s case was very strong (or very weak).[52]The appellant has not provided a “full account of exchanges and communications with those advisers” (Katib at [49]). The reason for this is that neither JST nor BDO have retained relevant records. While some fault lies with BDO, JST can also reasonably be expected to retain their own records. Given the passage of time, the recollections of Mr Bowen and Mr Watts were understandably somewhat vague (for example they could not recall whether or not they had received certain letters). The lack of those records prevents the Tribunal from understanding why BDO did not advise JST to appeal the closure notice.[53]I consider that the general rule that failings by a litigant’s advisers should be regarded as failings of the litigant should not be disapplied in this case, for the reasons given at (2) and (3) of paragraph [51] above. I am fortified in that conclusion for the reason given at [52] above.[54]I also 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.[55]Balancing all the above factors, I find this is not a case where permission to appeal should be granted.

Right to apply for permission to appeal

[56]Right to apply for permission to appeal 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: 21 August 2026