Carbon Six Engineering Limited v The Commissioners for HMRC [2026] UKFTT 177 (TC)

[2026] UKFTT 00177 (TC)

Case No TC09771

FIRST-TIER TRIBUNAL

TAX CHAMBER

Hearing Heard on: 14 January 2026

Date Judgment date: 29 January 2026

Taylor House, London

Appeal reference: TC/2024/05447

PROCEDURE – HMRC application to set aside Barring Order – - application refused

Before

TRIBUNAL JUDGE AMANDA BROWN KC

Between

CARBON SIX ENGINEERING LIMITEDAppellant

THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondent

Mr Li, director of the Appellant for Appellant

Ms Dhanoa and Ms Bhatt of counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs for Respondents

DECISION

Introduction

[1]This was the hearing of an application made by HM Revenue & Customs (HMRC) dated 30 September 2025 (Application)to set aside a direction that, pursuant to rule 8(1) Tribunal Procedure (First-tier Tribunal) (Tax Chamber) 2009 (FTTTC Rules), they be barred from further participation in the proceedings (Barring Order).

[2]For the reasons set out in paragraphs 97 - 129, I refuse the Application and, for the reasons set out in paragraphs130 - 134 I have decided to exercise my discretion under rule 8(8) FTTTC Rules to allow the appeal.

Relevant legislation

[3]In order to fully understand the chronology and the facts relevant to this Application I set out the provisions of rules 2 and 8 FTTTC Rules: “Rule 2(1) The overriding objective of these Rules is to enable the Tribunal to deal with cases fairly and justly.

(2) Dealing with a case fairly and justly includes— (a) dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties; (b) avoiding unnecessary formality and seeking flexibility in the proceedings; (c) ensuring, so far as practicable, that the parties are able to participate fully in the proceedings; (d) using any special expertise of the Tribunal effectively; and (e) avoiding delay, so far as compatible with proper consideration 5 of the issues.

(3) The Tribunal must seek to give effect to the overriding objective when it - (a) exercises any power under these Rules; or (b) interprets any rule or practice direction. … Rule 8 (1) The proceedings, or the appropriate part of them, will automatically be struck out if the appellant has failed to comply with a direction that stated that failure by a party to comply with the direction would lead to the striking out of the proceedings or that part of them. … (3) The Tribunal may strike out the whole or a part of the proceedings if - (a) the appellant has failed to comply with a direction which stated that failure by the appellant to comply with the direction could lead to the striking out of the proceedings or part of them; … (c) the Tribunal considers there is no reasonable prospect of the appellant’s case, or part of it, succeeding.

(4) The Tribunal may not strike out the whole or a part of the proceedings under paragraphs (2) or (3)(b) or (c) without first giving the appellant an opportunity to make representations in relation to the proposed striking out.

(5) If the proceedings, or part of them, have been struck out under paragraphs (1) or (3)(a), the appellant may apply for the proceedings, or part of them, to be reinstated. … (7) This rule applies to a respondent as it applies to an appellant except that: (a) a reference to the striking out of the proceedings must be read as a reference to the barring of the respondent from taking further part in the proceedings; and (b) a reference to an application for the reinstatement of proceedings which have been struck out must be read as a reference to an application for the lifting of the bar on the respondent taking further part in the proceedings. (8) If a respondent has been barred from taking further part in proceedings under this rule and that bar has not been lifted, the Tribunal need not consider any response or other submissions made by that respondent and may summarily determine any or all issues against that respondent. (a) dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties; (b) avoiding unnecessary formality and seeking flexibility in the proceedings; (c) ensuring, so far as practicable, that the parties are able to participate fully in the proceedings; (d) using any special expertise of the Tribunal effectively; and (e) avoiding delay, so far as compatible with proper consideration 5 of the issues. (a) exercises any power under these Rules; or (b) interprets any rule or practice direction. Rule 8 (a) a reference to the striking out of the proceedings must be read as a reference to the barring of the respondent from taking further part in the proceedings; and (b) a reference to an application for the reinstatement of proceedings which have been struck out must be read as a reference to an application for the lifting of the bar on the respondent taking further part in the proceedings.

Rule 8

[4]Unless otherwise stated all references to “rules” in this judgment are to the FTTTC Rules.

Chronology

[5]On 25 March 2022 HMRC issued determinations pursuant to regulation 80 Income Tax (Pay As You Earn) Regulations 2003 and section 8 Social Security (Transfer of Functions) Act 1999 in respect of income tax and national insurance contributions (NICs)they considered to be due from Carbon Six Engineering Limited (Appellant). The explanatory letter notifying of the issue of the determinations stated that the additional tax and NICs was due as the Appellant was a managed services company (MSC)for which the managed services company provider (Provider)was Churchill Knight & Associates (CKA). In fact, the Appellant has never contracted or otherwise engaged with CKA. It did, however, engage with The App Accounting Group (TAAG), another entity who HMRC believe to also be a Provider. The incorrect reference to CKA was never formally acknowledged by HMRC but was remediated in correspondence between the parties on 27 October 2022.

[6]The Appellant appealed the determinations to HMRC and requested a review. The review conclusion letter was dated 13 September 2024. Within the statutory 30 days, on 11 October 2024, the Appellant notified its appeal to the Tribunal.

[7]The appeal was acknowledged by the Tribunal and served on HMRC on 7 December 2024. HMRC were required to provide the Appellant with a contact email address within 14 days. The purpose of this direction was to facilitate communication between the parties only. At HMRC’s request, the Tribunal communicates with HMRC through what is known as their clearing house email. That email address acts as a central receiving point for all Tribunal communications and ensures that HMRC can direct Tribunal correspondence to the relevant case worker.

[8]HMRC were also directed to provide a statement of case within 60 days of 7 December 2024 i.e. by 5 February 2025.

[9]HMRC did not comply with the direction to provide a point of contact email address within the 14 days directed. It was eventually provided on 24 January 2025 i.e. 34 days late.

[10]No statement of case was served by HMRC on or before 5 February 2025 and no application for an extension of time for its service was received by that date.

[11]On 11 February 2025 the Appellant applied for HMRC’s case against it to be dismissed on account of the failure to comply with directions and for delays and conduct in respect of the enquiry and internal appeal.

[12]In response to that application, on 13 February 2025, HMRC applied for the appeal to be stayed behind the lead cases considering determinations issued to various taxpayers associated with CKA. HMRC stated that they did not propose to respond to the wider issues raised by the Appellant in its letter of 11 February 2025.

[13]Judge Brooks considered the correspondence of 11 and 13 February 2025 and, on 5 April 2025, responded to that correspondence. Judge Brooks deferred consideration of the late statement of case until after consideration of HMRC’s application for a stay of the appeal behind the CKA group of cases. He directed that the Appellant was to confirm, no later than 19 April 2025, whether he objected to HMRC’s application providing reasons for any objection. HMRC were directed that they may provide a response to such objection. The directions provided that in the absence of representations in accordance with the directions it was to be assumed that the party had no representations to make.

[14]The Appellant objected to HMRC’s request for a stay on 17 April 2025 on the basis that the Appellant had not engaged with CKA. The objection explained that HMRC had issued the determinations on the basis of a connection to CKA which had been flagged to them resulting in correspondence then referring to TAAG. The Appellant was anxious about the reversion to an asserted connection to CKA. The Appellant also again raised concerns about HMRC’s breach of Tribunal directions. HMRC did not respond to the objection. In accordance with Judge Brooks direction the Tribunal were therefore entitled to assume that HMRC’s application stood as served and that they therefore sought a stay behind the CKA lead appeals despite the terms of the objection and the fact that the correspondence in the underlying dispute issued post October 2022 referring to TAAG rather than CKA.

[15]The stay application and objection came before me on the papers as I was case managing both the CKA and TAAG groups of appeals. Like Judge Brooks, I deferred consideration of the Appellant’s concerns regarding the breaches of directions by HMRC and made the following directions:

“… no later than 26 May 2025 HMRC are to clearly identify which [Provider] they contend the Appellant was associated with and why. Within the same time if the Appellant is said to be an MSC of either [CKA] or [TAAG] HMRC are directed to renew any application for a stay as appropriate particularising the basis on which that renewed application is sought. In the absence of such an application HMRC are directed that unless no later than 18 June 2025 they produce a statement of case in this matter they shall be barred from these proceedings pursuant to rule 8(1) and (7).”

[16]No identification of an association with either CKA or TAAG and no renewed application with reasons was received by the Tribunal by 26 May 2025.

[17]On 27 May 2025, HMRC communicated with the Tribunal. That communication failed to acknowledge that the response was submitted late and provided no apology for late service. However, it accepted that reference had been made to the wrong Provider in the 13 February 2025 application and that the Appellant was associated with TAAG. The error was explained as arising from the reference to CKA in the March 2022 decision letter. An application was made for a stay behind the TAAG group lead cases.

[18]No statement of case was served on 18 June 2025. On 23 June 2025 the Appellant applied for HMRC to be barred from the proceedings having failed to make the application for a stay by 26 May 2025 and then having failed to serve a statement of case pursuant to an unless order. By further correspondence dated 24 June 2025 the Appellant applied for HMRC to be barred under rule 8(3)(c) on the grounds that HMRC’s case stood no reasonable prospects of success and that in the event HMRC were barred the appeal should be summarily allowed under rule 8(8). The Appellant also applied for costs.

[19]I reviewed that correspondence. I determined that despite non-compliance with my direction that HMRC identify the Provider and renew an application before 26 May 2025, as there had been an application made prior to 18 June 2025 there had been no formal breach of the unless order. I therefore refused the Appellant’s application for a barring pursuant to rule 8(1). My decision was communicated by letter dated 7 August 2025.

[20]Cognisant of the Appellant’s correspondence dated 11 February and 17 April 2025 in which he had raised what he considered to be persistent failures on HMRC’s part to comply with directions I treated that correspondence as an application to bar HMRC pursuant to rule 8(3)(b). As such there were three outstanding applications from the Appellant: applications under rule 8(3)(b) and (c) for HMRC to be barred and a costs application. By virtue of rule 8(4) the power to bar under rules 8(3)(b) and (c) can only be exercised after the party against whom the order is sought has been given an opportunity to make representations. Accordingly, and also in the letter dated 7 August 2025, I made the following direction: “Unless no later than 5pm on 14 August 2025 HMRC provides a fully reasoned response to each of the Appellant’s applications (and the allegations therein) … they shall be automatically barred from these proceedings.” (Unless Order)

[21]Consistent with the agreement between the Tribunal and HMRC referred to in paragraph 7 above the directions were sent to HMRC’s central clearing house.

[22]I am told, though no evidence by way of witness statement was produced, that HMRC entirely changed the legal team dealing with the CKA and TAAG group appeals on 5 August 2025. HMRC did not inform either the Appellant nor the Tribunal of the change. I am also told that there was an ineffective handover of the Appellant’s appeal and no specific instructions were given to the new team that it was not stayed behind either group. I am then told that because the directions were sent to the clearing house email address they had not been directed to the legal team dealing with the appeals. The directions were missed and HMRC did not comply. They did not respond to the Appellant’s applications.

[23]On 11 September 2025 the Appellant wrote to HMRC indicating its understanding that they had been barred from the proceedings. That understanding was factually correct as the operation of an unless order direction which notifies that a failure to comply will result in the automatic barring of HMRC is that as at 17.01 on 14 August 2025 HMRC were barred.

[24]However, formal notification of the Barring Order was not given until 18 September 2025. Notification was sent to HMRC in a letter (sent by email to the clearing house email address) dated 18 September 2025. The letter notifying the Appellant of the Barring Order was sent by email on 18 September 2025 but under cover of a letter dated 7 August 2025. That letter directed the Appellant that if any further application were to be made in the proceedings it needed to be made within 28 days of the date of the letter. The Appellant questioned the time limit for any further applications (28 days from 7 August 2025 having already passed) and, on 25 September 2025, the Tribunal corrected the error allowing 28 days from 25 September 2025 for any further application.

[25]HMRC’s letter, which was dated 18 September 2025, provided that any application for the Barring Order to be set aside needed to be made no later than 28 days from 18 September 2025.

[26]Again, I am told, but with no evidence to support it, that the Barring Order was not received by the new legal team. The reason given was again that the Barring Order had been sent to the clearing house email address. However, and I understand, by means of a letter from the Appellant to the officers concerned with the enquiry, HMRC’s technical internal clients became aware of the order and raised it with the legal team questioning what had happened. I am told that this prompted an instruction to counsel, Ms Dhanoa and her leader in the TAAG group appeals, Mr Nawbatt KC.

[27]On 30 September 2025, and therefore within the time limit directed, the Application was made. After setting out their view of the factual background HMRC, the Application was divided into two substantive parts: the application to set aside and the application for relief from sanctions.

[28]The application to set aside was broadly made on the following terms:(1) Whilst acknowledging the Tribunal’s power to automatically strike out an appeal under rule 8(1) HMRC considered that Barring Order decision had been made pursuant to the Tribunal’s rule 8(3)(a) discretion. On that basis it was contended that in order to have a merits-based determination of the issues in dispute in the Appellant’s appeal the bar required to be lifted and HMRC directed to serve the statement of case. It was claimed that HMRC’s case in the appeal was strong and arguable as evidenced by the progression of the CKA and TAAG group appeals.

(2) HMRC relied on rule 8(4) to contend that they should have been given an opportunity to make representations prior to the issue of the Barring Order and that had not occurred. It was said that when considering whether the bar should have been imposed the Tribunal should have regard to six factors: (a) The delay was an inadvertent error because HMRC presumed that their application, dated 27 May 2025, to stay behind the TAAG appeals had been granted as a stay was a sensible way to proceed. The explanation for the inadvertent error being that the legal team had changed, without an effective handover exactly at the point at which the unless order was issued. As soon as the errors had been identified HMRC acted promptly in making the reinstatement application. (b) No proper opportunity had been given to HMRC to make representations as required by rule 8(4). Given the circumstances those representations should have been at a hearing prior to strike out (reliance being placed on Parnham v HMRC

[2023] UKUT 285 (TCC)

(Parnham) and Ince v HMRC

[2017] UKFTT 645 (TC)

(Ince)). Applying a similar approach to adopted by the Upper Tribunal (UT)decision in HMRC v BMW Shipping Agents Limited

[2021] UKUT 91 (TCC)

(BMW)it was reasonable to conclude that the Barring Order was inappropriate, as the directions, Unless Order and Barring Order had been sent to the clearing house email address. (c) The granting and maintaining of the Barring Order is contrary to justice because the CKA and TAAG group appeals will progress and it would be anomalous to bar HMRC thereby treating this appeal differently to the others, The appeal should properly be stayed pending the outcome of the TAAG group appeals, and even if the Appellant wanted its appeal to be separately considered the proper course of action is to do so on a merits basis. (d) Applying the overriding objective and by reference to the UT judgment in HMRC v BPP Holdings Limited

[2014] UKUT 496

(BPP UT) I should be cautious to permit an appeal to proceed without participation by HMRC because to do so would result in “an unwarranted windfall” to the Appellant. An approach also adopted by the FTT in Parnham. (e) A Barring Order is said to be appropriate only where the party’s own conduct justified the order and not appropriate where a default arose in consequence of an inadvertent or administrative error. (f) Relying in Colman v HMRC

[2018] UKFTT 141

, it was contended that general fairness does not require the imposition or enforcement of the Barring Order. The overriding objective requires that the Tribunal facilitate and ensure participation by both parties in order ensure justice is served. (g) The inadvertent failures by HMRC were not deliberate, they had not caused extreme delay and were actively remedied.

[29]The application for relief from sanctions accepted that the correct test to be applied was as framed by the UT in Martland v HMRC

[2018] UKUT 178 (TCC)

. I note that since the submission of the Application the approach in Martland, was questioned by the UT in Medpro

[2025] UKUT 255 (TCC)

, at least in the context of the brining of a late appeal under section 83G Value Added Tax Act 1994. That position was resolved by the Court of Appeal in its judgment released after the hearing of the Application, on 19 January 2026

[2026] EWCA Civ 14 (Medpro)

in which it is now established that there is no relevant distinction between an application for relief from the sanction of missing a statutory appeal deadline and that for other defaults within Tribunal proceedings. Indeed, Medpro confirms that the guidance provided to the FTT when considering applications for relief from sanctions reflects that arising under the modified provisions of CPR 3.9.

[30]The relevant test to be applied, as acknowledged by HMRC requires a three-stage test:(1) determine the seriousness and significance of the default;

(2) determine the reason for the default;

(3) undertake an evaluative balancing exercise assessing the merits of the reasons given for the default and the prejudice caused to both parties in granting or refusing the relief sought considering all the circumstances and having particular regard to the need for litigation to be conducted efficiently and at proportionate cost and for statutory time limits to be respected.

[31]In that context the Application also invited me to apply the approach adopted the FTT judgment in Jumbogate Ltd v HMRC

[2015] UKFTT 0064 (TC)

(Jumbogate) from which it was at least inferred that one of the factors to be considered when undertaking the third stage of Martland the merits of HMRC’s case in the present and TAAG group appeals should be considered.

[32]Applying those principles HMRC contended:(1) The solicitors with conduct of the present appeal had only become aware of it after the Barring Order.

(2) The error leading to the Barring Order had been inadvertent, it was an oversight which should not be exaggerated and for which HMRC apologised together with an apology for the confusion as to the putative MSC provider and for not providing a statement of case.

(3) Little delay resulted from their failure to comply with the Unless Order because the Application had been made promptly upon the solicitors becoming aware of it and the matter has not yet reached statement of case stage such that there is no prejudice to a hearing date. It was confirmed that HMRC are prepared to comply with tight and short deadlines to now provide the statement of case.

(4) The reason for the delay is explained by the use of the clearing house email address and the absence of a full handover by the previous legal team to the new legal team. HMRC intend to defend this appeal as part of the TAAG group appeals.

(5) It would be highly prejudicial to HMRC to be barred from defending the appeal as it would preclude specific consideration of this appeal and any differences between this appeal and the remainder of the TAAG group such that the Tribunal in this case would be “forced to hand down a Decision without the complete case before it”.

(6) The bar would, in any event be “somewhat otiose” because it is “highly likely that the FTT will consider it in line with the overriding objective to have [this appeal] either joined to the TAAG group appeals, or stayed behind [them]”.

[33]In this context HMRC described the breach as moderate, promptly cured with no disruption to the case such that relief from sanction was justified as supported by the Court of Appeal judgment in Chartwell Estate Agents Ltd v Fergies Properties SA

[2014] EWCA Civ 506 (Chartwell)

[34]The Appellant provided a substantive, well-researched objection to the Application.

[35]Directions were issued to bring the Application to a hearing. HMRC complied with each of those directions on or before the due date.

Evidence and findings of fact

[36]I was provided with a bundle of documents and authorities. It was prepared by the Appellant though collaboratively with HMRC. The evidential documents consisted of the Tribunal directions and orders and interparty correspondence. I was not provided with a witness statement from any of the lawyers at HMRC.

[37]From the documents available to me I make the following findings of fact:(1) In the period from 7 December 2024 to 18 September 2025 the Tribunal issued 6 individual directions to HMRC. They failed to comply with every direction in time and in some instances at all.

(2) The Unless Order dated 7 August 2025 required HMRC to provide a fully reasoned response to each of the Appellant’s three applications: the two for Barring Orders and a costs’ claim, was not complied with on or before 14 August 2025 and was not and has not yet been complied with.

(3) The reason stated for the breach of the Unless Order is unsubstantiated by evidence, but I am prepared to accept it was because an email which HMRC accept was received by them was not passed on to the relevant team by way of administrative error and not a deliberate failure to comply.

(4) I do not however, accept that HMRC could reasonably have considered that the appeal had been stayed. They had applied for a stay behind CKA, the Appellant had objected and following a further request for clarification as to which group of appeals the present appeal was related HMRC had renewed their stay application. The stay had not been confirmed and HMRC should have been expecting correspondence which confirmed the position before assuming that their late response was sufficient to have stayed the appeal, however “sensible” they considered the application to be.

(5) Following the service of the Application further directions were issued and complied with by HMRC.

(6) HMRC want to participate in these proceedings and have provided an assurance, albeit through their counsel, that they intend to comply with any further directions issued by the Tribunal. Submissions HMRC’s

Submissions

[38]I have already set out the terms of the Application in rather more detail than I might ordinarily have done. However, I also propose to forensically summarise HMRC’s submissions to me in order that I may then address them in my explanation of why I refuse to exercise my case management discretion in this case.

[39]HMRC open their submissions by highlighting that I must determine their application acting in accordance with the overriding objective as set out in rule 2 with a particular focus on ensuring both parties are able to participate in the proceedings, avoiding unnecessary formality, seeking flexibility in procedure and dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues and the anticipated costs. I am invited to determine what the procedural consequence of their failure to comply with an unless order should fairly be bearing in mind the interest in compliance with directions and the public interest that disputes be determined on their merits where that can be achieve without injustice to the other party. The evaluative exercise I am required to undertake should, they say, take account of the stage that the proceedings had reached, whether a hearing date has been lost, the extent that the default disrupted efficient conduct of the proceedings, the prejudice to the parties, the promptness of remediation and whether any prejudice to the Appellant can be cured by lesser measures than barring.

[40]It is submitted that I am not bound to allow a procedural default to become dipositive of the proceedings where that outcome is disproportionate and inconsistent with the overriding objective.

[41]Relying on BPP UT and PGPH it is contended that I should exercise caution before refusing to maintain the draconian effect of the Barring Order. In particular because they were not given a proper opportunity to be heard. To fail to give them voice will, it is said, undermine the fairness in the proceedings. The UT judgment in Parnham is relied upon to confirm the importance of the rule 8(4) requirement to allow a party subject to a strike out/barring application to make representations as a point of procedural fairness. The FTT decision in Ince v HMRC

[2017] UKFTT 645 (TC)

is referenced to support a conclusion that where there is doubt as to the basis of a strike out/barring a hearing is required.

[42]It is acknowledged that the Barring Order was made without evaluative judgment at the moment of default due on the terms of the Unless Order. However, HMRC contend that I retain control of the process through the power to set it aside and reinstate HMRC’s right to participate. I am invited to “be slow to uphold a sanction which, in practical terms, disposes of the substantive appeal without a pleaded case … unless satisfied such an outcome is proportionate and consistent with the overriding objective.” I am told that I “should prefer (where available) measures which secure compliance whilst preserving a merit-based determination.”

[43]Their skeleton addresses the Martland three stage test. They also reference Jumbogate and invite its illustrative application in this case.

[44]Concerning Martland they contend that the stages are not a mechanical checklist but provide for an evaluative judgment to provide just and proportionate relief. HMRC contend that there is a distinction within the first stage of the test between the formal seriousness of breaching an unless order and a breach which has not derailed a hearing timetable, wasted court time or caused irremediable prejudice. It is said that the promptness of an application for relief is a material factor in the stage 3 balancing exercise.

[45]HMRC contend that in the present case their default has been mischaracterised as serious and significant because no fixed hearing date was lost and the appeal can now be effectively managed through a tight timetable. HMRC acknowledge that there was prior non-compliance by them but contend that is not a matter relevant to the first stage of the Martland test but to the third stage.

[46]HMRC accept that the reasons advanced for the delay which are repeated and supplemented as: the mischaracterisation of the present appeal as part of the CKA group, the complexity and size of the TAAG and CKA litigation groups, a change in the legal team plus the use of the clearing house email address, are not “ideal” but contend that they are administrative in nature. They contend that the relief jurisdiction should be exercised to ensure their effective participation in the appeal particularly given the promptness with which they made the Application.

[47]HMRC provide five principal reasons for exercising my discretion in favour of set aside/granting relief:(1) The consequence of refusing is disproportionate.

(2) The appeal can quickly be put back on track with strict directions.

(3) This case should be managed with the TAAG group appeals.

(4) HMRC would be severely prejudiced.

(5) It is inappropriate to consider HMRC’s conduct in the enquiry and prior to the appeal as part of the balancing exercise.

[48]By reference to BMW, I am reminded that in that case the UT considered that where a sanction has operated without the party being practically aware due to clerical or notification failures, the draconian nature of a strike out/barring is a weighty consideration in the overall balance even where the defaulting party was not blameless.

[49]HMRC rely on FTT examples (Colman v HMRC

[2018] UKFTT 141 (TC)

(Colman)and XG Concept Ltd v HMRC

[2017] UKFTT 92 (TC)

(XG Concept))to support a contention that “fairness is not a stand-alone concept”. In respect of each of those cases it is contended that the Tribunal accepted that to exclude one party from the merits-based determination of the appeal represented a real risk to the fairness of the trial.

[50]HMRC describe the maintenance of the Barring Order and determination of the appeal summarily as giving rise to a procedural victory for the Appellant. I assume this to be a response to the Appellant’s invitation for me to apply rule 8(8) though the provision is not referenced. HMRC contend that summary determination is not an appropriate vehicle for disposing of a fact sensitive tax appeal particularly in absence of a pleaded case from HMRC and where there are other appeals proceeding on common issues in the TAAG lead cases. The context of the TAAG group appeals is emphasised: namely, to ensure that all appeals concerning the MSC legislation where TAAG is the putative Provider be litigated consistently with one another. HMRC submit that to be excluded from participation in this appeal when continuing to defend the TAAG group appeals as a consequence of an inadvertent failure which was not deliberate and which had caused no delay or prejudice is an extreme and unfair outcome.

[51]In this context, during the hearing, we explored parts of Lord Neuberger’s judgment in BPP SC and in particular his comment that a procedural or windfall victory was a factor which might “perhaps” be considered in “exceptional circumstances”. The exceptional circumstances which HMRC claim to exist were essentially the same as the reasons for non-compliance i.e. that the legal team with conduct was unaware that the appeal had not been stayed and that the correspondence was sent to the clearing house email address in circumstances in which HMRC was “really very keen” to put its submissions and participate fully in the resolution of the substantive issue.

[52]I also explored with HMRC why the Application had not been accompanied by their responses to the Appellant’s 8(3)(b) and (c) Barring Order applications thereby complying with the terms of the Unless Order. It was contended, again with no evidence to support the internal consideration that had been given to this issue, that to have done so assumed that the Application would have been successful and was therefore considered to be presumptuous.

[53]In the hearing I invited submissions on Dominic Chappell v The Pension Regulator

[2019] UKUT 209 (TCC)

(Chappell). HMRC seek to distinguish that case on the basis that Mr Chappell was persistently non-compliant, and the UT had no confidence that such a pattern of behaviour would be remediated.

Appellant’s submissions

[54]I deal with these submissions much more shortly.

[55]The Appellant opposes the Application. The Appellant submits that the Application fails every stage of the Martland test and that the Barring Order must stand as the only proportionate outcome given HMRC’s sustained and systemic non‑compliance.

[56]The Appellant argues that the breach was “serious and significant” as there had been a previous breach of the 19 May 2025 directions which could have led to the granting of a Barring Order, but leniency was allowed. HMRC’s default was a direct failure to comply with the Tribunal’s “most serious tool of case management”. In the Appellant’s submission, HMRC’s attempt to re‑characterise the breach as merely “moderate” distorts both the context and the gravity of the Tribunal’s directions. The Appellant distinguishes between the discretionary framework of rule 8(3), relied on by HMRC, and the mandatory operation of rule 8(1), which in this case applied upon breach of an unless order.

[57]On the second stage of Martland, the Appellant maintains that the reasons advanced: administrative oversight, use of the clearing house email, and poor handover, are not credible. The Appellant asserts that HMRC’s explanation omits the long history of foundational errors, most notably the three‑year persistence of the “CKA error”, first made on 25 March 2022 and repeated in February 2025 despite the Appellant’s immediate correction of it on every occasion. The inbox rationale is, in the Appellant’s submission, flatly contradicted by the HMRC’s own conduct: HMRC had already designated specific legal contacts for this appeal, had successfully responded to Tribunal correspondence in the past, and subsequently received the 14 October 2025 listing communication from the same inbox they claim rendered them unaware of the Unless Order. The Appellant states that the failure was therefore an organisational, not accidental, default; and that administrative lapses do not constitute good reason, particularly for a represented litigant.

[58]At the third stage of Martland, the Appellant argues that “all the circumstances of the case” overwhelmingly defeat HMRC’s claim to relief. The Appellant relies on a detailed chronology demonstrating systematic procedural non‑compliance: failure to meet directions of December 2024, April 2025, May 2025, June 2025, and finally the breach of the Unless Order. The Appellant points to cumulative delays exceeding 1,000 days, including a 655‑day statutory review and multiple failures to provide a Statement of Case. This, the Appellant submits, has caused profound prejudice: more than three‑and‑a‑half years after the original claim, HMRC have still not provided the factual and legal basis of their case, obstructing the Appellant’s ability to prepare a defence. The Appellant further contends that HMRC’s conduct has forced the litigation to centre on process rather than substance, in a manner inconsistent with efficient, proportionate adjudication. Their conduct has forced Mr Li to spend hours away from his business.

[59]The Appellant emphasises that HMRC’s reliance on BPP UT is misleading. It argues that HMRC have omitted to disclose that the subsequent Court of Appeal and Supreme Court decisions upheld the correctness of the FTT’s original Barring Order and expressly rejected the notion that public bodies should benefit from relaxed compliance standards. The Supreme Court reaffirmed that a “public duty” argument cannot excuse procedural default, and that courts should expect higher, not lower, standards from state litigants. The Appellant therefore submits that the legal foundation of HMRC’s case is not only incomplete, but it also breaches the duty of candour.

[60]Overall, the Appellant contends that the breach was serious, the reasons advanced are untenable, and that the broader history demonstrates a sustained pattern of non‑compliance and procedural disregard. The Appellant argues that to reinstate HMRC would “reward unreasonable conduct”, undermine the authority of unless orders, and perpetuate the prejudice already suffered.

Review of case law

[61]In this section I review all of the authorities relied on by HMRC and provide my observations on them to ascertain their relevance and veracity to the matter I have to decide. I also include the UT judgments in Chappell and HMRC v Michael Breen

[2023] UKUT 252 (TCC)

(Breen) and the FTT judgment in Viking Enterprises Limited v HMRC

[2020] UKFTT 306 (TC)

[62]I set the summaries of each case out in chronological order rather than grouped by either court level or topic as this demonstrates the evolution of jurisprudence.

Chartwell

[63]Chartwell is not a tax case and does not therefore concern rule 8(1). It concerned the failure of Chartwell to serve witness statements pursuant to a direction requiring their mutual exchange. The failure was said to be justified because the statements could not be prepared without the disclosure of further documents by the other side. Once disclosure had been made Chartwell sought an extension of time to serve the witness statements and relief to be allowed to rely on them despite late service. The application was accompanied by a detailed witness statement setting out the background to the failure to serve earlier.

[64]The Court of Appeal refused to overturn the High Court’s decision to grant relief. The Court did not consider that insufficient weight had been put on the requirement to litigate efficiently and respect time limits. Nor did it consider undue weight had been put on the consequences of refusing to grant relief. The whole history of the directions and the disclosure dispute were weighed together also recognising that the trial date had not been prejudiced and that a fair trial was possible if relief were granted. Further, it was noted that the counterparty to the litigation also needed to be granted similar relief also having not served their witness statement by the due directed date. Accordingly, and the Court accepted that the judge had exercised his discretion to grant relief in a way which should not be interfered with.

Jumbogate

[65]Jumbogate is an FTT decision from 2015. It concerned an application for reinstatement of an appeal which had been struck out under rule 8(3)(c). Prior to the order striking out the appeal the taxpayer had indicated that it did not contest HMRC’s assessment of the facts of its case and that it did not propose to be represented at the appeal hearing but that it was not withdrawing its appeal, rather it wanted the Tribunal to decide the legal aspects of the case in its absence. HMRC applied to strike out the appeal on the basis that it bore no reasonable prospects of success. The FTT duly struck out the appeal noting that it is not for the Tribunal to make the taxpayers case for it. The taxpayer then sought to reinstate the appeal on the grounds that it had previously misunderstood the Tribunal’s role.

[66]Having determined that the FTT had a general power to reinstate the appeal (derived from the general case management provisions in rule 5 (rather than rule 8(5) which is specific to a strike out under rules 8(1) or 8(3)(a)) the FTT went on to consider the relevant factors to be considered in the exercise of that power. The parties in the appeal accepted that the approach to be adopted was the same as had been applied by the UT in Pierhead in the context of the power to reinstate a withdrawn appeal under rule 17 adopting the relevant jurisprudence, at that time, concerning relief from sanctions under CPR 3.9 (preceding Denton and Mitchell concerning the impact of the 2013 revision of CPR 3.9). It was thus concluded that the correct approach to be adopted was: “45. …(1) whether the appeal is arguable and has a reasonable prospect of success;

(2) the reasons for the Strike Out;

(3) whether there has been any material change since the Strike Out;

(4) whether HMRC would be prejudiced if the Strike Out were set aside;

(5) what prejudice would Jumbogate suffer if the Strike Out were not set aside; and

(6) the conduct of the parties” aside; and PGPH

aside; and

[67]This case is also a FTT judgment. It predates BPP SC but postdated BPP UT. It was an application made by the taxpayer seeking a barring order pursuant to rule 8(3)(b) in consequence of HMRC’s persistent failure to comply with directions of the Tribunal. At paragraph 34 the Tribunal refused the application stating that although HMRC’s conduct had been unsatisfactory the conduct was insufficient to justify them being barred from the proceedings. The Tribunal referenced BPP UT as indicating that a barring order should be considered as a last resort. At paragraph 37 the Tribunal summarised that HMRC’s behaviour in that case was not so egregious as to outweigh the desirability of a full merits’ determination of the appeal.

XG Concept

(b) XG Concept

[68]XG Concept also concerns an application under rule 8(3)(b). In this case HMRC applied to strike out the taxpayer for persistent failure to comply with directions which were not granted on an unless basis they contended the taxpayer’s conduct precluded a fair hearing.

[69]The Tribunal notes that it was not said by HMRC that a strike out for failure to comply with directions other than unless orders justified that the appeal be struck out unless the pattern of behaviour justified a conclusion that the proceedings could not be dealt with fairly and justly. An application under rule 8(3)(b) thereby required both a backward and forward look and to consider whether unless orders represent a more proportionate means of ensuring compliance. On the facts of that case however, the Tribunal considered that there was no evidence that the taxpayer would engage in the proceedings or comply with directions and the appeal was struck out. BPP

[70]The BPP appeals concerned a decision by the FTT to bar HMRC from further participation in the proceedings in consequence of a failure by HMRC to provide a response to a request from BPP for further information. The direction was made on an unless basis and warned that HMRC would be barred if they failed to comply. The direction was made after service of HMRC’s statement of case (which had been served late). HMRC partially complied with the order and BPP applied for them to be barred. The FTT barred HMRC.

[71]The UT reversed that decision. HMRC rely on paragraphs 60 and 61 of BPP UT in which the UT stated:

“60. However, the consequence of my imposing a barring order will be that the F-tT’s decision on the merits of the appeal, whatever it might be, will be unsatisfactory, in that it may hand an unwarranted windfall to BPP but perhaps more importantly will not adequately determine whether or not its supplies are zero-rated. The consequence of my refusal of a barring order, on the other hand, is that the F-tT will be able to reach a conclusion after full argument, and will be able to deal with the case fairly and justly, and thus in accordance with the overriding objective. 61. I do not go so far as to say that there should never be a barring order (or, in the case of an appellant, a direction striking out the appeal) unless the overriding objective is incapable of performance. There is nothing in rule 8 which could be read in a way which supports that proposition. Thus even if the F-tT remains able to perform the overriding objective, and even if there is no prejudice to the opposing party which cannot be remedied by a costs direction, a litigant’s conduct might be such that the ultimate sanction is all that remains to mark the tribunal’s disapproval of and unwillingness to tolerate that conduct. It is true, as Judge Mosedale recognised at [83], which I have set out above, that the F-tT has little by way of sanction in its armoury, but it does not seem to me that it is legitimate to impose the ultimate sanction for want of any other.”

[72]The UT’s decision was appealed to the Court of Appeal which reinstated the barring order. A further appeal was made to the Supreme Court

[2017] UKSC 55

(BPP SC). The Supreme Court confirmed that the FTT had been entitled to impose the barring order. The rationale of the Supreme Court differed from that applied by the Court of Appeal to reach the same conclusion.

[73]The Supreme Court confirmed that the approach to be adopted when considering whether a Tribunal was to lift or impose sanctions should follow a similar approach to that provided for in the CPR.

[74]Lord Neuberger proceeded to address the various challenges HMRC presented to the application of the approach in Denton v White Ltd

[2014] 1 WLR 3926

(Denton)and Mitchell News Group Newspapers Ltd

[2014] 1 WLR 795

(Mitchell), subsequently adopted in Martland. In the context of HMRC’s reliance on paragraphs 60 and 61 of BPP UT Lord Neuberger stated:

“30. Fourthly, Ms Simor argued that the Judge should have accepted the relevance of, and taken into account, the fact that the debarring order in this case prevents HMRC from discharging its public duty and could lead to the public interest being harmed in that VAT which should be paid may not be recovered. I consider that it would set a dangerous precedent if that point were accepted, as it would discourage public bodies from living up to the standards expected of individuals and private bodies in the conduct of litigation. It seems to me that there is at least as strong an argument for saying that the courts should expect higher standards from public bodies than from private bodies or individuals. In fairness, it should be said that this point was more attractively developed by Ms Simor when she said that it justified a more relaxed approach to all parties by tribunals than that adopted by the courts. Nonetheless, I find that unconvincing: there is no good reason to have different rules for public law cases. I consider that Moore-Bick V-P in R (Hysaj) v Secretary of State for the Home Department (Practice Note) [2015] 1 WLR 2472, paras 41 to 42 was right to reject a similar point in relation to public law cases in the courts. … 32. Sixthly, it was pointed out that a debarring order represents an unjustified windfall for BPP. It is true that the debarring order will either improve BPP’s prospects of success in the substantive surviving appeal (if the appeal goes ahead unopposed) or result in BPP succeeding on the appeal when it might not otherwise have done so (if HMRC concede the appeal). However, that point can always be made by a party facing a debarring order, and to give the point any weight, save perhaps in exceptional circumstances, would appear to me to undermine the utility of the sanction of a debarring order. I can see no exceptional circumstances in the instant case.”

Ince

[75]Ince is again a FTT judgment. The decision appealed was an excise duty assessment and penalty raised in circumstances in which the taxpayer had not challenged seizure of the goods. Despite statutory restriction on doing so he nevertheless challenged the assessment and penalty on the grounds that the goods were for personal use. HMRC applied to strike out the appeal on the basis that the Tribunal had no jurisdiction (rule 8(3)(b)) and that it had no reasonable prospects of success. The application was determined on the papers with the consent of both parties. However, the FTT noted that the Tribunal had the clear power under rule 29(3) to determine a strike out without an oral hearing but, in exercise of the overriding objective, needed to consider whether it was appropriate to do so.

Colman

[76]This case concerns an application made by the taxpayer that HMRC be barred on grounds that it was contended that during the enquiry HMRC had indicated that the areas of dispute were limited but the closure notice was issued on a basis wider than the indicated areas of challenge. It was claimed that the closure notice as issued constituted a failure to co-operate with the Tribunal such that the proceedings could not be dealt with fairly and justly and justified. Such application meeting the terms of rule 8(3)(b).

[77]On the basis that the Tribunal had no involvement in the dispute between HMRC and the taxpayer prior to the issue of the closure notice and there was no asserted failure to co-operate with the Tribunal it was considered that there was no power to bar HMRC and no power could be imputed by way of a purposive reading of the rule even in the light of the overriding objective. The Tribunal did not accept that the overriding objective represented a general power to ensure fairness in proceedings.

Martland

[78]Martland concerned the question as to whether the Tribunal should allow the taxpayer’s application in that case to bring an appeal out of time. However, and as indicated below in Chappell the approach advocated in that context represents the relevant test to be applied when considering a reinstatement application.

[79]The UT considered the relevant authorities of the Court of Appeal and Supreme Court and the appropriate test when considering a breach of the FTT Rules and relief from the associated sanction. The UT summarised the approach taken in the authorities:

“[40] In Denton, the Court of Appeal was considering the application of the later version of CPR Rule 3.9 above to three separate cases in which relief from sanctions was being sought in connection with failures to comply with various rules of court. The Court took the opportunity to “restate” the principles applicable to such applications as follows (at [24]): “A judge should address an application for relief from sanctions in three stages. The first stage is to identify and assess the seriousness and significance of the 'failure to comply with any rule, practice direction or court order' ... If the breach is neither serious nor significant, the court is unlikely to need to spend much time on the second and third stages. The second stage is to consider why the default occurred. The third stage is to evaluate 'all the circumstances of the case, so as to enable [the court] to deal justly with the application including [factors (a) and (b) in Rule 3.9(1)]” [41] In respect of the “third stage” identified above, the Court said (at [32]) that the two factors identified at (a) and (b) in Rule 3.9(1) “are of particular importance and should be given particular weight at the third stage when all the circumstances of the case are considered. [42] The Supreme Court in BPP implicitly endorsed the approach set out in Denton. That case was concerned with an application for the lifting of a bar on HMRC's further involvement in the proceedings for failure to comply with an “unless” order of the FTT [43] … The clear message emerging from the cases – particularised in Denton and similar cases and implicitly endorsed in BPP – is that in exercising judicial discretions generally, particular importance is to be given to the need for “litigation to be conducted efficiently and at proportionate cost”, and “to enforce compliance with rules, practice directions and orders”. …” “A judge should address an application for relief from sanctions in three stages. The first stage is to identify and assess the seriousness and significance of the 'failure to comply with any rule, practice direction or court order' ... If the breach is neither serious nor significant, the court is unlikely to need to spend much time on the second and third stages. The second stage is to consider why the default occurred. The third stage is to evaluate 'all the circumstances of the case, so as to enable [the court] to deal justly with the application including [factors (a) and (b) in Rule 3.9(1)]”

Chappell

[80]Mr Chappell’s appeal had been struck out under the provisions of the Tribunal Procedure (Upper Tribunal) Rules 2008 identical in terms to rule 8(1). He applied for his appeal to be reinstated. The facts of the case recited by the UT demonstrate that Mr Chappell had systematically failed to comply with directions issued by the UT and when explaining non-compliance and/or requesting extensions of time explanations had changed demonstrating that he had played the UT along. Eventually, Mr Chappell breached an unless order serving an otherwise partially compliant document one minute after the deadline for compliance. The appeal was stuck out. The notification of strike out provided that the judge was prepared to reinstate it if an application was received by a specified deadline and that Mr Chappell had also, by that date, ensured full compliance. The reinstatement application was made by the directed date but was not accompanied by full compliance with the previous unless order. The Pensions Regulator objected to the reinstatement. Directions were proposed for the hearing of the application. Mr Chappel continued his pattern of non-compliance.

[81]The UT set out the relevant legal principles to be applied when considering a reinstatement application where the appeal had been struck out in consequence of a breach of an unless order under rule 8(1) at paragraphs 65 – 101. I summarise these as follows:(1) The Tribunal must have regard to the overriding objective and must consider flexibility, participation, and avoidance of delay, and the duty of parties to cooperate.

(2) Although the CPR does not apply directly, the Tribunal must adopt the same approach to sanctions as articulated by the Supreme Court in BPP SC.

(3) BPP SC confirms that the three-stage Denton approach applies in the Tribunal context, including reinstatement applications following unless orders.

(4) Martland provides a structured adaptation of the Denton test for tribunals, including assessment of delay, reasons, and prejudice, with limited consideration of the strength of the underlying case.

(5) Consideration of underlying merits is generally irrelevant in case‑management decisions following default, save where the applicant’s case is so strong as to be analogous to a summary judgment scenario: Global Torch Ltd v Apex Global Management Ltd

[2014] 1 WLR 4495

(Global Torch).

(6) Breaches of unless orders require assessment of the underlying breach as well as the final breach, because the unless order represents a ‘second chance’: British Gas Trading Ltd v Oak Cash & Carry Ltd

[2016] 1 WLR 4530

(7) Where multiple failures led to the unless order, the entire sequence constitutes the underlying breach: Khandanpour v Chambers

[2019] EWCA Civ 570

(8) Applying these principles, the Tribunal must evaluate seriousness, reasons, prejudice, and the overarching need for procedural discipline, considering merits only to the limited Global Torch extent.

[82]The UT refused to reinstate Mr Chappell’s appeal because his breaches of the unless order were serious, prolonged and aggravated. He failed to comply fully with the unless order by the time the reinstatement application was made, misled the Tribunal, and repeatedly ignored deadlines and correspondence. The UT found no good reason for the breaches and no indication of future compliance. It also considered that reinstatement would cause significant prejudice to the Pensions Regulator, whereas the merits of the case were neutral. Giving particular weight to the need for efficient litigation and compliance with orders, the balance firmly favoured refusal.

Viking

[83]This was a judgment of the then Chamber President of the FTT on an application to reinstate an appeal struck out following a breach of an unless order. In refusing to reinstate the appeal the Tribunal considered it relevant that the taxpayer had never complied or sought to comply with the original terms of the directions which led to the unless order. The Tribunal stated: “45. … Where proceedings have been struck out on the ground that an appellant has failed to comply with a direction and consequential unless order then it seems to me that any application for reinstatement should not be granted unless the appellant has complied or provided a compelling explanation for the failure to comply. … BMW

[84]This was an appeal to the UT against a decision of the FTT refusing reinstatement of an appeal which had been struck out for breach of an unless order. It was determined post BPP SC. In BMW the representative had completed the notice of appeal form and given a particular email address for correspondence purposes. The representative in fact had no access to that email address. He communicated with the Tribunal via an alternative email address to which he had access. Some correspondence from the Tribunal was sent to the accessible email address; however, some was sent to the inaccessible one. The emails sent to the inaccessible email address included the general directions for the management of the appeal and ultimately an unless order for failing to comply with the directions. The appeal was therefore automatically struck out for breach of the unless order.

[85]BMW applied for the appeal to be reinstated. The representative acknowledged that the Tribunal had sent the direction to the email address shown on the notice of appeal and could not therefore be criticised. He accepted that it was his fault that he had used an inaccessible email address and that he had failed to diarise the matter such that he did not follow up as time passed and a statement of case and when directions should have been received. The FTT applied Marland to determine whether to reinstate. It considered that the default was serious and significant, it expressed no view at the second stage as to the adequacy of the reason for the default. At the third stage the FTT balanced all the circumstances. It noted that the representative had not received the unless order and although that was in consequence of having included the wrong email address on the notice of appeal, the error concerning the address had not been apparent as the Tribunal had also communicated with the accessible email address. The Tribunal determined that the prejudice to the Appellant if the appeal was not reinstated was significant, the tax at stake was in excess of £3m and, as a freight forwarder, acting as agent it had not retained any of the gross consideration from which the import VAT arose. The merits of the case were neither very strong nor very weak. In the circumstances the Tribunal reinstated the appeal.

[86]HMRC challenged the reinstatement contending that the FTT had failed to apply a stricter approach to compliance with time limits advocated by Chappell, further that “well intentioned incompetence” should not justify relief; and too much weight had been given to the prejudice to BMW if the appeal was not reinstated. The UT determined that the FTT had misapplied Martland because it had not placed particular weight at the third stage on the need to conduct litigation efficiently and proportionately expecting time limits to be complied with.

[87]The UT went on to remake the decision on reinstatement again in favour of the taxpayer. In this regard, the UT was clear that a breach of an unless order is serious and significant. At the second stage the UT noted that it would be too simplistic to conclude that the breach occurred because the taxpayer was not aware of the directions and unless order, that was because the representative had contributed to that state of affairs by including the wrong email address on the notice of appeal. The Tribunal considered that to be a “minor clerical error” with serious consequences particularly when combined with a failure to diarise. When undertaking the balancing exercise, the UT accepted that a serious and significant default without a good reason may still be relieved at the third stage. At paragraph 53 a distinction is drawn between reasons which are “not particularly “good”” and those that are “bad”. The not particularly good reason and the nature of the default must still be weighed including relative prejudice. The UT decided “by a slender margin” that as BMW had in fact and substance not received warning before the appeal was stuck out a refusal to reinstate was considered to be disproportionate to the prejudice of strike out. The UT stated, “if the facts were different, and the reasons for beach weaker it is unlikely that we would have reinstated the appeal.”

Breen

[88]Mr Breen’s appeal had been struck out in consequence of the breach of an unless order pursuant to rule 8(1) and following a pattern of persistent and prolonged failure to comply with Tribunal directions, including unless orders providing that a failure to comply may result in the appeal being struck out. The substantive appeal involved allegations that Mr Breen had deliberately failed to bring income tax into account and the burden of proof of showing deliberate conduct thereby fell on HMRC.

[89]I was the judge in the FTT which considered and determined Mr Breen’s reinstatement application. I found as facts that Mr Breen had failed over a considerable period to give proper attention to the conduct of his appeal and had provided no reason the matters leading to his failure to comply and he had been obstructive with HMRC and the Tribunal. As a consequence of a misunderstanding, he had failed to comply with the precise terms of the unless order but had provided all the documents that the unless order sought. I applied Martland and Chappell but by the finest of margins allowed the reinstatement because HMRC bore the burden of proving deliberate failure to bring income tax into account.

[90]On appeal by HMRC the UT considered that I had failed to take full and proper account of Mr Breen’s non-compliance. It also determined that I had inappropriately given weight to where the burden of proof lay in the appeal. The UT considered that in doing so I had come “perilously close” to considering the merits of the substantive appeal contrary to the guidance given in Chappell.

Parnham

[91]Parnham was an appeal to the UT in which that Tribunal was called to consider both whether the FTT had erred in in its decision refusing to bar HMRC and also refusing to strike out the Appellant or otherwise stay the appeal indefinitely in circumstances where both parties had agreed that a fair hearing was not possible. The factual circumstances in which the various applications had been made the to the FTT are complex following a protected related dispute. HMRC’s strike out application was made pursuant to rule 8(3)(c) (no reasonable prospects of success). The taxpayer’s application was made referencing the overriding objective in rule 2, the Tribunal’s general case management powers in rule 5(3) and rule 8(3). In essence the taxpayer contended that if the Tribunal was not satisfied that there was a power to bar HMRC under the provisions of rule 8 the combined effect of rules 2 and 5 permitted a barring order on the grounds of natural justice, in this regard the taxpayer relied on Foulser v HMRC

[2013] UKUT 38 (TCC)

(Foulser).

[92]The FTT decision to refuse to bar HMRC and/or stay the appeal indefinitely (or to strike out the taxpayer’s appeal). The UT considered that such decision was founded in a conclusion that a fair trial was not impossible.

[93]The passages relied on by HMRC in this appeal concern the challenge by the taxpayer in Parnham to the FTT decision to refuse to bar and/or stay indefinitely and its application of Foulser. Foulser concerned a taxpayer’s application to bar HMRC for asserted abuse of process by HMRC in circumstances in which HMRC had arrested the taxpayer’s advisors on the first morning of the hearing and the taxpayer considered a fair trial impossible. Morgan J (in the UT) drew a distinction between abuse of process within proceedings (over which the FTT has jurisdiction) and abuse collateral to the proceedings (where the Tribunal does not because jurisdiction in that regard is by way of judicial review). Morgan J determined that a barring order could be made under rule 5 in order to ensure fairness in proceedings even where the conditions for a rule 8 order not met. The FTT in Parnham interpreted Foulser as requiring that the exercise to bar or strike out a party under rule 5 required the party barred/struck out to be at fault.

[94]Before the UT the taxpayer contended that Foulser provided authority for an appeal to be indefinitely stayed under rule 5 where natural justice called for it because a fair trial was impossible and did not require fault to be established. Having considered further authority put to it, the UT agreed with the FTT’s conclusion that “for a party to be struck out or in this case barred – the party must have done something wrong”.

Medpro

[95]As indicated above the Court of Appeal judgment in Medpro was delivered after the hearing of the Application. I did not consider it necessary to seek representations from the parties on it because HMRC had appeared to accept that I was required to place particular weight, at the third stage of the Martland test on the requirement to comply with Tribunal orders, directions etc and efficient litigation.

[96]In its judgment the Court of Appeal confirmed the observations of Ryder LJ in BPP in the Court of Appeal (

[2016] EWCA Civ 121

paragraphs 37 and 38 (BPP CA)):

“37. … It should not need to be said that a tribunal’s orders, rules and practice directions are to be complied with in like manner to a court’s. If it needs to be said, I have now said it. 38. A more relaxed approach to compliance in tribunals would run the risk that non-compliance with all orders including final orders would have to be tolerated on some rational basis. That is the wrong starting point. The correct starting point is compliance unless there is good reason to the contrary which should, where possible, be put in advance to the tribunal. The interests of justice are not just in terms of the effect on the parties in a particular case but also the impact of the non-compliance on the wider system including the time expended by the tribunal in getting HMRC to comply with a procedural obligation. Flexibility of process does not mean a shoddy attitude to delay or compliance by any party.”

[97]The Court in Medpro states:

“27. This decision plainly held that there would be a change of culture in the tax tribunals and that the approach in Denton should be followed, even though the tribunal rules were silent on the weight to be attributed to the various factors to be considered. …”

Whether to reinstate Rule 8(4) representations

Whether to reinstate

[98]In view of HMRC’s conduct in the enquiry and in the proceedings the Appellant considered HMRC should be barred from the proceedings on the basis that HMRC had failed to co-operate such that a fair hearing was no longer possible and/or that absent a statement of case HMRC’s position in the appeal bore no reasonable prospects of success. Fully particularised applications were made by the Appellant inviting the Tribunal to make such an order; the first of which was made on 11 February 2025.

[99]Initial consideration of those applications was deferred by the Tribunal though it would have been open to HMRC to have responded to the applications at any point. However, and consistent with the requirements of rule 8(4), HMRC were formally invited to make representations in respect of those applications by directions dated 7 August 2025. HMRC were plainly therefore given the opportunity to make any representations they considered appropriate in respect of the Appellants rule 8(3)(b) and (c) application.

[100]Given HMRC’s shambolic and haphazard conduct in the proceedings I directed that the representations be made on a mandatory unless order basis. HMRC accept that they received the unless order. However, for the reasons given, to which I will come, they did not comply with it, and the appeal was therefore barred pursuant to rule 8(1).

[101]On that basis HMRC’s confused narrative in both the Application and the skeleton asserting that they have been unfairly denied their right to make representations before being barred in accordance with rule 8(4) is wrong. Rule 8(4) applies only to a Barring Order made pursuant to the discretionary power under 8(3)(b) and (c). There were applications made by the Appellant under both provisions and HMRC were provided with an opportunity to make representations of which they did not avail themselves but, in the end, they were not barred under rules 8(3) but under rule 8(1).

[102]Thus, whilst I accept the general propositions made by HMRC before me in this hearing as to the right prescribed in rule 8(4) and by reference to Ince and Parnham which confirmed the correct approach to the determination of a rule 8(3) Barring Order, the analysis is not directly relevant here.

[103]That said I accept that a similar approach should be adopted when exercising my discretion under rule 8(5) to set aside the Barring Order. However, in that context HMRC cannot contend that they have been denied the right to make representations or have a hearing. Representations have been made and I listened carefully to them at the hearing for which this is the judgment.

Applying Chappell

[104]I am bound to follow the approach set out in Chappell when considering whether to set aside the Barring Order. In that regard I am to apply the three stage Martland test recognising that the sanction of non-participation in this appeal was imposed in the context of the breach of an Unless Order.

Stage 1

[105]HMRC accept that a breach of an Unless Order is serious. However, they contend that it is not a significant breach, rather it is “moderate” because it was not deliberate but inadvertent and arose from an internal and administrative failing.

[106]Chappell confirmed that when considering the seriousness and significance of a breach of an Unless Order it is necessary to consider the underlying breach and failure to carry out the obligation compliance of which necessitated the issue of an Unless Order. Applying the overriding objective the UT carefully examined the breach and what led to it including all aggravating factors to determine the significance of the breach

[107]In determining the significance of the breach that led to the Barring Order I note that HMRC had not previously been directed to respond to the Appellant’s applications that HMRC be barred and in that sense the Unless Order was not a second chance at compliance. However, the Appellant’s first barring application was made on 11 February 2025 following HMRC’s failure to serve their statement of case. HMRC were therefore aware that, unless withdrawn, the application would need to be determined and that representations would be required before it could be determined. HMRC’s response to serve an application for the appeal to be stayed but behind lead cases unrelated to the Appellant’s appeal. That error was identified by the Appellant in its objection to the stay. Despite directions providing for a reply to the objection HMRC failed to respond and left the Tribunal with an extant application for an inappropriate and unexplained stay. When HMRC were directed to clarify the position, they failed to do so in accordance with the terms of the direction and also provided no statement of case. It is in this context that I made the Unless Order. It should have been apparent, upon service of the Unless Order, that the tolerance of the Tribunal was being stretched.

[108]I therefore consider that the breach; it was not a moderate breach, it was a serious and significant breach.

Stage 2

[109]In the Application and by their skeleton HMRC did not specifically address the reason for the breach of the Unless Order. The focus was the period between the accepted receipt of the Barring Order and the application that it be set aside. However, the Application and skeleton both reference that on 5 August 2025 (and thereby 2 days before the issue of the Unless Order) the legal team for both the CKA and TAAG legal teams had changed and that the present appeal had not been mentioned in the handover. Both documents also state that the Barring Order had been sent to the clearing house email address. As was all correspondence in accordance with the general agreement between the Tribunal and HMRC, that agreement specifically in place to ensure that correspondence sent by the Tribunal is directed to the correct legal team by those inside HMRC to manage team changes, departures etc. The reason also evolved in the skeleton and in argument that HMRC had considered that the appeal had been stayed as a stay represented a sensible course of action.

[110]Despite a decision not to call those responsible for the management of the clearing house email inbox, or the lawyers from either the old or the new team I have accepted the explanation given vis a vis the email address and team hand over, and that it was not a deliberate failure to comply. I have not accepted that a belief that a stay had been granted was reasonable. Thus, I do not consider the explanations represent “good” reasons for failure to comply either individually or collectively.

[111]HMRC contend that their case is substantively similar to that in BMW in terms of the reason for the breach i.e. it was an administrative error. As noted above the UT in BMW did not consider that the reason for breach in that case was a “good” reason, but it accepted that it was not a “bad” reason. There are differences between BMW and the present appeal. Firstly, in BMW it was accepted that neither the taxpayer nor the representative had actually received the directions or the Unless Order and as such could not have complied with them; here HMRC received all directions and the Unless Order; they simply did not comply with it. Secondly, in BMW the Tribunal had used both email addresses when communicating with the taxpayer’s representative such that it was not so readily apparent that the wrong email address was being used. In my view, these differences tip the balance in the present appeal such that I consider that the reasons given by HMRC are “bad” reasons.

Stage 3

[112]At the third stage of the analysis, I am required to consider all of the facts and circumstances and determine, in accordance with the overriding objective whether to set aside the Barring Order. As now confirmed in Medpro I am required to give particular or significant weight to the need for compliance with Tribunal directions and the need for efficient conduct in litigation.

[113]In this context I have regard to the following facts and circumstances:(1) HMRC’s breach was both serious and significant for the reasons set out in paragraphs 104 - 107 above.

(2) The reason given by HMRC for the breach was a “bad” reason as set out in paragraphs 108 - 110 above.

(3) In addition to the matters identified at stage 1 HMRC had also systematically failed to comply with each direction issued by the Tribunal from the point at which the appeal was acknowledged and served.

(4) The Barring Order has been made at a very early stage in the proceedings and prior to service of a statement of case.

(5) No hearing date has therefore been set and cannot be prejudiced by HMRC’s breach of the Unless Order.

(6) When making the application to set aside the Barring Order HMRC did not also comply with the terms of the Unless Order and provide representations on the Appellant’s rule 8(3)(b) and (c) applications.

(7) HMRC did not call evidence through which they could seek to reassure me that the administrative failings which gave rise to the Barring Order and been investigated and addressed, though did instruct their counsel to assure me that HMRC had every intention to comply with any further directions if the Barring Order is set aside.

(8) This appeal arises from circumstances in which HMRC contend the Appellant is an MSC associated with TAAG as a Provider, it is one of 1,160 taxpayers which have received determinations and one of 923 taxpayers with appeals against such determinations. The tax at stake across this group of taxpayers is very significant and the legal issues are untested.

(9) The lead cases identified for the TAAG group appeals will proceed to determine whether TAAG is a Provider and whether additional income tax and NICs is/are due from the taxpayers with appeals before the Tribunal under the MSC legislation.

(10) The tax at stake for the Appellant is approximately £134,000. A significant sum for a sole director company.

(11) In maintaining the Barring Order HMRC will be excluded from participating further in the present appeal including in connection with the Appellant’s application that the appeal be summarily determined in accordance with rule 8(8). It will thereby be denied the ability to address the merits of the substantive issues in the appeal.

(12) If this appeal is summarily determined in the Appellant’s favour there will have been no consideration of the merits of its appeal, in the event that the TAAG group litigation is unsuccessful the Appellant will not have to make payment of income tax and NICs which, had HMRC not been barred would have been payable.

(13) The asserted exceptional circumstances in this appeal are that HMRC is keen to participate but is presently barred due to an inadvertent and administrative error associated with a change of legal team and failure to forward an email from the clearing house inbox to the relevant lawyers.

(14) The Appellant, a litigant acting through its sole director, has complied with all directions and engaged with the Tribunal process and expects that where there was a breach of an Unless Order which specified that HMRC would be barred that would be the result if there was non-compliance.

[114]I have expressly not taken account of the following facts and matters:(1) Any conduct of HMRC during the course of the enquiry and in connection with the communication of the substantive decision or its review.

(2) The merits of this appeal as it is neither obviously strong nor obviously weak. It is a complex legal and factual issue (in this regard I apply Chappell which declined to follow Pierhead in this regard and which therefore overrides Jumbogate).

(3) That the Appellant bears the burden of proof in this appeal.

[115]The balancing of the factors identified in paragraph 112 is an evaluative exercise I must undertake to balance the fairness and justice to both sides.

[116]I have placed “particular” weight on the need for compliance with directions. For the reasons articulated by Ryder LJ in the Court of Appeal in BPP CA and adopted in Medpro all directions should be complied with and if Unless Orders are not upheld there will be a “shoddy attitude to delay”. In my view therefore the starting position should be that the Barring Order should be maintained unless to do so is disproportionate i.e. when taking account of all the other factors the balance of prejudice weighs sufficiently in favour of setting it aside.

[117]The reasons given by HMRC for contending that maintaining the Barring Order is disproportionate essentially come down to two things:(1) this was an administrative error which has not prejudiced a merits based determination of the appeal; and

(2) this appeal concerns determinations issued in the context of wider litigation which will determine whether additional income tax and NICs are due from customers of TAAG and the Appellant should not be permitted to succeed in the appeal until the merits of the wider issue have been determined in the lead cases or specifically on the facts of the present case.

[118]That this appeal is part of a putative group of appeals appears to me to be the argument which Lord Neuberger confirmed in BPP SC should be given little weight “save, perhaps, in exceptional circumstances”. It is not clear to me that he was satisfied that it would ever be a factor which would bear weight but certainly not unless there were exceptional circumstances. For reasons reflecting those which cause me to consider that the use of the very email that HMRC ask the Tribunal to use and an internal failure to effect a proper handover between legal teams represent “bad” reasons for a breach of an Unless Order I cannot accept that they represent exceptional circumstances permitting me to put any weight on the wider context in which this appeal sits. They are errors which should not have occurred in properly run litigation and which could easily have been prevented. There was nothing exceptional about them.

[119]This Tribunal determines strike out applications in the context of group appeals all the time. The fact that a matter is part of a wider group of appeals does not exonerate the non-compliance with directions.

[120]Further, I reject HMRC’s contention that there is some wider prejudice which arises if they are barred from this appeal in respect of those appeals. Those appeals will be litigated with the full participation of HMRC in accordance with the directions I have given in those appeals. I deal below in paragraphs 130 - 134 with how this appeal should be managed in light of my decision to maintain the Barring Order; however, in the context of the third stage evaluative exercise I simply note that HMRC’s assumption that the present appeal should be stayed if the Barring Order is maintained is presumptive and does not justify the lifting of the Barring Order.

[121]Turning therefore to whether the Barring Order, which deprives HMRC of contributing to a merits-based determination of the appeal, is counter-balanced by the inadvertent and administrative error I have reflected on the cases of Chappell, Breen and BMW. I recognise that Chappell and Breen are removed from the present case and are significantly more egregious. The period of delay and pattern of behaviour was more significant but, as in both those cases, in this case HMRC had persistently failed to comply with Tribunal directions. Further, the CKA stay application had been inappropriately made with the Tribunal having to force the appropriate application out of HMRC.

[122]Further, the Application itself was incorrect and/or misleading in the following respects:(1) In paragraph 11 it is implied that the error as to the putative MSC provider with which the Appellant was connected had been corrected and that HMRC had apologised. That apology was made to the Tribunal on 27 May 2025. There is no evidence that HMRC have ever apologised to the Appellant.

(2) Paragraph 19 states that on 7 August 2025 the Tribunal sent contradictory correspondence/directions stating both that HMRC had been barred and that it had not been barred from the proceedings. That statement was inaccurate and misleading. The only correspondence sent on 7 August 2025 confirmed that HMRC had not been barred for their breach of the direction issued on 19 May 2025. The second letter which was inadvertently dated 7 August 2025 was sent in an email dated 18 September 2025, attaching a letter also dated 18 September 2025 and it was sent to the Appellant, a copy being provided to HMRC.

(3) Paragraph 25 refers to HMRC’s clearing house email address. It confirms that all correspondence sent by the Tribunal and referred to above had been sent to and received by that email address. However, it is at least implicit from the paragraph that the Tribunal should have sent the relevant correspondence to the legal team dealing with the appeal (whoever that might have been given that I am told the team changed on 5 August 2025). Despite those instructing Counsel having certain knowledge of the arrangements for communication of Tribunal correspondence there is an inferred and unwarranted criticism of the Tribunal.

(4) In paragraph 31, rule 8(4) is summarised as follows:

“Rule 8(4) mandates that a party must be given an opportunity to make representations in relation to the proposed strike out.”

That summary entirely misrepresents the provision which provides only for representations to be made before the Tribunal exercises a discretion to strike out (or bar) a party. It does not apply in the case of an automatic strike out under rule 8(1). This position is further compounded in paragraph 35 in which it is stated that HMRC had not been given a proper opportunity to have a hearing before being barred and that a hearing “should have taken place”. As this was an automatic barring under rule 8(1) there was no requirement to have a hearing. (5) At paragraph 38 HMRC refer to paragraphs 60 – 61 of BPP UT to contend that “caution should always be adopted in administering extreme and draconian measures – such as barring” in the context of a situation in which a taxpayer would derive an unwarranted windfall through the debarment of HMRC. The paragraph makes no mention that the UT decision was overturned by the Court of Appeal and that the Supreme Court had upheld the decision of the Court of Appeal though for different reasons. Consideration of paragraph 32 of the Supreme Court judgment makes it clear beyond doubt that it is not that case that “caution should always be adopted”, rather “to give the [windfall] point weight, save perhaps in exceptional circumstances, would appear to undermine the utility of the sanction of a debarring order”. (6) Paragraph 47 invites the Tribunal to apply the test determined in Jumbogate when determining whether to set aside a Barring Order/reinstate an appeal which has been struck out with emphasis on the merits of the appeal being a relevant factor when, at least in this context, Jumbogate had been superseded by Chappell which was not referenced at all.

[123]Ms Dhanoa sought to explain these errors as arising from the hurried review of an incomplete file presented in early September once the Barring Order had been issued. However, HMRC had 28 days in which to prepare the Application; they made the Application in 12 days. Perhaps the other 16 may have permitted a fuller review of the file and consideration of the case law such that the errors were not made.

[124]However, even that seems unlikely as HMRC’s skeleton argument also contained similar statements. Those in 122(1) and 122(2) were not repeated but their inaccuracy was not acknowledged. Those in paragraphs 122(3) – (6) are repeated (at paragraphs 48(iii) (on this occasion in more adamant terms “Tribunal correspondence was sent to a generic HMRC mailbox rather than directly to the relevant live case team”), 19(iii), 21 (as regards 27(4) and (5)), 31 – 35).

[125]As was the case in Chappell and Viking the Application was not accompanied by compliance with the direction made on unless terms i.e. HMRC’s response to the Appellant’s rule 8(3) barring applications. To have complied would not have been, as HMRC contended, presumptuous, it would have demonstrated a willingness to now comply with the direction to facilitate the determination of those applications before progressing this appeal further. This is a factor to which I consider it appropriate to give some weight. I do so because it seems to me to be entirely consistent the requirement that weight be given to the need for compliance with directions.

[126]I have already noted the differences between the circumstances in BMW and the present appeal and for present purposes note that in that case the UT stated that “if the facts were different, and the reasons for the breach of directions were weaker, it is unlikely that we would have reinstated the appeal.” In my view the facts of this appeal are different, the reasons for breach are weaker and as the decision in BMW was a marginal one this case falls on the wrong side of the line.

[127]If the Barring Order is not set aside HMRC will not participate in a merits-based determination of the issues in this appeal. £134,000 will not be collected on behalf of taxpayers generally (assuming that the TAAG group appeals fail) but that is because HMRC failed to effect an adequate handover when legal teams changed and/or did not forward an email they accept they received for action. I have not reviewed more extensively the case law on strike out/reinstatement but from the decisions I have taken in the past that appeals are struck out for less and not reinstated. Whenever an appeal is struck out there is a risk of a windfall benefit that the outcome of the appeal is different to that which would have been determined on the merits of the appeal.

[128]Having undertaken the evaluative exercise I do not consider that maintaining the Barring Order is disproportionate.

[129]I do not consider the cases referred to by HMRC and which I have not already addressed, drive an alternative conclusion:(1) The decision I have reached is consistent with Chartwell I have carefully considered what I consider to be the relevant factors and excluded the irrelevant factors. I have done so mindful of the overriding objective and the specific features of rule 2(2).

(2) PGPH is an FTT decision which predates BPP SC. It was a case which did not involve a breach of an Unless Order.

(3) Despite XG Concept concerning a rule 8(3)(b) application, consistent with the approach in Chappell I have undertaken a forwards and backwards look. I have accepted that HMRC now wish to comply with directions and I am reasonably confident that they would comply but that is not, in my view, sufficient to outweigh the factors which compel a decision to maintain the Barring Order.

(4) Consistent with Colman I have not taken account of HMRC’s conduct in the enquiry or prior to the acknowledgement and service of the appeal to the Tribunal.

(5) Parnham and its consideration of Foulser confirmed that strike out/barring is appropriate only where a party was in the wrong or at fault in the context of rule 8(3). In a rule 8(1) strike out/barring fault a gateway condition and will have been proven.

[130]For those reasons I refuse the Application and HMRC are barred from further participation in these proceedings

Consequences following barring

[131]Rule 8(8) provides that “If a respondent has been barred from taking further part in proceedings under this rule and that bar has not been lifted, the Tribunal need not consider any response or other submissions made by that respondent and may summarily determine any or all issues against that respondent.”

[132]The Appellant has made an application under rule 8(8) for the summary determination of the appeal which I should now consider.

[133]HMRC’s skeleton argument (which strictly I should not consider having maintained the Barring Order) indicates the barring presents a pyrrhic victory as the appeal remains one which can and should be grouped with the TAAG group appeals and which should therefore be determined following the outcome in that appeal. In my view that cannot be right because to stay the appeal pending the outcome of the TAAG group lead cases and then to apply the judgment in this case (even on contested facts) is ultimately to allow HMRC to participate in the merits determination of the appeal when I have already determined that it is not in accordance with the overriding objective to allow them to do so. As such I consider it inappropriate to stay this appeal.

[134]Whilst the Appellant bears the burden of proof in this case no statement of case has been served and as such there is no response to the Appellant’s appeal that it is not an MSC in law or fact. As such I consider that it is in accordance with the overriding objective that the appeal be summarily determined in the Appellant’s favour.

[135]The appeal is therefore allowed.

Costs application

[136]The Appellant has applied for its costs in connection with the reinstatement application and more generally relating to the appeal.

[137]A costs application represents separate proceedings from the substantive appeal. As I indicated in the hearing, even were I to refuse the Application HMRC would be entitled to participate in the costs proceedings. Pursuant to rule 10(5) I cannot make an award of costs without giving HMRC the opportunity to make representations as the paying party.

[138]The Appellant has made two applications for costs. The first application was dated 23 June 2025. It was a claim for unreasonable costs pursuant to rule 10(1)(b). It did not, however, comply in form with the requirements of rule 10(3)(b) as it was not accompanied with a summary of the costs incurred. The second application was made on 8 October 2025 and indicates that a detailed schedule of costs will be submitted.

[139]The Appellant now has 28 days from the date of this decision to renew its claim for costs in a manner which complies with rule 10. Any such claim should be served on HMRC who will have 14 days from receipt of the application to provide any representations on it they wish to make. Any application and representations will then be considered and determined.

Right to apply for permission to appeal

[140]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:29 January 2026