“Contractual Disclosure Facility (CDF) – Offer period expired and you have not replied This letter contains important information about the CDF. Please read it carefully. I wrote to you on26 February 2020 to formally offer you the opportunity to enter into a CDF with HMRC. My letter told you that our offer would expire 60 days after you received it. The offer period has now expired and I have not received a reply from you. As I have not received a reply to our CDF offer, HMRC is not bound by the terms of the contract. What will happen next I will now investigate the tax fraud that we suspect you have committed. This may be a criminal investigation with a view to prosecution. Code of Practice 9, which I sent to you with my original offer, explains what I will do next. I will contact you by 30 June 2020to tell you how our investigation will proceed. If there’s anything about your health or personal circumstances that may make it difficult for you to deal with this investigation, please tell me so that I can help you in the most appropriate way.”
“We are making a late appeal on the grounds that we have been appointed recently as Mr William James Cook Junior’s tax representative.”
“The appellant did not have professional advisers to deal with this very serious Enquiry. It was for this reason that no appeals were made in good time. It would surely not be equitable to Mr Cook to have a liability imposed on him for technical reasons. It is plainly for this reason that the Appellant needs HMRC to open the assessments for all the relevant years. The Appellant took professional advice when he was confronted with a potential Bankruptcy outcome. It is patently clear that at no point should the income have been split on a 50:50 basis with his late father as he did not own the property.”
“Case management powers 5. —(1) Subject to the provisions of the 2007 Act and any other enactment, the Tribunal may regulate its own procedure. … (3) In particular, and without restricting the general powers in paragraphs (1) and (2), the Tribunal may by direction— … (e) deal with an issue in the proceedings as a preliminary issue; …”
“(4) If the notice of appeal is provided after the end of any period specified in an enactment referred to in paragraph (1) but the enactment provides that an appeal may be made or notified after that period with the permission of the Tribunal— (a) the notice of appeal must include a request for such permission and the reason why the notice of appeal was not provided in time; and (b) unless the Tribunal gives such permission, the Tribunal must not admit the appeal.”
“My Dealings with HMRC ... 15. When HMRC said that these matters are normally dealt with by accountants, I understood that it was usual, but not essential for an accountant or tax adviser to be involved. 16. I genuinely believed I was helping by responding to HMRC’s requests and providing information… … Explanation for the Delay 31. The delay in the Appellant seeking permission to appeal was caused entirely by my lack of understanding of HMRC’s enquiry and appeals process, combined with the Appellant’s reliance on my services after his original accountant stepped back from the matter.”
“18. Memory is especially unreliable when it comes to recalling past beliefs. Our memories of past beliefs are revised to make them more consistent with our present beliefs. Studies have also shown that memory is particularly vulnerable to interference and alteration when a person is presented with new information or suggestions about an event in circumstances where his or her memory of it is already weak due to the passage of time.”
“82. I should explain in more detail why I take this view. Without attempting to lay down any exhaustive rules, it seems to me that in general the proper function of factual witnesses, even of those involved in a case in a professional capacity…, is to give evidence of facts relevant to the issues in the case of which they can speak from their own knowledge (including in appropriate circumstances evidence of hearsay statements) ...”
“34. … Applications for extensions of time limits of various kinds are commonplace and the approach to be adopted is well established. As a general rule, when a court or tribunal is asked to extend a relevant time limit, the court or tribunal asks itself the following questions: (1) what is the purpose of the time limit? (2) how long was the delay? (3) is there a good explanation for the delay? (4) what will be the consequences for the parties of an extension of time? and (5) what will be the consequences for the parties of a refusal to extend time? The court or tribunal then makes its decision in the light of the answers to those questions. … 37. …The general comments in the above cases will also be found helpful in many other cases. Some of the above cases stress the importance of finality in litigation. Those remarks are of particular relevance where the application concerns an intended appeal against a judicial decision. The particular comments about finality in litigation are not directly applicable where the application concerns an intended appeal against a determination by HMRC, where there has been no judicial decision as to the position. None the less, those comments stress the desirability of not re-opening matters after a lengthy interval where one or both parties were entitled to assume that matters had been finally fixed and settled and that point applies to an appeal against a determination by HMRC as it does to appeal against a judicial decision.”
“…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” which engages rule 3.9(1). 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)]”. …”
“There is nothing in the wording of the overriding objective of the tax tribunal rules that is inconsistent with the general legal policy described in Mitchell and Denton. As to that policy, I can detect no justification for a more relaxed approach to compliance with rules and directions in the tribunals and while I might commend the Civil Procedure Rule Committee for setting out the policy in such clear terms, it need hardly be said that the terms of the overriding objective in the tribunal rules likewise incorporate proportionality, cost and timeliness. 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 courts. If it needs to be said, I have now said it.”
“accept that the UT should adopt a different, i.e., more relaxed, approach to compliance with rules, directions and orders than the courts that are subject to the CPR.”
“I can detect no justification for a more relaxed approach to compliance with rules and directions in the tribunals… [i]t 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”
“In a nutshell, the cases on time limits and sanctions in the CPR do not apply directly, but the Tribunals should generally follow a similar approach.”
“43. ... Whether considering an application which is made directly under rule 3.9 (or under the FTT Rules, which the Supreme Court in BPP clearly considered analogous) or an application to notify an appeal to the FTT outside the statutory time limit, it is clear that the judge will be exercising a judicial discretion. The consequences of the judge's decision in agreeing (or refusing) to admit a late appeal are often no different in practical terms from the consequences of allowing (or refusing) to grant relief from sanctions - especially where the sanction in question is the striking out of an appeal (or, as in BPP, the barring of a party from further participation in it). 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". We see no reason why the principles embodied in this message should not apply to applications to admit late appeals just as much as to applications for relief from sanctions, though of course this does not detract from the general injunction which continues to appear inCPR rule 3.9 to "consider all the circumstances of the case.”
“44. When the FTT is considering applications for permission to appeal out of time, therefore, it must be remembered that the starting point is that permission should not be granted unless the FTT is satisfied on balance that it should be. In considering that question, we consider the FTT can usefully follow the three- stage process set out in Denton: (1) Establish the length of the delay. If it was very short (which would, in the absence of unusual circumstances equate to the breach being “neither serious nor significant”), then the tribunal is unlikely to need to spend much time on the second and third stages – though this cannot be taken to mean that applications can be granted for very short delays without moving on to a consideration of those stages. (2) The reason (or reasons) why the default occurred should be established. (3) The tribunal can then move onto its evaluation of all the circumstances of the case. This will involve a balancing exercise which will essentially assess the merits of the reasons given for the delay and the prejudice which would be caused to both parties by granting or refusing the extension of time.” (1) Establish the length of the delay. If it was very short (which would, in the absence of unusual circumstances equate to the breach being “neither serious nor significant”), then the tribunal is unlikely to need to spend much time on the second and third stages – though this cannot be taken to mean that applications can be granted for very short delays without moving on to a consideration of those stages. (2) The reason (or reasons) why the default occurred should be established. (3) The tribunal can then move onto its evaluation of all the circumstances of the case. This will involve a balancing exercise which will essentially assess the merits of the reasons given for the delay and the prejudice which would be caused to both parties by granting or refusing the extension of time.”
“That balancing exercise should take into account the particular importance of the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected.”
“In doing so, the FTT can have regard to any obvious strength or weakness of the applicant's case; this goes to the question of prejudice – there is obviously much greater prejudice for an applicant to lose the opportunity of putting forward a really strong case than a very weak one. It is important however that this should not descend into a detailed analysis of the underlying merits of the appeal.”
“We have, however, concluded that the FTT did make an error of law in failing to acknowledge or give proper force to the position that, as a matter of principle, the need for statutory time limits to be respected was a matter of particular importance to the exercise of its discretion.”
“The exercise of a discretion to allow a late appeal is a matter of material import, since it gives the tribunal a jurisdiction it would not otherwise have. Time limits imposed by law should generally be respected.”
“we consider the three stage structure of the discretion at [44] of Martland … to represent an unimpeachable approach.”
“94. …At [44] of Martland, the Upper Tribunal set out the three-stage test. That paragraph says nothing about the ex-ante weight to be attached to the factors being weighed and is unimpeachable. “95. The question is whether [45] of Martland … goes further and in referring to the “particular importance of the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected” was doing what the Court of Appeal did in Denton, and according these factors particular weight. Read on its own, it must be doubted whether Martland was doing this. Martland at [45] is not unequivocally clear, and can be read as merely stressing that these factors matter, as indeed they do. But there can be no doubt that the Upper Tribunal has subsequently followed the Denton approach not merely as to the structure of the discretion (ie the three-stage test) but also as to the (additional, extra) weight to be accorded to theCPR 3.9 (a) and (b) factors (ie the “top table” point) ...”
“91. …In summary, Marcus Smith J concluded that paragraph [45] of Martland was clearly wrong in glossing section 83G of VATA 1994 so as to include the factors contained in the current version ofCPR 3.9 , which are absent from the statutory test in section 83G. Judge Cannan did not consider Martland to be clearly wrong in this respect, concluding that Parliament had envisaged that the Upper Tribunal would give guidance on the exercise of the discretion in section 83G, which could extend to drawing an analogy with the CPR and giving guidance on the weight to be attributed to particular factors.”
“92. The Appellant submits that as a matter of judicial comity we should follow the decision in Medpro UT unless we consider it to be clearly wrong. The difficulty for us here is the existence of two previous decisions of the Upper Tribunal, one of which holds the other to be clearly wrong. 93. We find ourselves unable to conclude that either decision is clearly wrong or, conversely, clearly right. We note that HMRC are contemplating an appeal so it is possible the conflict may be resolved at a higher level, but we cannot delay this decision on that account. In the circumstances, we consider that we should follow Medpro UT on the grounds that it is the more recent decision and expressly considers the correctness of the earlier decision.”
“44. I also consider that Marcus Smith J’s characterisation of the Martland guidance (as interpreted in Katib) as amounting to a fetter on discretion is overblown. The three- stage test described in Martland plainly requires the FTT to consider all the circumstances of the case. That expressly recognises that there is a judicial discretion to be exercised. 45. In my judgment, therefore, Marcus Smith J was wrong, and Judge Cannan was right…First, guidance is just that: guidance. Where a superior court or tribunal gives guidance to an inferior court or tribunal, the inferior court or tribunal may depart from it if it gives sound reasons for doing so. That is reflected in Lady Rose’s reference to the absence of special circumstances. Second, as Lady Rose made clear, it is appropriate for an appellate court to lay down guidance even where a discretion appears to be unfettered. Third, in BPP the Supreme Court specifically approved the giving of guidance where non-compliance with time limits is in issue.”
“…The Martland guidance (as amplified by Katib) is appropriate.”
“In the context of an appeal right which must be exercised within 30 days from the date of the document notifying the decision, a delay of more than three months cannot be described as anything but serious and significant.”
“I refer to my on-going investigation into your tax affairs until the period ended5/6/2020 and I would like to set out HMRC’s view of the matter. Points agreed You did not return all the income earned from your property business. You have agreed on the basis as to how HMRC have calculated the income tax and national insurance you are due to pay. You received rental income from the property 2 Park Cottages from 2009/2010 Points not agreed How and when the income tax and NICs due will be paid Your view It is your view you are actively seeking ways to fund the settlement. HMRC view Whilst HMRC agree you are attempting to fund the settlement by selling property, the lack of firm completion dates is a concern. Also, while you have made a payment on account of£22,500 , this is only a small percentage of the actual income tax and NICs due. As previously advised, if you are seeking to settle via a contract by instalment payments, regular, significant amounts should have been paid throughout my investigation.”
“Dear Nyree Attached please find a copy of the penalty information and notification of penalty assessment issued to your client. I have also attached a copy of Mr Cook Jnr’s SA statement as at today’s date. Please note the balance on this does not include the amount being charged by the penalty assessment nor have the payments on account already held been considered. Finally there is an up to date statement for Mr Cook Snr as previously discussed. Yours sincerely Linda”
“Hi Linda Thank you, I will pass this information over to Billy and Pembertons Thank you for all your help in finalising all the outstanding tax and penalties. Kind regards Nyree”
“Enclosed please find information relating to the penalties we have charged. You agreed your behaviours at our settlement meeting on16 February 2022 and the quality of disclosure is based on the formal closure of your investigation.”
“49. …in most cases, a litigant seeking permission to make a late appeal on the grounds that previous advisers were deficient will face an uphill task and should expect to provide a full account of exchanges and communications with those advisers … … 54 …when considering applications for permission to make a late appeal, failures by a litigant’s adviser should generally be treated as failures by the litigant.”
“58. It is clear from the Decision that Mr Bridger did not provide competent advice to Mr Katib, misled him as to what steps were being taken, and needed to be taken, to appeal against the PLNs and failed to appeal against the PLNs on Mr Katib’s behalf (see [7] and [16]). But extraordinary though some of Mr Bridger’s correspondence was, the core of Mr Katib’s complaint is that Mr Bridger was incompetent, did not give proper advice, failed to appeal on time and told Mr Katib that matters were in hand when they were not. In other words, he did not do his job. That core complaint is, unfortunately, not as uncommon as it should be. It may be that the nature of the incompetence is rather more striking, if not spectacular, than one normally sees, but that makes no difference in these circumstances. It cannot be the case that a greater degree of adviser incompetence improves one’s chances of an appeal, either by enabling the client to distance himself from the activity or otherwise. 59. Mr Magee urged us to give particular weight to the FTT’s finding, at [15], that Mr Katib did not have the expertise to deal with the dispute with HMRC himself, but that does not weigh greatly in the balance since most people who instruct a representative to deal with litigation do so because of their own lack of expertise in this arena. We do not consider that, given the particular importance of respecting statutory time limits, Mr Katib’s complaints against Mr Bridger or his own lack of experience in tax matters are sufficient to displace the general rule that Mr Katib should bear the consequences of Mr Bridger’s failings and, if he wishes, pursue a claim in damages against him or Sovereign Associates for any loss he suffers as a result. This conclusion is fortified by the fact that the FTT’s findings demonstrate that there were some warning signs that should have alerted Mr Katib to the fact that Mr Bridger was not equal to the task. Despite Mr Bridger assuring Mr Katib that his appeals were in hand, he was still receiving threats of enforcement action ([9]). Mr Bridger’s advice to “cease to be a man by making a declaration to this effect” should have alerted Mr Katib to the warning signs. Mr Katib is not without responsibility in this story.”
“77. In fairness we note that in one of the authorities Mr McNall referred us to (Corbin’s case at [22] (Corbin v Penfold Metallising Co Ltd [2000] 4 WLUK 152 referred to in Tyers v Aegis Defence Service (BVI ) Ltd and others[2023] EWHC 896 (KB) it was described how the litigant did what a person in his position might be expected to do “which is to go to [their] solicitors, who are apparently efficient and responsible in this area of work, and left them to get on with it”
“64… (1) failures by the taxpayer’s adviser should generally be treated as failures by the taxpayer; (2) the general rule that the failure of an adviser to advise the taxpayer of the deadlines for making appeals, or to submit timely appeals on his behalf, is unlikely to amount to a "good reason" for missing those deadlines when considering the second stage of the evaluation required by Martland; (3) when considering the third stage of the evaluation required by Martland, exceptions to the general rule are possible and, if a taxpayer was misled by his advisers, that is a relevant consideration; (4) the core of the taxpayer’s complaint is that the adviser was incompetent, did not give proper advice, failed to appeal on time and told the taxpayer that matters were in hand when they were not. That core complaint is not as uncommon as it should be. It cannot be the case that a greater degree of adviser incompetence improves one's chances of an appeal; (5) the fact that the taxpayer did not have the expertise to deal with the dispute with HMRC himself does not weigh greatly in the balance since most people who instruct a representative to deal with litigation do so because of their own lack of expertise in this arena; (6) given the particular importance of respecting statutory time limits, neither the taxpayer's complaints against his adviser nor his own lack of experience are sufficient to displace the general rule that a taxpayer should bear the consequences of his adviser’s failings; (7) this conclusion is fortified by the fact that there were some warning signs that should have alerted the taxpayer to the fact that the adviser was not equal to the task – the taxpayer was still receiving threats of enforcement action, and the advice to "cease to be a man by making a declaration to this effect" should have alerted the taxpayer to the warning signs; (8) the adviser’s conduct does not have any real weight when considering the factors relevant to the final stage of the three-stage approach outlined in Martland; and (9) whilst the financial consequences of the taxpayer not being able to appeal were very serious because his means were limited such that he would lose his home, this factor was not as weighty as the Tribunal said it was. The core point is that the taxpayer would suffer hardship if he (in effect) lost the appeal for procedural reasons. However, that could be propounded by large numbers of taxpayers, and it does not have sufficient weight to overcome the difficulties posed by the fact that the delays were very significant, and there was no good reason for them.”
“46. Unfortunately for Mrs Green, it is well established that “when considering applications for permission to make a late appeal, failures by a litigant's adviser should generally be treated as failures by the litigant” (see the Upper Tribunal's decision in HMRC v Katib[2019] STC 2106 ('Katib') at [54]). In Katib, the Upper Tribunal had to consider the extent to which reliance on an adviser was a justifiable reason for failing to make an appeal in time. In that case, the adviser did not provide competent advice to Mr Katib, misled him as to what steps were being taken to appeal and failed to appeal on Mr Katib's behalf. On the facts of the case, the Upper Tribunal concluded that failings by the appellant's agent could not be relied upon by the appellant at any stage in the Martland analysis. The Upper Tribunal observed at [56] that: “… the correct approach in this case is to start with the general rule that the failure of [the adviser] to advise Mr Katib of the deadlines for making appeals, or to submit timely appeals on Mr Katib's behalf, is unlikely to amount to a 'good reason' for missing those deadlines when considering the second stage of the evaluation required by Martland. However, when considering the third stage of the evaluation required by Martland, we should recognise that exceptions to the general rule are possible and that, if Mr Katib was misled by his advisers, that is a relevant consideration.” 47. In [58] and [59], the Upper Tribunal said: “… the core of Mr Katib's complaint is that [the adviser] was incompetent, did not give proper advice, failed to appeal on time and told Mr Katib that matters were in hand when they were not. In other words, he did not do his job. That core complaint is, unfortunately, not as uncommon as it should be. It may be that the nature of the incompetence is rather more striking, if not spectacular, than one normally sees, but that makes no difference in these circumstances. It cannot be the case that a greater degree of adviser incompetence improves one's chances of an appeal, either by enabling the client to distance himself from the activity or otherwise.” 48.We are bound by the decision in Katib and, as a result, we are driven to find that the fact that Mrs Green was let down by Mr Russell and Cobham Murphy does not constitute a good reason for the failure to appeal.” “… the correct approach in this case is to start with the general rule that the failure of [the adviser] to advise Mr Katib of the deadlines for making appeals, or to submit timely appeals on Mr Katib's behalf, is unlikely to amount to a 'good reason' for missing those deadlines when considering the second stage of the evaluation required by Martland. However, when considering the third stage of the evaluation required by Martland, we should recognise that exceptions to the general rule are possible and that, if Mr Katib was misled by his advisers, that is a relevant consideration.”
“More information If there is anything about your health or personal circumstances that may make it difficult for you to deal with this matter, please tell me so that I can help you in the most appropriate way. My contact details are at the top of this letter.”
“If you need help If you have any health or personal circumstances that may make it difficult for you to deal with this matter, please tell us. We’ll help you in whatever way we can.”
“being a litigant in person with no previous experience of legal proceedings is not a good reason for failing to comply with the rules”
“Ignorance of the law cannot, as a matter of policy, ever amount to a reasonable excuse for failing to observe the law. This is because otherwise the law would favour those who chose to remain in ignorance of it above those persons who chose to acquaint themselves with the law in order to abide by it.”
“Parliament cannot have intended ignorance of the law to be a reasonable excuse because Parliament must have enacted the law with the intention that it would be obeyed. In all these circumstances, ignorance of the law simply cannot amount to a reasonable excuse.”
“the eyes of the court are to be bandaged by the application of the maxim as to ignorantia legis.”
“permission to appeal out of time should only be granted exceptionally, meaning that it should be the exception rather than the rule and not granted routinely.”
“… the purpose of the time limit is to bring finality, and that is a matter of public interest, both from the point of view of the taxpayer in question and that of the wider body of taxpayers.”