In the recent case of Samuel and Helen Moore (t/a Moore Farms) v HMRC [2022] UKFTT 411 (TC), the First-Tier Tribunal had to consider whether to permit a late appeal against an HMRC decision after a later court judgment in a different case strongly indicated that that HMRC decision had been incorrect.
The taxpayers were farmers who had made use of the VAT agricultural flat rate scheme. However, in 2013 HMRC unilaterally cancelled their certificate, preventing them from using the scheme. The taxpayers decided not to appeal within the statutory 30 day period because: (i) based on the prevailing view of the law at the time, they did not think they would succeed; and (ii) they believed that an HMRC officer had told them that the scheme would be ending anyway. (The scheme was not in fact ending, and HMRC contested that the officer had said that it was.)
In 2017, in a different case, it was found that the reason for a cancellation of a scheme certificate had been incorrect as a matter of law. As the reason was the same as HMRC had used in relation to the taxpayers, they now considered that their certificate had been incorrectly cancelled and so submitted a late appeal (in 2018).
In line with the three stage approach established by prior case law for determining whether to allow a late appeal, the tribunal first established the length of the delay – five years. The parties agreed that this was serious and significant, and the tribunal cited a prior case in which the Upper Tribunal had applied the same description to a delay of 3 months.
The tribunal then established the reasons for the delay (see above), as part of which it held that HMRC had not misinformed the taxpayers that the scheme was ending.
This left the third stage, evaluating all the circumstances - balancing the merits of the reason(s) for the delay against the prejudice caused to both parties if the appeal were allowed or refused. The tribunal considered that the publication of a new case might have some weight in the balancing exercise but that it was not, by itself, a good reason for not appealing in time. After noting that the taxpayers would be significantly prejudiced if the appeal were denied and that HMRC would be so if it were allowed, the tribunal took 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". This evaluation process led the tribunal to deny permission to appeal.
Permission for a late appeal is not routinely granted. Accordingly, taxpayers should consider making a timely protective appeal if they disagree with HMRC's interpretation of the law and, if they do not appeal in time, seek to minimise the delay before they apply for permission to appeal out of time.
