Time is of the Essence

Les Howard emphasises the importance of dealing with HMRC in a timely fashion when it comes to applications for appeals

I sometimes sit as a non-legal member of the First Tier Tax Tribunal. I sit on a mixture of substantive and application hearings. It is an interesting annex to my day job as a VAT consultant.

On one day recently I heard three taxpayer applications for appeals to be heard out-of-time. Unusually, all three cases were decided in the taxpayers’ favour. The main reason was HMRC’s incompetence in failing to prepare their documentation properly. Had they prepared these properly the results may have been different. (Of course, whether the taxpayers will be successful on their substantive appeals is a separate question.)

Most applications for appeals to be heard out-of-time, whether for VAT or any other tax, are lost at Tribunal stage.

The problem is simple! Taxpayers (or their advisers) fail to check the time limit that applies when HMRC make a decision or complete a review.

As it happens, I have in front of me an HMRC decision letter in relation to VAT. It helpfully and clearly states that the taxpayer has the choice to seek a review of the decision, or an appeal to the Tax Tribunal (the obligation to offer a review was enacted with effect from 1 April 2009). In both cases, the time limit is 30 days. Simple. The 30-day time limit for a review is provided by s83C(1)(b). The 30-day time limit for an appeal is provided by s83G(1)(a).

If the taxpayer chooses a review, this is undertaken by a different HMRC Officer to the decision-maker. S83E makes provision for this review to be made out-of-time. This includes reference to a ‘reasonable excuse’, which readers will be familiar with. This means a dilatory – or busy – taxpayer will be refused a review.

S83F(6) provides that HMRC must produce the conclusion(s) of their review within 45 days, or such longer period as may be agreed with the parties. Of course, a taxpayer will not really be able to insist that HMRC do not extend this period, as frequently reviews take much longer than 45 days. In any case, if HMRC fail to request an extension to the time period for review, s83F(8) provides that they will be deemed to have upheld their decision. The taxpayer is effectively forced to acquiesce to HMRC’s own dilatoriness!

There is a raft of case law addressing the issue of out-of-time appeals. The FTT case in Mrs Francine Francis helpfully brings together some of the higher court decisions, together with the Civil Procedure Rules (CPR). You can read the decision here: http://www.bailii.org/uk/cases/UKFTT/TC/2016/TC05234.html

The detailed questions which a Tribunal or Court will ask are considered from para 44. It must be appreciated that the question of whether an appeal or application was made out-of-time is treated in the same methodical way as any substantive question of VAT or any other tax.

You can find some HMRC guidance, addressing both direct tax and indirect tax appeals, in their guidance at https://www.gov.uk/hmrc-internal-manuals/appeals-reviews-and-tribunals-guidance/artg2000 This includes reference to time limits.

Les Howard is a partner in vatadvice.org, a specialist VAT practice based in Cambridgeshire. He lectures on VAT and sits on the Tax Tribunal