New Judicial Guidance on Admission of Late Tax Appeals Explained
One matter we are frequently asked to advise on is when a taxpayer, whether an individual or a company, is ‘out of time’ for submitting an appeal against a tax assessment issued by HMRC.
Some commentators believe that a recent decision of the Upper Tax Tribunal is one of the most important for many years to affect tax procedures and is likely to give rise to a substantial increase in late tax appeals.
However, as the decision of the Upper Tribunal was a ’split decision,’ it may well lead to further litigation to clarify the position on when late tax appeals should be allowed to proceed. What it certainly does is emphasise that, wherever possible, any administrative time limits which are imposed should be strictly observed.
Appeals against both direct tax and VAT assessments should be made within thirty days of the relevant period and, strictly speaking, if not made, the tax assessment becomes final.
An appeal to the First-tier Tribunal (FTT) after the time limit has expired will be allowed ‘only if the tribunal gives permission’ (Taxes Management Act 1970 and VAT Act 1994).
The Tribunal has a discretion to admit a late tax appeal if there is a reasonable excuse or other consideration to justify it. In practise, this frequently imposes a conflict between avoiding injustice to the taxpayer and prejudicing HMRC in the exercise of its statutory obligations.
In the Case of Martland v HMRC [2018] UKUT 178 (TCC) (‘Martland’), the Upper Tribunal, when considering applications from taxpayers who had missed deadlines and sought relief from sanctions being imposed, established a three -stage test for admitting late appeals.
Subsequently, in a recent rare ‘split decision,’ the Upper Tribunal has decided that its decision in the Martland case was wrong.
In Medpro Healthcare Ltd v HMRC [2025] UKUT 255 (TCC), (‘Medpro’), the Upper Tribunal, failed to follow one of its previous decisions, despite having followed that decision on many occasions. The Upper Tribunal stated that tribunals must apply a transparent and fair balancing exercise when deciding whether to allow an appeal brought after the relevant deadline had passed.
Tim Thompson of KANGS outlines the position generally.
The Decision Reached in Martland
The Upper Tribunal stated that when the First-tier Tribunal (FTT) considers applications for permission to appeal out of time, the starting point is that permission should not be granted unless it is satisfied that, on balance, it should be.
When making its deliberations, the FTT should, as a three-stage test, take into account:
- the length of the delay; if short, generally suggesting that it is ‘neither serious nor insignificant,’
- the reason(s) why the default occurred,
- the merits generally, balancing the reasons for delay and prejudice which would be caused to both parties by granting or refusing delay.
This ruling in the Martland case has been adopted in numerous applications to the FTT for permission to appeal out of time and, on occasion, has also been followed by the Upper Tribunal in cases such as HMRC v Katib [2019], which involved an application based on the failures of a professional advisor. It was found that the FTT had made an error of law by ‘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 practical consequence of these two cases was to make it extremely difficult to succeed in applications seeking leave to appeal out of time, particularly where the delay had arisen from an error on the part of a professional adviser.
Events Leading to The Medpro Case
In 2022, substantial penalties had been imposed on Medpro exceeding £1million, and on another company, exceeding £40,000. The Director was issued with a Personal Liability Notice in respect of both amounts, requiring him to settle both debts in full.
The Director submitted an Appeal in respect of the assessment for £40,000, which was seventy days late, and both he and Medpro submitted Appeals in respect of the larger amount, both of which were five and a half months late.
When the matter came before the FTT, Medpro blamed the delays on:
- professional adviser failings and
- serious issues faced by the business.
These arguments and the application were dismissed with the mistakes being treated as the fault of Medpro and were classified as ‘serious and significant.’
Accordingly, Appeals were submitted to the Upper Tribunal.
The Upper Tribunal’s Decision in Medpro
The Upper Tribunal found that the appeal should be allowed given that the FTT decision was flawed in several aspects and remitted the case back to the FTT for further consideration.
The Upper Tribunal found that the FTT had failed to:
- provide proper reasons for its judgment, large parts of which were lifted directly from the parties’ submissions, without explaining which arguments were accepted or rejected. The absence of reasoning was, in itself, enough to overturn the decision.
- properly apply the Martland three-stage test. While it considered the seriousness of the delay and the reasons for it, it never undertook the crucial third test, set out above, which is the most important stage.
How Can We Assist You?
As outlined above, the Medpro case potentially poses a significant change to the manner in which ‘out of time’ tax appeals will be considered.
However, taxpayers should always seek to comply with time limits which are imposed because there is never a guarantee that leave will be granted to submit a tax appeal out of time.
The Judgment in Medpro specifically highlights the importance of obtaining competent and professional advice when tackling tax issues which continually becomes more complicated.
The team at KANGS possesses many years’ experience advising clients involved in tax disputes with HMRC of every nature. Our team of tax solicitors maintains an ever-watchful eye on the ever changing tax legislation and the Judgments passed down by the various courts and tax tribunals.
KANGS has secured successful judgements before the FTT. The teams experience and expertise in tax litigation are vital in achieving favourable outcomes for our client’s.
If you are subject to any type of HMRC investigation, or expect one to be opened against you, whether civil or criminal in nature and at any stage, please do not hesitate to contact our team on the details below. We would be delighted to hear from you.
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
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