In Exclusive Promotions and Fox v HMRC [2022] UKFTT 103 (TC) (1 March 2022), the FTT dismissed appeals against penalties for failing to pay the amounts specified in accelerated payment notices (APNs) on time and confirmed that (barring an obvious or gross procedural error) neither a belief in the invalidity of an APN nor being granted interim relief from enforcement of an APN pending resolution of a related judicial review (JR) dispute constitute a reasonable excuse for not paying an APN on time. The FTT also provided guidance that in certain circumstances, HMRC’s failure to consider and respond to representations may mean that the time limit for paying an APN doesn’t begin to run.
These appeals were heard together because they appealed the penalties/surcharges on broadly the same three grounds.
In their first ground, the appellants argued that the penalties/surcharges were invalid because the due date for paying the APNs had not yet been triggered.
In Exclusive’s case, since HMRC didn’t respond to some of Exclusive’s representations (in particular, those challenging whether a designated officer had determined the amount of the APNs), the FTT decided that it was a flawed determination on the grounds of Wednesbury unreasonableness.
Since the FTT did not have the jurisdiction to decide the validity of the flawed determination, that challenge would have to be made by way of JR in the HC. Consequently, the FTT agreed with HMRC that time had run and the due date for payment of the APNs had passed. The penalties for Exclusive failing to pay the APNs on time were not invalid on this ground. Even if it would have had jurisdiction to decide this issue, the FTT would still have dismissed this appeal since HMRC’s determination would have been the same even if it had considered all the designated officer points.
In Mr Fox’s case, HMRC withdrew the surcharges for late payment of two APNs, so the FTT could only provide guidance as to what it would have decided had they not been withdrawn. Mr Fox submitted letters which clearly stated that they were representations about the APNs issued to him and, in the body of the letters, he incorporated by reference the submissions made in his JR claim. Until it withdrew the surcharges, HMRC had argued that those letters were not representations and had therefore not responded to them. HMRC intended to run the same argument against the various appellants stayed behind this appeal.
The FTT would have decided that the letters were representations because ‘there is no substantive difference between repeating the JR grounds within the body of the letter of representations...and incorporating the grounds by reference’ to the JR grounds. Since the FTT would have decided that the letters were representations and HMRC had not responded to them and therefore not provided a determination, the FTT would have agreed with Mr Fox that the time limit for paying the APN had not yet started to run, so the imposition of the surcharges had been premature.
The FTT dismissed the appellants’ second argument that they had a reasonable excuse for not paying the APNs on time because they believed their JRs would succeed. This was dismissed because in neither case was there an ‘obvious or gross’ error:
Finally, the FTT found that neither appellant believed that the interim relief order (which prevented HMRC from enforcing the APNs unless HMRC succeeded in the JR dispute) meant that they did not have to pay their APNs. Even if the appellants had such a belief, that belief would have been objectively unreasonable, so it still would not have constituted a reasonable excuse for not paying the APNs on time.
Why it matters: Although FTT decisions are only binding on the parties to the case, the expectation is that this decision will provide guidance to the FTT in respect of 500 other appeals that were stayed pending the outcome of this appeal.
In accordance with the CA decision in Beadle [2020] EWCA Civ 562 and the UT decision in Sheiling [2020] UKUT 175 (TCC) (since the CA in Sheiling did not consider this point), the FTT decision reiterates that there is a very high hurdle for the alleged invalidity of an APN to be able to form a reasonable excuse defence to APN penalties and that this requires there to be an ‘obvious or gross’ procedural error, ‘such as a misplaced decimal point’. In this case, neither appellant had cleared that hurdle.
Similarly, this decision confirms that being granted interim relief preventing HMRC from enforcing an APN unless or until HMRC succeeds in a related JR dispute with the appellant does not normally constitute a reasonable excuse for not paying an APN on time.
Of most interest is that the FTT has provided guidance that in certain circumstances, HMRC’s failure to consider and respond to representations (such as, ignoring a letter that provides representations by way of a sentence incorporating the grounds of a related JR claim) may mean that the time limit for paying an APN does not begin to run, so any penalties or surcharges imposed on the APN recipients are premature and therefore invalid.
In Exclusive Promotions and Fox v HMRC [2022] UKFTT 103 (TC) (1 March 2022), the FTT dismissed appeals against penalties for failing to pay the amounts specified in accelerated payment notices (APNs) on time and confirmed that (barring an obvious or gross procedural error) neither a belief in the invalidity of an APN nor being granted interim relief from enforcement of an APN pending resolution of a related judicial review (JR) dispute constitute a reasonable excuse for not paying an APN on time. The FTT also provided guidance that in certain circumstances, HMRC’s failure to consider and respond to representations may mean that the time limit for paying an APN doesn’t begin to run.
These appeals were heard together because they appealed the penalties/surcharges on broadly the same three grounds.
In their first ground, the appellants argued that the penalties/surcharges were invalid because the due date for paying the APNs had not yet been triggered.
In Exclusive’s case, since HMRC didn’t respond to some of Exclusive’s representations (in particular, those challenging whether a designated officer had determined the amount of the APNs), the FTT decided that it was a flawed determination on the grounds of Wednesbury unreasonableness.
Since the FTT did not have the jurisdiction to decide the validity of the flawed determination, that challenge would have to be made by way of JR in the HC. Consequently, the FTT agreed with HMRC that time had run and the due date for payment of the APNs had passed. The penalties for Exclusive failing to pay the APNs on time were not invalid on this ground. Even if it would have had jurisdiction to decide this issue, the FTT would still have dismissed this appeal since HMRC’s determination would have been the same even if it had considered all the designated officer points.
In Mr Fox’s case, HMRC withdrew the surcharges for late payment of two APNs, so the FTT could only provide guidance as to what it would have decided had they not been withdrawn. Mr Fox submitted letters which clearly stated that they were representations about the APNs issued to him and, in the body of the letters, he incorporated by reference the submissions made in his JR claim. Until it withdrew the surcharges, HMRC had argued that those letters were not representations and had therefore not responded to them. HMRC intended to run the same argument against the various appellants stayed behind this appeal.
The FTT would have decided that the letters were representations because ‘there is no substantive difference between repeating the JR grounds within the body of the letter of representations...and incorporating the grounds by reference’ to the JR grounds. Since the FTT would have decided that the letters were representations and HMRC had not responded to them and therefore not provided a determination, the FTT would have agreed with Mr Fox that the time limit for paying the APN had not yet started to run, so the imposition of the surcharges had been premature.
The FTT dismissed the appellants’ second argument that they had a reasonable excuse for not paying the APNs on time because they believed their JRs would succeed. This was dismissed because in neither case was there an ‘obvious or gross’ error:
Finally, the FTT found that neither appellant believed that the interim relief order (which prevented HMRC from enforcing the APNs unless HMRC succeeded in the JR dispute) meant that they did not have to pay their APNs. Even if the appellants had such a belief, that belief would have been objectively unreasonable, so it still would not have constituted a reasonable excuse for not paying the APNs on time.
Why it matters: Although FTT decisions are only binding on the parties to the case, the expectation is that this decision will provide guidance to the FTT in respect of 500 other appeals that were stayed pending the outcome of this appeal.
In accordance with the CA decision in Beadle [2020] EWCA Civ 562 and the UT decision in Sheiling [2020] UKUT 175 (TCC) (since the CA in Sheiling did not consider this point), the FTT decision reiterates that there is a very high hurdle for the alleged invalidity of an APN to be able to form a reasonable excuse defence to APN penalties and that this requires there to be an ‘obvious or gross’ procedural error, ‘such as a misplaced decimal point’. In this case, neither appellant had cleared that hurdle.
Similarly, this decision confirms that being granted interim relief preventing HMRC from enforcing an APN unless or until HMRC succeeds in a related JR dispute with the appellant does not normally constitute a reasonable excuse for not paying an APN on time.
Of most interest is that the FTT has provided guidance that in certain circumstances, HMRC’s failure to consider and respond to representations (such as, ignoring a letter that provides representations by way of a sentence incorporating the grounds of a related JR claim) may mean that the time limit for paying an APN does not begin to run, so any penalties or surcharges imposed on the APN recipients are premature and therefore invalid.
