[2010] UKFTT 449 (TC)

TC00714
Appeal number: TC/2009/14837

VALUE ADDED TAX – Application by the Appellant for an extension of time to appeal against decisions by HMRC – Appeals lodged almost 14 and 21 months out of time – whether there is an obligation on the Tribunal on such applications to consider the criteria in CPR 3.9(1) pursuant to Sayers v Clarke Walker – held there is no such obligation – held the relevant criterion in accordance with which the Tribunal’s discretion to extend time should be exercised is that such exercise should apply the overriding objective of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 to deal with cases fairly and justly (see: rule 2(2)) – in the exercise of the discretion applying the overriding objective, the Tribunal balanced, on the one hand, its assessment of the Appellant’s culpability in delaying appealing and the prejudice to HMRC in terms of the public interest in good administration and legal certainty, and, on the other hand, the loss and injury which would be suffered by the Appellant if an extension of time was refused – held that on conducting this balancing exercise in the exceptional circumstances of the case the loss and injury which would be suffered by the Appellant if an extension were refused outweighed the Appellant’s culpability and the prejudice to HMRC – time to appeal extended accordingly – allocation of the appeals to the Complex category – time for HMRC to send or deliver their statement of case extended

FIRST-TIER TRIBUNAL
TAX 

	FORMER NORTH WILTSHIRE DISTRICT COUNCIL	Appellant
(now abolished and replaced by WILTSHIRE COUNCIL)
	-and-	
	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (Value Added Tax)	Respondents
	
	TRIBUNAL: 	JOHN WALTERS QC (TRIBUNAL JUDGE)
			MRS. E. BRIDGE		
			
Sitting in public at 45 Bedford Square, London WC1 on 12 July 2010

The Appellant did not appear and was not represented 
Sarabjit Singh, Counsel, instructed by HMRC Solicitor’s Office, for the Respondents

© CROWN COPYRIGHT 2010

Following a hearing on 19 April 2010, the Tribunal directed (by a direction released on 26 April 2010) that Wiltshire Council’s [“the Appellant’s”] application for an extension of time in which to appeal against the Respondent Commissioners’ [“HMRC’s”] decisions dated 14 December 2007 and 7 July 2008 was to be adjourned to a date to be fixed.  The adjourned hearing was listed to take place on 12 July 2010, and HMRC appeared by Counsel (Mr. Sarabjit Singh).  There was no appearance by or on behalf of the Appellant, but the Tribunal received written submissions from the Appellant on 9 July 2010.  We have taken these written submissions into account as will appear below.  Pursuant to rule 33 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (“the Rules”) the Tribunal decided to proceed with the hearing on 12 July 2010, being satisfied that the Appellant had been notified of the hearing and considering that it was in the interests of justice to proceed with the hearing.  At the hearing, the Tribunal reserved its decision on the application for an extension of time to appeal. After consideration, we make the following Directions for the Reasons which appear below.

DIRECTIONS

1.	The Appellant’s application for an extension of time in which to appeal against the decisions of HMRC contained respectively in HMRC’s letters dated 14 December 2007 and 7 July 2008 is GRANTED.  Time will be extended to 2 October 2009, with the consequence that the notice of appeal lodged on that date is deemed to have been lodged in time in relation to the appeals against those decisions.

2.	The appeals are hereby allocated to the category of Complex cases. 

3.	The time for the sending or delivery of HMRC’s statement of case in relation to the appeals is hereby EXTENDED to 17 December 2010.

4.	Each party has liberty to apply to the Tribunal for further directions. 

REASONS

      Introductory facts
1.	On 29 June 2005, 7 August 2006 and 2 October 2007, the former North Wiltshire District Council (now abolished and replaced by Wiltshire Council, the Appellant) made voluntary disclosures claiming £713,033.35, in total, alleged to have been overpaid as VAT on the Appellant’s supplies of off-street car parking.
2.	On 14 December 2007, HMRC informed the former North Wiltshire District Council [“the Council”] that they considered that no overpayment of VAT had occurred because the Council’s supplies were properly taxable and informed the Council that it could request a reconsideration of the decision by HMRC or appeal to the VAT and Duties Tribunal within 30 days.
3.	The Council made no request for reconsideration and did not appeal to the Tribunal within 30 days (or at all) but on 25 June 2008 submitted a further voluntary disclosure claiming £241,330 alleged to have been overpaid as VAT on the same basis.
4.	On 7 July 2008, HMRC informed the Council of their refusal to meet the claim for the same reasons as those given on 14 December 2007 (and in identical terms) and again informed the Council that it could request a reconsideration of the decision by HMRC or appeal to the Tribunal within 30 days.
5.	Again the Council made no request for reconsideration and did not appeal to the Tribunal within 30 days (or at all). 
6.	The Council, along with the other district councils in Wiltshire, and the Wiltshire County Council, were replaced by the Wiltshire Council (the Appellant – a unitary authority) on 1 April 2009.
7.	On 10 June 2009 the Appellant submitted a further voluntary disclosure claiming £233,860.55 allegedly overpaid as VAT on the same basis as the earlier claims.  This claim related to the period 1 April 2008 to 31 March 2009.
8.	On 24 July 2009, HMRC informed the Appellant of their refusal to meet the claim for the same reasons as those given on 14 December 2007.
9.	On 2 October 2009, the Appellant lodged a notice of appeal with the Tribunal in which it sought to appeal out of time against HMRC’s decisions dated 14 December 2007, 7 July 2008 and 24 July 2009.  On 2 November 2009, HMRC objected to the Appellant’s application for an extension of time in which to appeal.
10.	At the hearing on 19 April 2010 at which the Appellant did not appear and was not represented, HMRC did not oppose the grant by the Tribunal of an extension of time in which to appeal against the latest decision, that dated 24 July 2009.  In the directions released on 26 April 2010, the Tribunal extended the time for appealing HMRC’s decision dated 24 July 2009 with the effect that the Appellant’s Notice of Appeal against that decision was deemed to have been served in time.
11.	However, the Tribunal made no decision at or following the hearing on 19 April 2010 in relation to the Appellant’s applications for extension of time in which to appeal against HMRC’s earlier decisions (those dated 14 December 2007 and 7 July 2008) and adjourned those applications to be heard on a date to be fixed.  The Tribunal directed that at the adjourned hearing it would require the parties to address in their submissions the criteria (a) to (i) set out under the heading “Relief from sanctions” in CPR 3.9(1), following Sayers v Clarke Walker [2002] EWCA Civ 645 at [21]; [2002] 1 WLR 3095 and referred to at CPR note 52.6.2.
12.	The adjourned hearing was fixed for 12 July 2010 and proceeded as recorded above.
The Appellant’s submissions
13.	In accordance with the Tribunal’s direction, the Appellant’s written submissions focussed on the criteria set out under the heading “Relief from sanctions” in CPR 3.9(1).
14.	Under the heading ‘(a) the interests of the administration of justice’, the Appellant notes that any decision made by the Tribunal will have a direct impact on the residents of Wiltshire, because it will affect the finances of the Appellant. The Appellant states that the North Wiltshire District Council “did not understand the legal procedures required following the submission of its voluntary disclosures” and submits that a refusal of an extension of time to appeal would penalise the Appellant for the Council’s failure to “[recognise] due process”.
15.	Under the heading ‘(b) whether the application for relief has been made promptly’, the Appellant accepts that its application was not made promptly but makes the point that HMRC’s rejection of its claims made respectively on 29 June 2005, 7 August 2006 and 2 October 2007 was not made until 14 December 2007, a date 29 months after the first claim was made. 
16.	Under the heading ‘(c) whether the failure to comply was intentional’, the Appellant submitted that the failure to lodge an appeal to the Tribunal in time was not intentional. The Appellant’s submissions made the point that the Council had employed no VAT specialists or experts.  They were advised by third party advisors that ‘off-street parking claims’ should be submitted by them, as by other local authorities, but such advice did not extend to the procedure required to be followed in making an appeal to the Tribunal.  The Appellant attached to its written submissions a copy of a publication by PricewaterhouseCoopers LLP addressing the issue of VAT on local authority parking fees.  The publication states in terms that it ‘has been prepared for general guidance on matters of interest only, and does not constitute professional advice’. Nevertheless the Appellant’s submissions stated that the Council had placed reliance on the publication which it interpreted as meaning that the correct procedure was to submit voluntary disclosures on a regular basis, while waiting for a test case involving the Isle of Wight local authority to progress through the appeal procedure.  The Appellant further submitted that the statement by HMRC that they considered that no overpayment of VAT had occurred because the supplies were properly taxable did not inform it (or the Council) that HMRC had made a decision on their claim, because to them the statement appeared to be a repetition of HMRC’s long-held position on the issue.  The Appellant complained that HMRC’s decision letters (particularly the letter dated 14 December 2007) did not place enough emphasis on the right to appeal and the applicable time limit. 
17.	The Appellant attached to its submissions two letters from HMRC to the Council relating to off-street parking, dated respectively 18 October 2007 and 14 December 2007 (the first decision letter).  At the hearing, Mr. Singh handed up a copy of the letter from HMRC to the Council dated 7 July 2008 (the second decision letter). 
18.	The letter dated 18 October 2007, written by Julia Rabbitts, Higher Officer, HMRC Local Compliance South, Large & Complex” acknowledged the voluntary disclosure made on 2 October 2007 relating to the year to 31 March 2007.  It went on:
“When the final judgement in the case has been given I will take the necessary action with regard to the claim.  Until then I look forward to receiving a further claim for the year to 31 March 2008 in the near future.  
If you have any queries please do not hesitate to contact me.”
19.	 The letter dated 14 December 2007, also signed by Julia Rabbitts, was in the following terms:
“I refer to your voluntary disclosures dated 29 June 2005, 7 August 2006 and 2 October 2007 for the total amount of £713,033.55 in respect of VAT declared on charges for off street car parking.  HM Revenue and Customs consider that no overpayment of VAT has occurred, because the supplies are properly taxable.
You may be aware that even when an activity is deemed under Article 4(5) of the Sixth VAT Directive (now Article 13 of Directive 2006/112/EC) not to be carried on by way of business because it is undertaken by a public body acting in the capacity of a public authority, this is made subject to the condition that there should not be a significant distortion of competition with non-public bodies providing similar services.  HMRC takes the view that the test of when there could be a significant distortion of competition is, in the main, one which must be applied on a national basis. That is, we argue, especially so in a market such as the provision of parking facilities.  However, the Tribunal in the case of the Isle of Wight Council and others has disagreed with that approach, and the matter has now been referred by the national courts to the European Court of Justice for a preliminary ruling.
While this issue is still the subject of litigation, we do not propose to pay your claim even if you are able to satisfy us that you operate off-street car parks under a special legal regime.  If the European Court of Justice rules that our interpretation of the law is incorrect and, as happened in the case of the Isle of Wight, the test must be applied to each local market or area, we will re-examine your claim but we shall need your assistance in determining the level of competition locally.
In the case of the Isle of Wight Council (LON/00/653) heard on 16-18 February 2004, the Tribunal identified the following which they concluded amounted to a special legal regime for the purposes of Article 4(5).
The Road Traffic Regulations Act 1984 empowers local authorities to provide off-street parking places (and to authorize parking on roads) when it appears to them necessary to do so for the purposes of relieving or preventing congestion of traffic.  Section 35 of that Act enables local authorities to make orders covering the use of a parking place and other matters, and the appellant Council had (as at the date of the hearing) made 18 such orders as a part of its overall traffic management plan. The Local Authorities Traffic Orders (Procedure) (England and Wales) Regulations 1996 lay down detailed procedures that the local authorities are obliged to follow when making or varying an order under the 1984 Act.
While we accept that individual circumstances may differ from those identified by the Tribunal, we would expect to see a similar level of evidence to support the contention that you operate your off-street car parks under a special legal regime.  While not exhaustive, we hope that the annex to this letter provides some helpful examples of the type of supporting evidence and records that we would normally expect to see.  In summary, these include:
01 Evidence of the application of a special legal regime to each of the car parks for which you are claiming and for the periods covered by your claims.  An example might include “XXX Council (Off-Street Parking Places) Consolidation Order 19XX” and subsequent “Amendment Orders”.
02 Evidence that you have correctly accounted for the VAT due on your VAT returns.  This would include evidence of monies collected for each car park and day, including season tickets; spaces contracted to specific users and invoiced income.  It would also require an audit trail to show when the VAT on that income was declared on your VAT returns.
03 Details of parking facilities which might compete with those which you provide, including any provided by other public bodies, commercial, “park and ride” and leisure parking which might serve the areas covered by your car parks.
You need to confirm that you have checked the accuracy of your claim and whether or not you hold evidence that your supplies are made under a special legal regime, as described in the ‘facts’ section of the isle of Wight tribunal decision (VTD 18557, Appeal No. LON/00/653). [original emphasis]
If you disagree with this decision you may request a reconsideration by this office. You also have the right to appeal to the VAT and Duties Tribunal.  Any appeal must be made to the Tribunal within 30 days from the date of this letter.  I should advise you that if you do decide to appeal to a tribunal, and if your circumstances are the same as those in the case of the Isle of Wight Council and others, the Commissioners may apply to have the case stood over until such time as the ECJ Judgment is known.
Yours sincerely”
20.	An Annex dealing with record-keeping and evidence to support claims was attached to the letter dated 14 December 2007.
21.	The letter dated 7 July 2008, also signed by Julia Rabbitts, in which HMRC refused the claim made in the voluntary disclosure dated 25 June 2008 for repayment of £241,330 was in identical terms to the letter dated 14 December 2007, except that reference was made in the opening paragraph to the voluntary disclosure dated 25 June 2008 for the total amount of £241,330.
22.	The Appellant states that the letter dated 14 December 2007 misled the Council in that it did not emphasise the importance of an appeal being lodged within 30 days, but instead focussed on the evidential and other requirements for pursuing a claim for a refund of tax charged for off-street parking.  It was, moreover, in the Appellant’s submission, inconsistent with Officer Rabbitts’s earlier letter of 18 October 2007, because that earlier letter indicated that the Council did not need to take further action, apart from continuing to submit voluntary disclosures, until such time as a judgment had been given by the ECJ in the Isle of Wight case, and no judgment had been given before the letter dated 14 December 2007 was sent.  It was submitted that in these circumstances the staff at the Council were not aware that they were not following the correct appeals procedure because of the terms of the correspondence received from Officer Rabbitts.
23.	The Appellant submits that once the oversight was discovered by the new VAT team at the Wiltshire Council (following the replacement of the Council by the Wiltshire Council on 1 April 2009) “action was taken in an attempt to remedy the situation”. The appeal was lodged by the Appellant, as stated above, on 2 October 2009.
24.	Under the heading ‘(d) whether there is a good explanation for the failure’, the Appellant’s submissions accept that the original explanation given by them – that in the period leading up to 1 April 2009 (when the new council was formed) the staff were busy and focussed on ensuring that procedures were in place for the new council – might not be adequate.  The Appellant asks the Tribunal to take into account the material given above under heading (c) as the Appellant’s ‘good explanation for the failure’.
25.	Under the heading ‘(e) the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant pre-action protocol’, the Appellant stresses that it has always maintained a good working relationship with HMRC, answering their questions and disclosing errors and omissions to HMRC in a timely fashion.
26.	Under the heading ‘(f) whether the failure to comply was caused by the party or his legal representative’, the Appellant submitted that there was no failure by any legal representative of the Appellant.
27.	Under the heading ‘(g) whether the trial date or the likely trial date can still be met if relief is granted’, the Appellant submitted that this point was irrelevant, there having been no trial date set.
28.	Under the heading ‘(h) the effect which the failure to comply had on each party’, the Appellant submitted that it had no effect on the Council, because that Council was unaware of its compliance failure.
29.	Under the heading ‘(i) the effect which the granting of relief would have on each party’, the Appellant submitted that there would be no effect at all until a final decision in the litigation concerning the Isle of Wight Council was reached.  The Appellant makes the point that if an extension of time to appeal is granted and the subsequent appeal is successful (following clarification of the legal position by the final decision in the Isle of Wight Council litigation), then ‘any financial benefit gained would flow directly into funding local government services for the Wiltshire community’.

HMRC’s submissions
30.	Mr. Singh emphasised that the 30-day time limit for lodging an appeal is laid down by statute – section 83G(1) VAT Act 1994 (“VATA”) – noting that section 83G(6) gives the Tribunal power to give permission for an appeal to be brought out of time.  He referred us to rule 2(1) of the Rules – the overriding objective to enable the Tribunal to deal with cases fairly and justly – and rule 2(2) which expands the concept of dealing with cases fairly and justly to include, amongst other things (rule 2(2)(e)), ‘avoiding delay, so far as compatible with proper consideration of the issues’.  He also referred us to rule 5(3) of the Rules, which allows the Tribunal to extend the time for complying with any rule, practice direction or directions.  This, he submitted did not cover this case on its own, because the time limit was laid down by statute. However rule 20(1),(4)(b) of the Rules did cover the case, allowing the Tribunal to extend time for a notice of appeal under rule 5(3)(a).  He emphasised that while these provisions did not in terms set out the basis on which the Tribunal should exercise its discretion to extend time, the context both of the Rules, and of the analogous provisions of the CPR, showed that it should do so ‘so as to ensure a fair and just procedural result’.
31.	  He submitted that the Tribunal should not consider itself obliged to consider the criteria (a) to (i) set out under the heading “Relief from sanctions” in CPR 3.9(1) (which he described as the ‘check list in CPR r.3.9(1)’), when deciding whether to grant an extension of time to an appellant who has filed an out-of-time notice of appeal.
32.	In making this submission, Mr. Singh recognised that the criteria in CPR 3.9(1) had been considered (without criticism) in contexts other than that in issue in Sayers v Clarke Walker (which was whether the time to file an appellant’s notice under CPR Part 52 should be extended), including the present context of whether an appellant should be granted an extension of time in which to bring an appeal before the VAT and Duties Tribunal (The Medical House plc v Commissioners for HMRC [2007] 2CMLR 8, where HMRC had themselves submitted that this was the appropriate course). 
33.	Nevertheless, Mr. Singh drew the distinction between a case where the Court of Appeal has to consider whether the time to file an appellant’s notice under CPR Part 52 should be extended, and analogous cases where permission to appeal is required, and the present case where the appeal sought to be brought would be the first occasion of judicial consideration and determination of a disputed issue.
34.	He submitted that the application of the criteria in CPR 3.9(1) in accordance with Sayers v Clarke Walker will require a court or tribunal to evaluate the merits of the proposed appeal “in cases where the arguments for granting or refusing an extension of time [are] otherwise evenly balanced” (ibid. at [34]).  He made the point that the task of weighing up the merits of an appeal is relatively straightforward for a court which is considering an application to appeal from a judicial determination already made because the court will have the judgment of the lower court which is sought to be appealed.  On the other hand, in a case where this Tribunal is deciding whether to extend time for appealing, he submitted that ‘it would be difficult for the Tribunal to weigh up the merits of an appeal without incurring disproportionate time and expense in investigating the merits’.
35.	Mr. Singh referred us to R (oao Howes) v Child Support Commissioners [2007] EWHC 559 (Admin) where, in the context of an application for judicial review of a decision of a Child Support Commissioner, Black J considered whether the Commissioner had correctly exercised his discretion under regulation 11(3) of the Child Support Commissioners (Procedure) Regulations 1999 to accept a late application for leave to appeal against the decision of an appeal tribunal ‘for special reasons’.  In response to a submission by Counsel that she should evaluate the sufficiency of the Commissioner’s approach to his task by reference to CPR 3.9 (ibid. [37]), Black J declined to do so, and in terms refused to impose upon Child Support Commissioners an obligation to refer to CPR 3.9(1) (ibid.  [39]).  As Mr. Singh submitted, her reasoning for so doing was that there was no equivalent provision to CPR 3.9, or indeed any checklist of any sort, contained in the Child Support Commissioners (Procedure) Regulations 1999, and she considered there was no reason why those Regulations could not have contained some such provision if it had been thought appropriate.  
36.	Mr. Singh made the point that the Rules (under which this Tribunal regulates its procedure) likewise do not contain any equivalent provision to CPR 3.9, although they do contain a number of provisions which mirror other provisions of the CPR.  He submitted therefore that this Tribunal should not consider itself obliged to apply the checklist in CPR r.3.9(1) when deciding whether to extend time for bringing an appeal, and further submitted that if this Tribunal held, contrary to his submissions, that it was so obliged, then any failure by this Tribunal, in any case where an extension of time is applied to appeal for, to consider and apply the checklist in CPR r.3.9(1) would amount to an error of law giving grounds for appeal, which, he submitted would be a perverse outcome, given that no such checklist appears in the Rules.  He referred us to Bansal v Cheema [2001] C.P. Rep 6, as an example of a case where the Court of Appeal had allowed an appeal where a judge had failed in his duty to work systematically through the provisions of CPR r.3.9(1).
37.	Instead, Mr. Singh submitted, this Tribunal should decide whether or not to extend time for bringing an appeal simply by reference to the overriding objective set out in rule 2 of the Rules.
38.	He submitted that there were certain factors on which the Tribunal should ‘particularly focus on’, which are: (a) whether there is a good reason for the delay in lodging the notice of appeal; and (b) whether extending time would be prejudicial to the interests of good administration and legal certainty.  He submitted that the Tribunal’s enquiry ‘should not be focussed on the merits of the appeal’, indeed he at first submitted that we should not consider the merits at all. He accepted, when pressed by us, that we should or could consider the merits in a ‘finely balanced’ case.  He referred to R (oao Howes) – see: above.
39.	He said that courts routinely consider whether there is a good reason for delay in all manner of proceedings, when deciding whether to extend time.  He noted that in Sayers v Clarke Walker, Brooke LJ had effectively said that this was all a judge would need to consider when deciding whether to extend time for an appellant’s notice to be served under CPR Part 52 ‘in very many cases’ (ibid. [19]).
40.	He referred to the statutory 30-day time limit for appealing to the Tribunal and linked it to the interests of good administration and legal certainty, by analogy with the ‘similarly short time limit’ for bringing judicial review proceedings.  In fact, as he noted, the time limit in that context is that a claim form must be filed ‘(a) promptly; and (b) in any event not more than 3 months after the grounds to make the claim first arose’ (CPR 54.5(1)).  He cited R v Hammersmith and Fulham London Borough Council, ex p Burkett [2002] UKHL 23; [2002] 1 WLR 1593 for Lord Steyn’s comment that the rationale of the relatively short time limit for bringing judicial review proceedings is “the need for public bodies to have certainty as to the legal validity of their actions”.  He submitted that the same rationale applies to the 30-day time limit for appealing to the Tribunal.
41.	Mr. Singh also cited R v Dairy Produce Quota Tribunal, ex p Caswell [1990] AC 738 for Lord Goff’s comment that even if the court considers that there is good reason for extending the time for bringing judicial review proceedings “it may still refuse leave (or, where leave has been granted, substantive relief) if in its opinion the granting of the relief sought would be likely to cause [substantial] hardship or [substantial] prejudice [to any person] or would be detrimental to good administration” (ibid. at 747B/C). He submitted that, similarly, ‘even where a good reason is disclosed for delay in lodging a notice of appeal before the Tribunal, it may still be appropriate to refuse to extend time in the interests of goods administration if, for example, the delay is egregious’.
42.	Mr. Singh cited Smith v Brough [2005] EWCA Civ 261; [2006] C.P Reg 17.  This was a case where the Court of Appeal considered an application for extension of time to appeal against an order of a lower court and, having regard to the overriding objective in CPR r.1.1, considered the criteria in CPR 3.9(1), following Sayers v Clarke Walker. The delay in Smith v Brough  was 39 months in all (ibid.  [36]). Brooke LJ, in a passage referred to by Mr. Singh, stressed three matters as follows: (1) that it is a fundamental principle of our common law that the outcome of litigation should be final; (2) that the law exceptionally allows appeals out of time; and (3) that this, and the other exceptions mentioned in [the passage from the judgment of Lord Woolf CJ in Taylor v Lawrence [2002] EWCA Civ 90 at (b); [2003] QB 528 referred to by Arden LJ at [34] of Smith v Brough] are the exception to a general rule of high public importance and reserved for rare and limited cases where the facts justifying the exception can be strictly proved.
43.	The passage of Lord Wool CJ’s judgment in Taylor v Lawrence referred to by Arden LJ included the following:
“The law does its best to reduce the gap [between justice and truth].  But there are cases where the certainty of justice prevails over the possibility of truth … and these are cases where the law insists on finality.  For a policy of closure to be compatible with justice, it must be attended with safeguards: so the law allows appeals: so the law, exceptionally, allows appeals out of time: so the law still more exceptionally allows judgments to be attacked on the ground of fraud: so limitation periods may exceptionally be extended.  But these are exceptions to a general rule of high importance, and as all the cases show, they are reserved for rare and limited cases, where the facts justifying them can be strictly proved.”
44.	Mr. Singh made submissions by reference to the criteria in CPR r.3.9(1) without prejudice to his submission that the Tribunal is not obliged to consider those criteria when deciding whether or not to extend time.  He submitted that the Appellant had served no evidence in support of their case, which was a weakness in its case. 
45.	With reference to criterion (a) ‘the interests of the administration of justice’, Mr. Singh referred again to the statutory time limit of 30 days, commenting that the strict time limit is necessary both in the interests of good administration and legal certainty.  He stressed that the Appellant is asking the Tribunal to extend the 30-day limit by a maximum of nearly 21 months and submitted that the interests of the administration of justice would be seriously prejudiced if appeals so far outside the statutory time limit were allowed to proceed.  He cited R (oao Cook) v General Commissioners of Income Tax [2009] EWHC 590 (Admin), where Dyson LJ (as he then was) mentioned the prejudice to HMRC which arises if appeals are sought to be brought out of time in “not being able to close its books” and the public interest in “promoting the policy that challenges to assessments should be brought within the short period specified by the statute” (ibid.  [22]). Cook was, furthermore, a case where the factor that the putative appeal was assumed to be unanswerable on the merits “could not be decisive” (ibid.  [24]).   
46.	With reference to criterion (b) ‘whether the application for relief has been made promptly’, Mr. Singh points to the delays of 21 months and 14 months respectively and makes the obvious point that application was not made promptly.
47.	With reference to criterion (c) ‘whether the failure to comply was intentional’, Mr. Singh submits that it was, having regard to the narrative in each decision letter whereby HMRC informed the Council of its right of appeal and the relevant 30-day time limit.
48.	With reference to criterion (d) ‘whether there is a good explanation for the failure’, Mr. Singh submits that the preoccupation of the Council’s staff with ensuring that procedures were in place for the new Wiltshire Council cannot justify the failure.  The Wiltshire Council came into being on 1 April 2009 and the appeals should have been entered by 13 January 2008 and 6 August 2008 respectively.  Mr. Singh notes that the alleged preoccupation of the Council’s staff did not prevent the calculation and submission of further voluntary disclosures on 25 June 2008 and 10 June 2009 respectively.  
49.	With reference to criterion (e) ‘the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant preaction protocol’, Mr. Singh notes that the Appellant did not appear at the hearing on 19 April 2010 of its own application for an extension of time to appeal and comments: ‘therefore the Appellant’s record of compliance is not good’.
50.	With reference to criterion (f) ‘whether the failure to comply was caused by the party or his legal representative’, Mr. Singh submits that the failure was caused by the Appellant (or the Council), not any legal representative.
51.	 With reference to criterion (g) ‘whether the trial date or the likely trial date can still be met if relief is granted’, Mr. Singh, in agreement with the Appellant said that this was not a relevant criterion.
52.	With reference to criterion (h) ‘the effect which the failure to comply had on each party’, Mr. Singh submitted that the delay in lodging a notice of appeal ‘meant that [HMRC] considered their refusal of the Appellant’s voluntary disclosures on [14 December 2007 and 7 July 2008] as closed matters’.  He acknowledged that the effect of the failure on the Appellant meant that (absent relief being granted) it would be unable to challenge HMRC’s decisions.
53.	With reference to criterion (i) ‘the effect which the granting of relief would have on each party’, Mr. Singh submits that this would mean that the Appellant would be able to challenge the legality of decisions made by HMRC up to 2½ years ago.  HMRC would have to reopen matters they properly regarded as closed long ago.  He argues that the effect of this would be that HMRC’s need to manage tax collection and tax litigation with certainty and finality would be prejudiced, and he cites the decision of the Upper Tribunal (Tax and Chancery Chamber) in John Wilkins (Motor Engineers) Ltd. v HMRC [2009] UKUT 175 (TCC); [2009] STC 2485, where it was said:
“The 30-day time limit is long established and well known, and is there for good reason.  Contrary to the appellant’s argument, there is prejudice to the government (or other taxpayers) in having to meet large, unexpected claims, since they are disruptive of the government’s planning of its income and expenditure.  The time limit, short though it may be, is justified for that reason, and in the interests of legal certainty, and should not be lightly extended.”
54.	Mr. Singh accepted in argument that the claims in issue in this application would not have budgetary implications for the government.
Discussion and Decision
55.	We address, first, the submission made by Mr. Singh that this Tribunal is not obliged to consider the criteria (a) to (i) set out in CPR 3.9(1) when deciding whether to grant an extension of time to an appellant who has filed an out-of-time notice of appeal.
56.	We accept that submission because, as Mr. Singh pointed out, the Rules (which govern our procedure) simply empower us to extend time in appropriate cases and we should exercise the discretion to do so in order to give effect to the overriding objective in rule 2(1) of the Rules to deal with cases fairly and justly. We note, and respectfully adopt so far as it relates to the absence of any equivalent provision to CPR 3.9(1) in the Rules, the reasoning of Black J in R (oao Howes) v Child Support Commissioners (see: [35] and [36] above). 
57.	Exercising our discretion to give effect to the overriding objective may however, and often will in practice, involve consideration of some or all of the criteria (a) to (i) set out in CPR 3.9(1).
58.	We also accept Mr. Singh’s submission that in the exercise of our discretion to give effect to the overriding objective we must pay particular attention to whether the Appellant has shown good reason for the delay in lodging the appeal and whether extending time would be prejudicial to the interests of good administration and legal certainty.
59.	However we reject his submission that we should not consider the merits of the proposed appeal at all, or that we should consider the merits only when, on consideration of other relevant factors we find the case to be ‘finely balanced’.  
60.	In applying the overriding objective to deal with cases fairly and justly, we consider that we ought to take account of all factors relevant to the proportionate exercise of our discretion (proportionality being an aspect of fairness and justice) and such factors will include a consideration of the merits of the proposed appeal so far as they can conveniently (and proportionately) be ascertained.
61.	While we recognise that even where the merits of the proposed appeal are high, in the sense that we can safely conclude that the appeal would be likely (or even certain) to succeed, this cannot be a factor to “trump” all other factors which we must consider (R (oao Cook) v General Commissioners of Income Tax – see above [45]), nonetheless we note that in R (oao Howes) Black J herself held that the Commissioner had to take into account, in the necessary balancing process, “the weighty fact that this was an appeal that he himself thought might have merit” (ibid. [41]).
62.	There is some force in Mr. Singh’s point that it is generally easier than it is for this Tribunal on an original appeal, for a court to weigh up the merits of an appeal where an application is being made to appeal from a judicial determination already made, because the court will have to hand the judgment of the lower court which is sought to be appealed.
63.	However in this case we are entirely satisfied that, absent the difficulties caused by the late appeal, the Appellant’s appeals against the decisions 14 December 2007 and 7 July 2008 are appeals which have sufficiently good prospects of success to make a refusal by this Tribunal to entertain them a real and practical loss or injury to the Appellant.  This is demonstrated by HMRC’s statement in correspondence that they “may apply to have [an in-time appeal] stood over until such time as the ECJ judgment [in the Isle of Wight appeal] is known” and also by HMRC’s decision not to oppose the grant by the Tribunal of an extension of time to appeal against the latest of the three decisions, that dated 24 July 2009.
64.	This is also confirmed by the ECJ judgment in the Isle of Wight appeal (reference C-288/07) which was in fact delivered on 16 September 2008.  In summary the Court held that Article 4(5) of Sixth VAT Directive is to be interpreted as meaning that the significant distortions of competition, to which the treatment as non-taxable persons of local authorities would lead, must be evaluated by reference to the activity in question, as such, without such evaluation relating to any local market in particular. This was, as we understand it, in accordance with HMRC’s submissions.  However the ECJ also decided that the expression ‘would lead to’ is, for the purposes of the second subparagraph of Article 4(5) of the Directive, to be interpreted as encompassing not only actual competition, but also potential competition, provided that the possibility of a private operator entering the relevant market is real, and not purely hypothetical, and that the word ‘significant’ is, for the same purposes, to be understood as meaning that the actual or potential distortions of competition must be more than negligible. Thus there are highly likely to be issues of significance to be decided in the Appellant’s appeal (whether or not limited to an appeal against the decision dated 24 July 2009) the determination of which could not be forecast with any certainty.
65.	We also regard as significant the fact that we are concerned with an original appeal against a decision of an emanation of government (HMRC) rather than with an appeal against a judicial determination already made.  In the context in which we are concerned, judicial dicta relating to the fundamental principle that the outcome of litigation should be final (Smith v Brough and Taylor v Lawrence) are not directly in point – here, ex hypothesi, there has been no (substantive) litigation and the question is whether an original appeal against an administrative decision should be entertained by this Tribunal.
66.	There is, we acknowledge, a closer analogy with a late application to bring judicial review proceedings.  In that context, we note, the time limit is longer than 30 days (see [40] above), and its rationale is the need for public bodies (including HMRC) to have certainty as to the legal validity of their actions (ex p Burkett) and the need to support the public interest in the need for good administration (ex p Caswell).  We also note the Court’s comments in R (oao Cook) that prejudice may arise to HMRC if an appeal is brought out of time in that it should be “able to close its books”, and that there is a public interest in enforcing the 30-day time limit for bringing an appeal which has been laid down by statute.
67.	Nevertheless the right of appeal which the Appellant seeks to exercise is much narrower and more focussed (and an essential part of the VAT system routinely used) than the broad entitlement to apply to bring judicial review proceedings against almost any type of administrative decision, and it would be reasonable to expect HMRC, at any rate in some circumstances, to be ready to deal with an appeal to the Tribunal within section 83 VATA which is sought to be brought after the expiry of the 30-day time limit.  Indeed HMRC’s decision not to oppose, at the directions hearing on 19 April 2010, the grant of an extension of time in relation to the late appeal brought by the Appellant against the decision dated 24 July 2009 demonstrates this, and, in practice, applications for short extensions of time to appeal to this Tribunal are often, sensibly, not opposed by HMRC.
68.	 In our judgment, the crucial balancing exercise which we must carry out in order to exercise our discretion in a fair and just disposal of the application is between, on the one hand, our assessment of the Appellant’s culpability in delaying to lodge their notice of appeal and the prejudice to HMRC in terms of the public interest in good administration and legal certainty, and, on the other hand, the loss and injury which would be suffered by the Appellant if an extension of time is refused. We consider that the criteria in CPR 3.9(1), which are relevant to this case, are effectively addressed in this balancing exercise.
69.	 We have already considered the loss and injury which would be suffered by the Appellant if an extension of time is refused.  It is real and substantial, but cannot for that reason be determinative (R (oao Cook)).
70.	We turn to consider, first, the Appellant’s culpability in delaying to lodge their notice of appeal.
71.	Without doubt the Appellant is seriously culpable in this regard.  The delay is almost 21 months relative to the decision dated 14 December 2007 and almost 14 months relative to the decision dated 7 July 2008.  Delays of this length would, in most normal cases, prevent the exercise of the discretion to extend time to appeal.  The delay is not justified (without more) by HMRC’s not having rejected the claims made respectively on 29 June 2005, 7 August 2006 and 2 October 2007 until 14 December 2007.  An appellant’s tardiness in bringing an appeal must be considered independently of the time taken by HMRC to reach the relevant decision.  The two actions are not comparable.  It is only the appellant’s bringing of an appeal, and not HMRC’s reaching of the relevant decision, which engages the Rules and the Tribunal’s discretion.  
72.	The Appellant’s excuse for the delay so far as it relates to its staff being busy and focussed on ensuring that procedures were in place for the introduction of the new council on 1 April 2009 cannot be accepted.  That excuse expired on 1 April 2009, some 6 months before the notice of appeal was ultimately lodged, and, as Mr. Singh noted, the Council’s, and later the Appellant’s, staff found time and opportunity to make further voluntary disclosures on 25 June 2008 and 10 June 2009.
73.	We also consider that the Council was culpable if (as the Appellant claimed) it failed to appreciate that an appeal ought to have been lodged within 30 days of, respectively, the 14 December 2007 letter and the 7 July 2008 letter.  We note that both letters included (as their final paragraph) by inference a statement that the letters contained decisions and a direct statement that appeals must be made to the Tribunal within 30 days of the date of the letter.  We consider that it is obvious that the appeals being referred to were appeals against the decisions respectively contained in the letters. 
74.	We do, however, consider that this culpability is mitigated by the terms of HMRC’s letters of 18 October 2007, 14 December 2007 and 7 July 2008.  We note that these letters, all of which were before us, were evidence, as opposed to assertion, supporting the Appellant’s application.
75.	 The letter of 18 October 2007, read in the context of voluntary disclosures having been made on 29 June 2005, 7 August 2006 and 2 October 2007 without any decision having been communicated by HMRC to the Council in respect of them, gives the clear indication that HMRC was expecting to accumulate claims from the Appellant until “final judgment in the case” – presumably the Isle of Wight case – “has been given”, and that then HMRC (through Julia Rabbitts) would “take the necessary action with regard to” all the accumulated claims.
76.	The subsequent letter of 14 December 2007 manifests a change in policy on the part of HMRC. As we have said, a fair reading of the letter leaves no doubt that it contained an appealable decision.  We also consider it clear that the appealable decision was to refuse the claims made by the Council in the voluntary disclosures of 29 June 2005, 7 August 2006 and 2 October 2007. Any competent VAT professional would have understood that this was the import of the letter.  If (as the Appellant submitted) the Council employed no VAT specialists or experts, there seems to us to have been no good reason why the Council did not take professional advice on the letter and the appropriate response which the Council ought to have made to it.
77.	Nevertheless, the whole tenor of the letter of 14 December 2007, and of the letter in identical terms of 7 July 2008, was that HMRC anticipated that the claims made by the Council would go forward into the litigation process. Specifically, the letters anticipate that the Council would attempt to satisfy HMRC that it operated off-street car parks under a special legal regime and gave a summary indication of the evidence supporting such a contention that HMRC ‘would normally expect to see’. The letters included in underlined passages the advice that the Council needed to confirm that it had checked the accuracy of its claims and whether or not it had evidence hat its supplies were made under a special legal regime, and there were annexes enclosed which dealt with record-keeping and evidence to support claims.
78.	We find it easy to understand that (as the Appellant claimed) Council officials who were not VAT professionals could have missed the importance of the communication of appealable decisions by these letters and instead have formed the (incorrect) impression that nothing of substance had changed in HMRC’s practice of accumulating claims for action, finally, when the ECJ’s judgment in the Isle of Wight case became available.  We regard this as a factor mitigating the culpability of the Council (and the Appellant) in not making timeous appeals against the refusals of claims contained in the letters.
79.	We also regard this factor as relevant in considering the second relevant issue which we have identified, namely the prejudice to HMRC which would be caused by a decision by this Tribunal to extend time for appealing, in terms of the public interest in good administration and legal certainty.
80.	We criticise the terms of the letters of 14 December 2007 and 7 July 2008 in that they demonstrate a falling short by HMRC in the standards of good administration which taxable persons (or potential taxable persons) have the right to expect from HMRC in dealing with their tax affairs.  It should not conceivably be necessary to consult a VAT professional in order to ascertain whether a letter from HMRC contains an appealable decision.  The letter of 14 December 2007 ought, in our judgment, to have contained a statement that the policy evident in the terms of the letter of 18 October 2007 was being departed from, in that ‘the necessary action with regard to’ all the accumulated claims made by the Council was being taken before, and not after, the ECJ’s judgment in the Isle of Wight case had been given. The letters of 14 December 2007 and 7 July 2008 ought also to have made the point with some emphasis that HMRC’s expectation that the Council would attempt to satisfy HMRC that it operated off-street car parks under a special legal regime and that the Council should confirm that it had checked the accuracy of its claims and whether or not it had evidence to support them, was subject to the proviso that the Council would indeed request a consideration or appeal to the Tribunal within the 30 day time limit.
81.	These factors, in our judgment, detract in this case from the weight which we would normally apply in the balancing exercise to the need to promote the public interest in good administration which is evident in the requirement to observe the statutory time limit for appealing to the Tribunal. 
82.	There also appear to us to be unusual factors in this case which detract from the weight which we would normally expect to attribute, in the balancing exercise, to the public interest in legal certainty.
83.	So far from being prejudiced by “not being able to close its books” (R (oao Cook)), HMRC, as we have said, evidently anticipated that it would keep its books open in relation to the claims being made by the Council.  Further, in both the letters of 14 December 2007 and 7 July 2008 HMRC advised that if the Council did decide to appeal to the Tribunal and its circumstances were the same as those of the Isle of Wight Council and the other litigants in the Isle of Wight case, then HMRC might apply to have the Council’s case stood over until such time as the ECJ’s judgment in the Isle of Wight’s case was known.  
84.	We recognise that there is a public interest in HMRC knowing where it stands in relation to claims made by taxable persons (or potential taxable persons) and that if we allow an extension of time for appealing in this case, HMRC must reopen matters which they might reasonably have thought were closed almost 3 years ago.  
85.	Nevertheless the Council’s potential appeals, first, would be additional to the appeal which is already deemed to be in time and, secondly, would be additional to the appeals of other local authorities which raise the same general issue.  The point can be made that the general issue of the liability of local authorities to VAT on charges for off-street parking is not a closed issue as far as HMRC is concerned.  This detracts from the force of Mr. Singh’s point that the interests of legal certainty point to a refusal of an extension of time for appealing.
86.	For completeness, we review the criteria in CPR r.3.9(1).  As to (a), we have mentioned the factors weighing with us under the general heading of ‘the interests of the administration of justice’.  As to (b), we have accepted that the application for relief has not been made promptly.  As to (c), having regard to the terms of HMRC’s correspondence which we have already discussed, we find on the balance of probabilities that the failure to comply was not intentional.  As to (d), we consider that there is no good explanation for the failure, but that nevertheless HMRC must bear some of the blame for it, by reason of the terms of their correspondence with the Appellant.  As to (e), we do not consider that the Appellant has been materially in default in relation to other procedural compliance.  As to (f), we agree with the parties that the failure to comply was caused by the Council and the Appellant, and not by any legal representative.  Criterion (g) is irrelevant, as there is no actual or likely trial date fixed.  As to (h), the failure to comply has potentially the obvious substantive disadvantage to the Appellant of its not being able to pursue a valuable claim with a real prospect of success.  The failure to comply has not, in our judgment, caused serious real and substantial prejudice to HMRC because of the points we have mentioned.  As to (i), the effect of granting relief would remove the disadvantage to the Appellant which we have mentioned, and would require HMRC to defend a decision which they may have thought had become final over 2 years ago, but this is qualified by the factors to which we have referred.
87.	Finally we consider the balancing exercise identified at paragraph [68] above. In order to exercise our discretion in a fair and just disposal of the application, we weigh, on the one hand, our assessment of the Appellant’s culpability in delaying to lodge its notice of appeal and the prejudice to HMRC in terms of the public interest in good administration and legal certainty, and, on the other hand, the loss and injury which would be suffered by the Appellant if an extension of time is refused.
88.	Taking account of the authorities which have been cited to us, we find that in the exceptional circumstances of this case the loss and injury which would be suffered by the Appellant if an extension of time is refused outweighs the Appellant’s culpability in delaying to lodge its notice of appeal and the prejudice to HMRC in terms of the public interest in good administration and legal certainty.
89.	We therefore decide to extend the time for lodging an appeal to the Tribunal against the HMRC’s decisions contained in their letters of 14 December 2007 and 7 July 2008 respectively, so that the appeals actually lodged by the Appellant on 2 October 2009 are deemed to have been lodged in time.
90.	We make consequential directions as to the time by which HMRC must serve their Statement of Case and also as to the allocation of the appeals to the category of Complex cases (see: rule 23 of the Rules).  The Appellant is particularly referred to rule 10(1)(c) of the Rules pursuant to which it has the opportunity to deliver a written request to the Tribunal within 28 days of the date of release of these directions that the appeal proceedings be excluded from potential liability for costs under rule 10(1). 
Right to apply for permission to appeal
91. This document contains full findings of fact and reasons for our decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Rules.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

JOHN WALTERS QC

TRIBUNAL JUDGE
RELEASE DATE: 22 September 2010