[2011] UKFTT 535 (TC)
TC01382
Appeal numbers TC/2010/03415
LON/2008/0762
VAT – HMRC
decision to deny input tax claim ––Application for
permission to appeal after the end of the specified time limit for an appeal – Value
Added Tax Act 1994, s.83G(1) and (6) – Permission refused
FIRST-TIER TRIBUNAL
TAX
DATA SELECT LIMITED Appellant
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS Respondents
TRIBUNAL:
Dr Christopher Staker (Tribunal
Judge)
Sitting in public in London on 16 July 2010
Mr Timothy Brown for the
Appellant
Mr Michael Holland QC for the
Respondents
© CROWN COPYRIGHT
2010
DECISION
Introduction
1. By a
notice of appeal dated 9 April 2010, the Appellant seeks to appeal against a
decision of the Respondents (“HMRC”) dated 28 April 2009 (the “Decision”) to
deny the Appellant’s right to deduct input tax of £166,250 claimed in respect
of a particular transaction in VAT period 04/06 for the purchase of mobile
phones. The Decision was based on HMRC being satisfied that that
transaction was connected with the fraudulent evasion of VAT and that the
Appellant knew or ought to have known of such a connection.
2. The Appellant’s
notice of appeal included a request that the time for making the appeal be
extended. A hearing on this request for an extension of time in which to
appeal was held on 16 July 2010. The present decision is a decision on that request
only.
The relevant legislation
3. The
Appellant seeks to appeal to the Tribunal against the Decision pursuant to s.83
of the Value Added Tax Act 1994 (“VATA”). Section 83G VATA relevantly provides
as follows:
(1) An appeal under
section 83 is to be made to the tribunal before—
(a) the end of the
period of 30 days beginning with—
(i) in a case where P
is the appellant, the date of the document notifying the decision to which the
appeal relates, …
(6) An appeal may be
made after the end of the period specified in subsection (1) … if the tribunal
gives permission to do so.
The submissions of the parties
4. The
Appellant’s notice of appeal, under the heading “Reasons why the appeal is made
late”, states: “The Appellant did not receive notification of the decision. A
copy of the decision letter was requested and supplied as soon as the Appellant
became aware of it while corresponding with the Commissioners on other matters”.
5. At the
hearing, Mr Brown submitted on behalf of the Appellant amongst other matters as
follows.
6. The
decision whether to grant an extension of time to appeal is within the
discretion of the Tribunal, which should be exercised having regard to whether
there has been prejudice to the other party and with regard to the overriding
objective.
7. The
relevant chronology is as follows. On 26 May 2006, HMRC began an extended verification of the Appellant’s 04/06 VAT return. By a letter dated 3 March 2008, HMRC denied input tax of some £3.7 million in respect of deals 1 to 15 and
17 on that return. The Appellant appealed in time against that decision, and
that appeal is presently pending before the Tribunal as case number
LON/2008/0762 (the “2008 appeal”). In the Decision dated 28 April 2009, HMRC subsequently denied input tax of £166,250 in respect of deal 16 in that same
return. The Appellant now seeks to appeal against the Decision in the present
proceedings.
8. The
Appellant’s position is that it did not receive the 28 April 2009 letter, which is why it did not appeal against the Decision at the time. By a letter
dated 31 December 2009, the Appellant wrote to HMRC in connection with the 2008
appeal, raising various matters. HMRC responded to that letter by a letter
dated 25 February 2010, which contained a reference to the fact that HMRC had
denied input tax in relation to deal 16 in a letter from HMRC dated 28 April
2009. This was the first time that the Appellant was aware of this. The
Appellant then asked for a copy of the Decision dated 28 April 2009. This was provided under cover of a letter from HMRC dated 3 March 2010. This communication was in fact received by the Appellant on 8 March 2010.
9. Even assuming
3 March 2010 to be the date on which the Appellant received the copy of the
Decision, the 30 day deadline for appealing would then be 2 April 2010, which was Good Friday. The notice of appeal was in fact sent by e-mail to the Tribunal
on 25 March 2010, which was within this deadline. However, the Tribunal wrote
back in a communication dated 6 April 2010 saying that the notice of appeal was
not acceptable as it was incomplete, due to the fact that the pages containing certain
sections of the notice of appeal had not been included in the e-mail. That
communication from the Tribunal was received on 7 April 2010. The Appellant’s advisors then sent a complete notice of appeal to the Tribunal by e-mail at 6pm on 9 April 2010.
10. As to the Appellant’s
contention that it did not receive the Decision earlier, it is difficult for
the Appellant to prove a negative. The Appellant had already appealed against
the HMRC decision to deny input tax in relation to deals 1 to 15 and 17 in the
VAT period in question, and there is no reason why the Appellant would not have
also appealed against the denial of input tax in relation to deal 16 if the
Appellant had been aware of the Decision in relation to deal 16. Indeed, deal 16
was traced back to a contra-trader, which would arguably have been easier for
the Appellant to defend.
11. Reliance was placed on a
witness statement of Mr Stephen Vincent, director of the Appellant. Mr Brown
acknowledged that the weight to be placed on this witness statement was a
matter for the Tribunal, given that Mr Vincent did not attend the hearing. Mr
Brown submitted that no advice had been sought from the Appellant’s advisors in
relation to the Decision until February 2010, which was consistent with the Appellant’s
position.
12. Mr Brown further submitted
that if there was a valid reason for the Appellant not appealing in 2009, it
would be extremely harsh not to allow the appeal to go forward solely on the
basis of delay in bringing an appeal after the Appellant’s receipt of the
Decision in March 2010. The notice of appeal was at most filed a few days
after the elapse of 30 days from the time of receipt of the Decision. HMRC
were not prejudiced by any such delay and have suffered no detriment as it is
input tax that is being claimed. There is an extant appeal in relation to
other deals in the VAT period in question, and the Decision was not taken by
HMRC until April 2009, which was itself some 3 years after the VAT period in
question.
13. Arguments on behalf of HMRC
were contained in a written notice of objection to the application for
extension of time, dated 12 May 2010, and in the oral submissions of Mr Holland
QC.
14. The written notice of
objection stated amongst other matters as follows. The Decision was sent to
the correctly named Appellant at the correct address and was therefore
correctly notified. HMRC has had a great deal of correspondence with the
Appellant in relation to the 2008 appeal and there are no other known instances
of postal correspondence from HMRC not reaching the Appellant. The Appellant
was always aware that it had carried out deal 16. Prior to February 2010 the
Appellant had neither raised with HMRC any issue as to repayment of the
£166,250 claimed input tax that remained outstanding from the denial letter of
3 March 2008 nor raised any query with respect to deal 16 that neither appeared
in the statement of case, the deal sheets or the evidence served by HMRC in
relation to the 2008 appeal. The Appellant’s officers are experienced businesspeople
who had ample information that there was a further sum of input tax relating to
the VAT period in question that had not been denied in the 3 March 2008 decision, and failed to raise the matter. This should count against the Appellant in
the exercise of the Tribunal’s discretion even if the Tribunal is satisfied
that the Appellant did not in fact receive the 28 April 2009 letter. In any event, the Appellant did not act with due expedition after receipt of the 3 March 2010 letter. The Appellant was requested by HMRC by fax on 8 March 2010 to
accompany any appeal notice with a full explanation of the reasons for the
appeal being sought to be lodged out of time, yet a notice of appeal was not
sent until 12 March 2010 (and effectively 13 March 2010 as it was sent at
17:53) which was 11 days after the expiry of a 30 day period. It was submitted
that this should count against the Appellant, relying on John Wilkins (Motor
Engineers) Ltd v HMRC [2009] UKUT 175 (TCC). It was further submitted that
it would be disruptive of the Government’s planning of its income and
expenditure if it were required to meet large and unexpected claims, and that
HMRC should not be placed at the whim of an appellant in their allocation of
resources in defending complex and resource intensive appeals commenced so long
after expiry of the 30 day limit.
15. In oral submissions, Mr
Holland QC added amongst other matters as follows. If the application were
granted, the result would be a genuine expansion of the scope of the existing
2008 appeal, requiring an additional 6 HMRC officers to give evidence. In the
present case, unusually, it is HMRC and not the Appellant that is out of funds
in relation to the £166,250 input tax in question and it is therefore HMRC that
has an interest in the speedy resolution of the matter. If the application is
granted, and the proposed appeal joined to the 2008 appeal, this would raise
issues as to the applicable costs regime as the 2008 appeal is under the old
costs regime while the proposed appeal would be under the new regime. The
reason for having time limits on appeals is so that HMRC can have certainty as
to its resources and because it becomes harder to investigate matters as time
goes by. Reliance was placed on a witness statement of an HMRC official dated
26 February 2009, paragraph 84(1) of which indicates that representatives of
the Appellant have previously denied having received correspondence from HMRC.
The VAT return for the period in question was incomplete when submitted. The
Appellant must have been aware throughout that the £166,250 in question had not
been repaid to them by HMRC yet never queried this. In exercising its
discretion, the Tribunal is entitled to have regard to the fact that time
limits exist for a purpose and to the effect that granting the application
would have in practice on the other party.
16. In reply, Mr Brown submitted
that the HMRC official whose witness statement is relied on also did not attend
the hearing, that the fact that the Appellant never previously queried the
non-repayment of the £166,250 input tax was at best neutral and perhaps in fact
in favour of the Appellant’s case, and that the fact that the input tax
remained outstanding would not have appeared in the Appellant’s records as the
Appellant had offset the amount.
The Tribunal’s findings
17. The parties in their
arguments referred to no case law dealing specifically with the exercise of the
Tribunal’s discretion under s.83G(6) VATA. The Tribunal notes that in NVM
Private Equity Limited v HMRC [2010] UKFTT 106 (TC), the Tribunal
considered that in the exercise of this discretion, it should have regard to
the factors referred to in CPR Rule 3.9(1), namely:
(a)
the interests of the administration of justice;
(b)
whether the application for relief has been made promptly;
(c)
whether the failure to comply was intentional;
(d)
whether there is a good explanation for the failure;
(e)
the extent to which the party in default has complied with other rules,
practice directions, court orders and any relevant pre-action protocol;
(f)
whether the failure to comply was caused by the party or his legal
representative;
(g)
whether the trial date or the likely trial date can still be met if relief is
granted;
(h)
the effect which the failure to comply had on each party; and
(i)
the effect which the granting of relief would have on each party.
18. The Tribunal has also had
regard to the overriding objective in Rule 2 of the Tribunal Procedure
(First-tier Tribunal) (Tax Chamber) Rules 2009.
19. A significant issue in this
matter has been whether the Appellant had notice of the Decision around the
time that it was issued in April 2009, or whether the Appellant only had notice
that the Decision had been made on receipt of the HMRC 25 February 2010 letter,
and only had a copy of the Decision itself on receipt of the HMRC 3 March 2010
communication.
20. The Tribunal sees some force
in the Appellant’s arguments that it is difficult for the Appellant to prove a
negative, and that the Appellant is unlikely not to have appealed against the
Decision in 2009 if it had knowingly received it at that time. However, the
Tribunal is satisfied on the evidence that the Decision would have been sent by
HMRC to the Appellant in April 2009. While not wholly impossible that the
Decision never left HMRC in April 2009 despite being recorded in their systems
as having been sent, that is highly improbable. The remaining possibilities
are then that the Decision when sent in April 2009 was lost in the post, or was
lost internally within the Appellant’s administration after receipt without
coming to the attention of the relevant officer of the Appellant.
21. The former of these last two
possibilities would be a rare occurrence, although certainly not unknown. The
degree of likelihood of the latter would depend on factors individual to the
Appellant, and in particular, on the reliability of its internal
administration. Some evidence of the Appellant’s internal procedure for
handling incoming mail was provided in paragraph 4 of the witness statement of Stephen
Vincent. Mr Brown acknowledged that as Mr Vincent did not attend the hearing
where he could have been cross-examined, the weight to be placed on this
statement is a matter for the Tribunal.
22. It is noted that paragraph 8
of the HMRC notice of objection states that “The Appellant’s contention that it
did not receive the letter from the Commissioners is, as yet, unsubstantiated
by sworn evidence”. It was therefore clear that HMRC were putting in issue the
lack of sufficient evidence of non-receipt of the Decision in 2009. The
statement of Mr Vincent was perhaps adduced in response to this. However,
given the amount in issue in this appeal, a sum of £166,250, and given that
this is such a central issue, the Tribunal considers that the Appellant could
reasonably have been expected to go to greater lengths to seek to establish by
evidence the unlikelihood of the Decision having been received in 2009, beyond
simply producing a witness statement of one director who was unavailable to
attend the hearing.
23. The Tribunal is prepared to
give some weight to the statement of Mr Vincent. However, in view of the
limited details given in paragraph 4 of that statement, and in view of Mr
Vincent’s failure to attend the hearing, the Tribunal cannot regard it as sufficient
to exclude as a likely explanation that the Decision when sent in April 2009
went missing in the internal administration of the Appellant. On the basis of
the evidence before it considered as a whole, the Tribunal is unable to
conclude that the Appellant never received the Decision when it was sent in
April 2009.
24. Even if the Decision was
received by the Appellant when sent in April 2009, and was lost in the
Appellant’s internal administration, this would not necessarily wholly exclude
the possibility of the grant of an extension of time in which to appeal.
However, for an extension of time to be granted in such circumstances, it would
be necessary for the Appellant to sufficiently persuasive reasons as to why it
would nonetheless be appropriate to grant an extension of time.
25. Even if it
were the case that the Appellant did not receive the Decision when sent in
April 2009, the Tribunal would also need to consider whether it is satisfied
that the Appellant acted with diligence when it did receive a copy of the
Decision in March 2010. The Appellant appears to assume that in this event,
the deadline for appealing was 30 days from the date of receipt of the copy of
the Decision (which is said to be 8 March 2010), or at least, 30 days from the
date of the letter transmitting the copy of the Decision (which was 3 March
2010). The Tribunal considers that this is not the case. Under s.83G(1)(a)(i)
VATA the time limit for appealing is 30 days from “the date of
the document notifying the decision to which the appeal relates”,
not 30 days from date of receipt by the appellant of the document
notifying the decision. That means that in this case, where the Appellant is
seeking to appeal against the Decision dated 28 April 2009, the time limit is
30 days from 28 April 2009, regardless of when the Decision was received by the
Appellant. In cases where the decision appealed against is not received by the
appellant until after the expiry of this deadline, or even until shortly before
expiry of the deadline, this may be a circumstance justifying an extension of
the deadline under s.83G(6). However, an extension of the deadline will not
necessarily be for 30 days after the date of receipt of the decision in
question. Any extension would be for whatever period is reasonably appropriate
in all of the circumstances.
26. Given the amount
in dispute in the proposed appeal, and given the length of time that had
elapsed since the date of the Decision, the Appellant should have acted promptly
with all due diligence upon receiving notice of the Decision. The evidence is
that the copy of the Decision was received by the Appellant on 8 March 2010 and
that the notice of appeal was first sent by e-mail to the
Tribunal on 25 March 2010. Having considered the contents of the Appellant’s
notice of appeal, the Tribunal is not persuaded that the Appellant required 17
days in order to file a notice of appeal with an application for an extension
of time, and notes that even then the notice of appeal that was filed was in
unacceptable form as it did not contain all pages. A notice of appeal in acceptable form was
not filed until 12 April 2010. The Tribunal is not satisfied that the
Appellant acted with the diligence that would reasonably be expected after
receiving the copy of the Decision. This also does not necessarily wholly exclude
the grant of an extension of time to appeal, but is a factor to be taken into
account.
27. The Tribunal does
not accept all of the arguments of HMRC. The Tribunal does not consider that
the Appellant was under any obligation to raise with HMRC the
matter of the input tax in relation to deal 16 before it had notice of the
Decision, or that its failure to do so should count against the Appellant. The
fact that granting the request would expand the scope of the existing 2008
appeal is not considered relevant, as this would have been the case if the
notice of appeal had been filed within time. The fact that granting the
request would give rise to issues as to costs in the appeal is also not
considered particularly relevant as such issues would be capable of some
appropriate resolution.
28. The Tribunal does however
give weight to the consideration that the Government’s planning of its income
and expenditure is affected when decisions are challenged long after the time
limit for an appeal has expired, and that HMRC’s management of its own
resources is similarly affected, and that investigation of appeals becomes more
difficult for HMRC as time passes. The longer the period of time that has
elapsed since the expiry of the time limit for an appeal, the more persuasive
the circumstances will need to be to justify an extension of time. The amount
in dispute in the appeal is considered neutral. On the one hand, given that it
is a very significant amount, care should be taken before concluding that the
Appellant has lost the opportunity to challenge the Decision. On the other
hand, given that it is a very significant amount, care should be taken before
concluding that after such a passage of time, the Decision still not a settled
matter.
29. The Tribunal takes into
account that the VAT return for the period in question is already the subject
of another pending appeal. This is considered to be of some but limited
relevance. It is true that this means that the VAT return for that period
remains unsettled in any event. However, the fact that some aspects of that
VAT return remain unsettled as they are subject to the 2008 appeal is not of
itself a reason for allowing other aspects of the same return to be challenged
long after the deadline for an appeal. While the proposed appeal may to a
degree overlap with the existing appeal, it nonetheless raises discrete
matters.
30. The Tribunal has considered
these matters in the light of the considerations in paragraphs 17 and 18 above,
to the extent that they are relevant on the basis of the evidence and arguments
that have been presented by the parties. The Tribunal is not satisfied on a
balance of probabilities that the Appellant did not receive the Decision when
it was sent in April 2009. The Tribunal is not satisfied that the Appellant
has advanced persuasive reasons why nonetheless an extension of time to appeal
should now be allowed. The Tribunal is not satisfied that the Appellant has
acted with due diligence. On a consideration of all of the circumstances of
the case as a whole, the Tribunal is not persuaded that the application for an
extension of time to appeal should be granted. The application is accordingly
refused.
31. This document contains full
findings of fact and reasons for the decision. Any party dissatisfied with this
decision has a right to apply for permission to appeal against it pursuant to
Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules
2009. 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.
Christopher Staker
TRIBUNAL JUDGE
RELEASE DATE: 5 August 2010
