DECISION
Introduction
1.
This decision concerns an application for permission to appeal out of
time.
2.
Following the hearing on 30 November 2012, the Tribunal invited further
written submissions in the light of the decision of the Upper Tribunal in Data
Select Limited v HMRC [2012] UKUT 187 (TCC).
3.
Following the receipt of such submissions, the Tribunal issued a summary
decision on 4 February 2013 refusing the Appellant’s application.
4.
The Appellant subsequently requested full findings of fact and reasons
for the Tribunal’s decision.
The facts
5.
The Appellant wished to claim a repayment of VAT in respect of what it
considered to be overpaid output VAT on its receipts from certain gaming
machines over the period 1 April 2003 to 5 December 2005. On 23 August 2006 it
submitted a detailed claim to HMRC. Receiving no response, it sent a follow up
letter on 15 January 2007.
6.
On 30 January 2007, HMRC replied, stating that in their view the ECJ
ruling in Finanzamt
Gladbeck v Edith Linneweber (ECJ Case C-453/02) [2005] All ER (D) 254 meant that the
Appellant’s claim was incorrect and they therefore refused it. They said that
the Appellant had the right to appeal this decision to the predecessor tribunal
to this Tribunal.
7.
On 5 February 2007 the Appellant wrote back to HMRC, referring to an
appeal by Rank Group plc and asking for their claim to be stood behind that
appeal. HMRC did not respond to this letter, and claim not to have received it
(though we find that they did).
8.
On 15 October 2009, following the decision of the High Court in Rank
Group plc v HMRC [2009] STC 2304, the Appellant
wrote to HMRC again, referring to its letter dated 5 February 2007 and asking
for its original claim now to be reconsidered in the light of the Rank
decision.
9.
On 24 November 2009 HMRC replied to the Appellant by email. At that
time, HMRC were taking the view that all income from gaming machines was
taxable, and they therefore formally rejected the Appellant’s voluntary
disclosure once again. They did not question the Appellant’s reference to its
earlier letter dated 5 February 2007, hence we accept that letter was sent as
claimed by the Appellant and received by HMRC.
10.
In HMRC’s email dated 24 November 2009 (which was sent to the email
address given at the foot of the Appellant’s earlier letter dated 15 October
2009), HMRC gave specific details of the Appellant’s rights of review or appeal
if it wished to contest HMRC’s decision, as follows:
“If you do not agree with my decision, you can
·
ask for my decision to be reviewed by an HMRC officer not
previously involved with the matter, or
·
appeal to an independent tribunal
If you opt for a review you can still appeal to the tribunal
after the review has finished.
If you want a review you should write to me at the above
address within 30 days of the date of this letter, giving your reasons why you
do not agree with my decision.
If you want to appeal to the tribunal you should send them
your appeal within 30 days of the date of this letter.”
11.
Mr Tack inferred that this email had not been seen by the Appellant,
though he had no express instructions on the point. In the absence of any
evidence to the contrary, we find that it was duly received by the Appellant.
12.
The next event took place on 7 July 2011, when accountants on behalf of
the Appellant wrote to HMRC again, seeking an update on the progress in
processing the Appellant’s original claim. HMRC replied on 19 September 2011,
confirming that the claim was rejected and once again offering the Appellant
the opportunity of a formal review or an appeal, in either case requiring
action within 30 days. The stated reason for rejection of the claim was that
it was not received until 11 July 2011, and was therefore out of time (this
made no reference to the much earlier correspondence).
13.
On 27 October 2011 the Appellant’s accountants wrote again to HMRC,
sending copies of the past correspondence and asking HMRC to confirm that the
claim was stood over for local reconsideration pending the outcome of Rank.
14.
On 25 November 2011 (incorrectly dated 25 October 2011 in the case of
the letter to the Appellant), HMRC wrote again to the accountants and to the
Appellant, re-iterating their rejection of the claim and confirming that the
Appellant could apply for a review or make a direct appeal to the Tribunal, in
either case within 30 days of the HMRC letter.
15.
Notwithstanding this letter, the Appellant did not request a formal
review nor did it submit notice of appeal to the Tribunal until 5 March 2012.
Mr Tack was not able to give any reason for this final period of delay, merely
observing that it was not a delay of such a length as should “knock out” the
Appellant’s claim.
Legislation, submissions and caselaw
Legislation
16.
The discretion the Tribunal is asked to exercise is that contained in
section 83G Value Added Tax Act 1994 (“VATA94”), which provides, so far as
relevant, 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.”
17.
The Tribunal therefore has a broad discretion so far as the legislation
is concerned, and the key question is what criteria should be applied in
exercising that discretion.
Submissions and caselaw raised at the hearing
18.
At the hearing, Mr Tack referred the Tribunal to Former
North Wiltshire District Council v HMRC [2010] UKFTT 449 (TC), where
the Tribunal was considering applications for permission to appeal out of time
in a VAT matter where the appeals were respectively almost 14 and 21 months out
of time. After balancing, on the one hand, the Tribunal’s 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 that would be suffered by the appellant if
an extension of time was refused, the Tribunal held that in the exceptional
circumstances of the case permission ought to be granted.
19.
The general point that came out of North Wiltshire which was
agreed on by both parties at the hearing (but see below) was that the Tribunal
should not reach a decision by reference specifically to the list of factors
set out at CPR 3.9(1). Mr Tack referred to the following factors which he submitted
should be taken into account in the Tribunal’s balancing exercise when
balancing the potential prejudice to the Appellant against its culpability in
delaying the appeal and HMRC’s prejudice:
(1)
Fault. He submitted the Appellant was not at fault, specifically in the
light of its request to HMRC to hold matters in abeyance pending Rank in
its 5 February 2007 letter (which was raising a different basis for the appeal
compared to the Linneweber basis on which HMRC had by then rejected
it). He invited us to accept (which we do) that HMRC received that letter, and
said that in the light of it, the subsequent delay should not be laid at the
Appellant’s door. In respect of the period up to November 2009, we agree with
him.
(2)
Good administration/finality. We accept that this is not an issue up to
November 2009. Mr Tack effectively submitted that as Rank was (and
remains) an ongoing issue generally, this appeal is only a very small part of a
much larger picture of uncertainty for HMRC and as such the issue of uncertainty/finality
should not carry much weight in the balancing exercise.
20.
Mr Tack observed that the likelihood of success was
also a factor that was considered in North Wiltshire. In the present
case, he said the ECJ decision in Rank gave no particular help as it
covered mechanised bingo but not the machines the subject of this appeal.
There was therefore no particularly strong indication either way as to the
likelihood of success in this appeal.
21.
Mrs Ratnett said the Appellant had effectively had
three warnings of the need to appeal promptly, the first of them in January
2007 and the last of them in November 2011. She cited Eltham Hill Golf Club
and Institute v HMRC [2012] UKFTT (487) (TC) (in which the period of delay
was over 4 years) and Bathgate Leisure Limited v HMRC [2012] UKFTT (637)
(TC) (in which the period of delay was some three years eleven months. She did
not take us to any particular passages in those decisions, relying more on the
similarity between the periods of delay in those cases and the period that she
considered to be the culpable period in this case.
The Data Select case
22.
At the hearing, neither party referred to the decision of the
Upper Tribunal in Data Select Limited v HMRC [2012] STC 2195 and the Tribunal, having referred the parties to that case, gave them the
opportunity of making further written submissions following the hearing.
23.
The principles that should govern the Tribunal’s exercise of this
discretion were considered at some length by the Upper Tribunal in Data
Select. It was said that:
“As a general rule, when a court or tribunal is asked to
extend a relevant time limit, the court or tribunal asks itself the following
questions: (1) what is the purpose of the time limit? (2) how long was the
delay? (3) is there a good explanation of the delay? (4) what will be the
consequences for the parties of an extension of time? And (5) what will be the
consequences for the parties of a refusal to extend time. The court or
tribunal then makes its decision in the light of the answers to those
questions.
….
In my judgment, the approach of considering the overriding
objective [in Civil Procedure Rule 1.1] and all the circumstances of the case,
including the matters listed in CPR r 3.9, is the correct approach to adopt in
relation to an application to extend time pursuant to section 83G(6) of VATA.”
24.
Rule 1.1 of the Civil Procedure Rules lays down the “overriding
objective of enabling the court to deal with cases justly and at proportionate
cost”. Until 1 April 2013 (i.e. at the time the Upper Tribunal was considering
it for the purposes of Data Select), Rule 3.9 provided, so far as
relevant, as follows:
“On an application for relief from any sanction imposed for a
failure to comply with any rule, practice direction or court order the court
will consider all the circumstances including–
(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.”
25.
Since 1 April 2013, Rule 3.9 has been radically shortened, so that it
now provides as follows:
“On an application for relief from any sanction imposed for a
failure to comply with any rule, practice direction or court order the court
will consider all the circumstances of the case, so as to enable it to deal
justly with the application, including the need –
(a) for litigation to be conducted efficiently and at
proportionate cost; and
(b) to enforce compliance with rules, practice directions and
orders.”
26.
For the purposes of the present application, we consider the guidance of
the Upper Tribunal in Data Select should be read as referring to the
original version of rule 3.9 and should not now be modified to refer to the new
version.
Post-hearing submissions
27.
In his further submissions, Mr Tack argued that the Appellant’s
application for an extension of time did not “offend the factors listed in CPR
3.9(1)”. He observed that “all that was said and done on 30 November [at
the hearing] effectively included and satisfied the factors in CPR 3.9(1)”.
He then went on to link his previous submissions to particular paragraphs of
CPR 3.9(1) and make some supplemental points.
28.
He submitted that the Appellant’s letter dated 5 February 2007
represented effectively a new basis for its claim, namely a claim under Rank
rather than under Linneweber that had been rejected by HMRC in their
letter dated 30 January 2007. Thus no appealable decision was at that stage
extant. And when HMRC failed (in his submission) to reply to the Appellant’s
letter dated 15 October 2009, that state of affairs continued. He submitted
that under section 98 VATA 94, HMRC were required to communicate with the
Appellant by post, thus there was no basis on which HMRC’s email of 24 November
2009 should be treated as a valid decision. So far as the 25 November 2011
decision was concerned, it was clearly wrong, therefore defective and
effectively should be seen as HMRC letting down the Appellant in terms of the
administration of justice.
29.
He also submitted that the delay between HMRC’s final decision and the
notification of the appeal to the Tribunal should be seen in the context of a
decision which he submitted was defective. This weighed in favour of the
Appellant when considering the length of the delay. Given that, in his
submission, the Appellant was “trying to enforce its claim”, the fact and
length of the delay should not be held against it, nor should the delay be
considered as intentional.
30.
He pointed out that the effect of refusing permission would be to shut
out the Appellant, a “smallish business”, from a potential refund of £154,000
of VAT plus interest. For HMRC there was no significant prejudice in the delay
because the correspondence since 2007 made it clear that the Appellant was
pursuing a claim based on Rank.
31.
Mrs Ratnett did not have significant further submissions to make, beyond
agreeing that it was appropriate to consider the matters listed in CPR 3.9(1),
but that her earlier submissions effectively did so. She maintained HMRC’s
basic position that this application concerned a claim that had effectively
been rejected by HMRC in January 2007. However many different ways that claim
was justified, her central point appeared to be that it was essentially the
same claim throughout and therefore the Appellant should have acted as soon as
it was originally rejected to take advantage of its rights of appeal.
Discussion and decision
32.
We should first mention that, in line with the
recently published decision of the Upper Tribunal in O’Flaherty v HMRC
[2013] UKUT 161 (TCC), there is no limitation on extensions of time to
“exceptional” cases. Each case must be considered on its own merits in line
with the judicial guidance summarised in Data Select. Having said that,
we also consider that it is for the Appellant to show that the time limit
should be extended. As was confirmed in O’Flaherty, “it should
be the exception rather than the rule that extensions of time are granted”.
33.
Addressing the specific questions raised in Data Select, we
consider first that the purpose of the time limit is to bring finality and
certainty to disputes between HMRC and taxpayers so that both are able to “close
their books” on a dispute and move on to other matters.
34.
Second, in the present case, we consider the question of the “length of
the delay” must be considered broadly in the overall context of the history of
the matter. We do not consider this is a case where we are simply looking at
either (a) a delay from 30 January 2007 when HMRC issued their original
rejection of the claim, or (b) a delay from 25 November 2011 when HMRC issued
the last rejection. What we have are a series of repeated rejections, of which
the final decision issued on 25 November 2011 is only the most recent.
35.
Having considered the history of the correspondence between HMRC and the
Appellant, it is obvious that there was a degree of misunderstanding. However,
the bare fact remains that the Appellant was informed three times (30 January
2007, 24 November 2009, and 25 November 2011) that it should take specific
action if it wished to appeal – on the latter two occasions identifying quite
specifically what the Appellant needed to do and by when – and it failed to do
so until March 2012. Even if the first of HMRC’s rejections was insufficient,
the second clearly was and once the Appellant was offered a third opportunity
it should have gratefully seized it without delay, not taken the view that a
further delay of several months would be acceptable. It is against that
background that we assess the length of the delay.
36.
In answer to the question of whether there was a good explanation for
the delay, whilst that might have been the case in the early period after
January 2007, we do not consider there was a good explanation for the
Appellant’s repeated disregarding of the specific statements that were made
concerning the time limits. HMRC were seeking to bring finality and it seems
to us that they did everything they could to that end, only to be repeatedly
ignored by the Appellant.
37.
The consequences of the delay for the Appellant are significant, in that
it is shut out from pursuing a claim for £154,000 plus interest which, we are
prepared to assume for present purposes, has a strong prospect of success. For
HMRC the consequences are that they cannot close their books on a long running
appeal for an amount which, though not small, is hardly significant in the
overall context of the Rank litigation.
38.
So far as the Appellant is concerned, however, it is difficult to square
the importance which this appeal supposedly has for it with its cavalier disregard
of clearly stated time limits.
39.
In short, the cumulative failures of the Appellant promptly to exercise
the rights of review or appeal offered to it leave the strong impression that
it has little or no regard for time limits, even after repeated very clear
warnings. This is not a simple case of one misunderstanding giving rise to a
delay; the Appellant has failed to take the appropriate course of action which
has been very clearly signposted to it on at least two occasions, and now seeks
to avoid the consequences of that failure.
40.
We consider that the Appellant has not shown proper attention to its own
affairs and whatever the strength of its case (which is unknown until the Rank
decision has been fully worked through in the UK judicial system, but we are
prepared to assume it is strong), we do not feel the interests of justice
militate in favour of us granting permission to appeal out of time, given the
particular history of this claim.
41.
The application for permission to appeal out of time is therefore
refused.
42.
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.
KEVIN POOLE
TRIBUNAL JUDGE
RELEASE DATE: 24 May 2013
