Making a late tax appeal

Madan Salhan looks at some of the issues and pitfalls to be considered in making a late tax appeal

Reasonable excuse – late appeals

When a matter cannot be settled by agreement with the taxpayer and HMRC, then the avenues open to the adviser are to seek a review of the decision or lodge an appeal with the First Tier Tribunal.

In this situation, getting it right is crucial as mistakes can be costly.

In the case Mr S Hayat v HMRC and Mr Hussain v HMRC, the agent failed to lodge the original decision with the tribunal, which resulted in the appeal being returned.

The agent finally managed to lodge the appeal with the correct documents on 14 February 2012, but the tribunal had not processed the documents and, on the following day, both Mr Hayat and Mr Hussain were made bankrupt on the petition of HMRC in the High Court of London.

An annulment application was made after having to raise some £400,000.

This is a cautionary tale that, for the unwary: appeals can be a minefield.

HMRC’s Section 54 taxes management argument

If the taxpayer has failed to seek a review to lodge the appeal in the correct format, then HMRC will ordinarily consider the matter has been agreed in accordance with S54 TMA 1970.

HMRC will consider a late review displacing the S54 TMA 1970 agreement if it considers that a reasonable excuse existed.

If HMRC considers that a reasonable excuse did not exist, then your only recourse is to send your appeal to the tribunal.

HMRC’s position

In the matter of Rowley’s Yard Ltd TC/2011/09534, the appellant sought a refund of monies paid relating to corporation tax.

The following arguments were advanced and are taken from speaking notes provided to the tribunal on the day of the hearing:

That there would be a prejudice to HMRC if the late application was allowed. Time limits exist to give finality in legal proceedings to both sides and allow HMRC to move onto other cases – something that is in the general public interest.

It was stated that HMRC had already expended significant energy and expenditure on this case, far more than should have been necessary, and at this late stage a dilatory taxpayer and agent should not be allowed to have their case reopened unless there were exceptional reasons.

HMRC said that there were not exceptional reasons.

More generally, time limits are set by Parliament and, as a matter of public policy, should be respected. As Judge Brannan said in Pytchley v HMRC [2011] UKFTT 277 at [23]:

‘The normal statutory 30-day limit on appeals serves an important purpose of producing finality and ensuring that HMRC can regard a taxpayer’s affairs as closed off in respect of certain years where no appeals have been lodged. Therefore, permission to bring an appeal out of time should not be granted lightly.’

Additionally, Sir Stephen Oliver in Ogedegbe v HMRC [2009] UK ftt 364 AT [7] said:

‘While this Tribunal has got the power to extend the time for making an appeal, this will only be granted exceptionally.’

HMRC contended that the above points suggested that generally there needs to be a compelling and demonstrable reasonable excuse that prohibited the company from making an appeal in time.

HMRC contended in this case that that could not be shown.

HMRC considered the excuse unreasonable because it did not stop the company dealing with other aspects of business.

This matter had been considered by the Solicitor’s Office prior to the matter being listed for a hearing and an interesting point was made by HMRC, namely:

‘It would be contrary to that objective (final and certainty) if individual taxpayers were able to make claims against the public purse many years after those monies have been spent’ (see Monro V HMRC [2008] EWCA Civ 306).

It will be clear that HMRC will contest these applications vigorously.

Test of a reasonable excuse

Starting point

HMRC’s view is set out supra that a reasonable excuse defence can only apply in exceptional circumstances.

I say that a reasonable excuse defence should look at the ordinary English usage, which must be given their plain and ordinary meaning.

Two-legged test

Reasonable excuse is a two legged test and consideration needs to be given to the following:

  • Is there a reasonable excuse?
  • Was the failure put right without unreasonable delay once the reasonable excuse ceased to apply?

The first point has been well rehearsed and taxpayers have made successful claims for reasonable excuse by blaming errors made by their agents and by citing mistakes made by HMRC.

A full reference of cases referred in the Rowley Yard case is found in the table titled cases.

However, what is meant by the second test and what guidance is available to advisers as to what is meant by ‘without unreasonable delay’?

Is this 14 days or maybe 30 days? What about 14 years?


S49 Taxes Management Act 1970 or Regulation 17 of The General Commissioners (Jurisdiction and Procedure) Regulations 1994

In the instant case of Rowley’s Yard Ltd, the matter was further complicated as the appeals against the Corporation Tax assessments for the accounting periods ended 31 December 1994, 1995 and 1996 were determined by the General Commissioners on 12 December 1997.

The point that was being made was an appeal should have been lodged to the General Commissioners 14 days after the clerk issued the decision of the General Commissioners and the application was 14 years out of time!


The appellant successfully showed that he did in fact have a reasonable excuse. The successful arguments advanced covered:

  • The company relied on professional advisers.
  • There was confusion as to who was responsible: was it the company or the receiver?
  • It took HMRC just as long to deal with an error and mistake made by the appellant.
  • There was limited cash.
  • The tribunal had a wider discretion to consider the broader context of the case, being the unfairness to retain monies not due.

The Rowley Yard’s Ltd case was in two parts, the first being to reopen a decision of the General Commissioners. The second limb was to consider if the decision itself should be set aside, the latter decision is pending.


This case shows that it is important to prepare a chronology of events of what went wrong and to show why it was not possible to act sooner.

Remember – success and failure can come down to the failure to explain a gap of time.

Madan Salhan is managing director, Salhan Accountants, Birmingham, winners of the Entrepreneur of the Year 2012 award at the annual Birmingham Chamber of Commerce Group awards. In addition, Salhan Accountants received a High Commendation at the Taxation Awards in 2011 in the category of best general tax practice.