Jason Nicholas James v The Commissioners for HMRC
[2023] UKFTT 661 (TC)
Hadleigh Cohen v The Commissioners for HMRC
26 July 2024
[2024] UKFTT 707 (TC)
First-tier Tribunal
Mr. Cohen got a tax penalty for paying late. He tried to appeal on time but used the wrong form. The court let him appeal late because of the mistake and because HMRC's online help was confusing. The court also said he had a good reason for paying late because he misunderstood the HMRC advisor, so the penalty was cancelled.
Key Facts
- •Hadleigh Cohen (Appellant) received a £2,868 penalty for late tax payment for the 2021-22 tax year.
- •The penalty notice was issued on May 2, 2023, with a 30-day appeal deadline of June 2, 2023.
- •The Appellant initially filed the wrong appeal form on May 2, 2023, and the correct form was only sent on July 8, 2023 (received July 11, 2023).
- •HMRC rejected the appeal as late on October 2, 2023.
- •The Appellant appealed to the Tribunal on October 17, 2023.
- •The Appellant sought support from HMRC's Extra Support Team due to personal circumstances and was confused about instructions regarding the three-month deadline to "complete" the tax return.
- •The Appellant believed filing and payment were due simultaneously.
Legal Principles
Applications for extensions of time limits are assessed based on factors such as the purpose of the time limit, length of delay, reason for delay, and prejudice to parties.
Data Select Ltd v R & C Comrs [2012] STC 2195
Three-stage approach for relief from sanctions: (1) Assess the seriousness of the breach; (2) Consider why the default occurred; (3) Evaluate all circumstances to deal justly with the application.
Denton & Ors v T H White Ltd & Ors [2014] EWCA Civ 906
Martland three-stage approach for late appeals: (1) Establish delay length; (2) Establish reasons for default; (3) Balance reasons for delay against prejudice to both parties.
Martland v R & C Comrs [2018] UKUT 178 (TCC)
The initial burden of proof is on HMRC to demonstrate a penalty is due. Once discharged, the burden shifts to the Appellant to demonstrate a reasonable excuse.
Perrin v R & C Comrs [2018] BTC 513
Reasonable excuse is an objective test, considering all circumstances and whether a reasonable taxpayer would have acted similarly.
The Clean Car Co Ltd v C&E Commissioners [1991] VATTR 234
Outcomes
Appeal for extension of time to appeal the penalty allowed.
The Tribunal found the delay, while significant, was not serious due to the Appellant's genuine error in using the wrong form, the prompt action after receiving the correct form, and immediate appeal to the Tribunal after HMRC's rejection. The Tribunal balanced the prejudice to both parties and considered the importance of efficient litigation and respecting statutory time limits.
Substantive appeal (late payment penalty) allowed; penalty set aside.
The Tribunal found that the Appellant's belief that he had three months to both file and pay the tax, based on his confusing webchat interactions with HMRC advisors, was objectively reasonable given his circumstances and his efforts to seek timely clarification. The Tribunal determined this constituted a reasonable excuse for the late payment.