In Ashington & Ellington, Ashstead and Darfield v HMRC3 , the FTT dismissed HMRC’s applications, under Rule 8 of The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the Tribunal Rules), to strike out the taxpayers’ appeals.
This case involved three appeals by Ashington & Ellington Social Club & Institute Limited (Ashington), Ashtead Village Club (Ashtead) and Darfield Road Working Men’s Club & Institute Limited (Darfield) (the Appellants). Each appeal concerned a claim for repayment of output tax which had previously been accounted for in respect of gaming machine takings.
Following HMRC v Rank Group (Rank)4 , HMRC repaid each of the Appellants together with statutory interest. In doing so, HMRC issued a protective assessment to each under section 80(4A), Value Added Tax Act 1994, to recover the tax and interest repaid in the event that HMRC succeeded in subsequent appeals.
Ashington applied to the FTT for permission to appeal out of time. Ashtead and Darfield argued that they had already appealed in time and only applied for permission to appeal out of time if that was found not to be the case.
HMRC objected to any of the Appellants being given permission to appeal out of time but if any appeal was in existence, it applied to have it struck out, under Rule 8 of the Tribunal Rules, on the ground of no reasonable prospect of success.
Following the recent Supreme Court decision in BPP Holdings Limited v HMRC5 , the FTT applied the three-stage approach set out in Denton v TH White Ltd6 (Denton): i) seriousness and significance of the delay; ii) reasons for the non-compliance; and, iii) circumstances of the case.
Applying Denton, the FTT concluded that Ashington’s delay of three years and five months to comply with a 30-day appeal time limit was serious. The non-compliance was caused by an administrative error on the part of its advisor who had failed to recognise that Ashington had not received an initial rejection of its claim and so no earlier appeal had been submitted. This was not a good enough reason for non-compliance and in the FTT’s view a notice of appeal could have been provided within the 30-day time limit. Allowing Ashington’s appeal to proceed would cause HMRC prejudice. On this basis, the FTT refused Ashington’s application for permission to appeal out of time.
Ashtead and Darfield were not in the same position. They had appealed and then received a repayment from HMRC following the Rank decision. HMRC had then issued protective assessments, under section 80(4A), to recover the repayments in the event that HMRC succeeded in subsequent appeals. The FTT accepted that Ashtead and Darfield thought that their original appeals were still outstanding. It rejected HMRC’s argument that it had been made clear to them that HMRC had conceded the original appeals and that they had to appeal the protective assessments.
Accordingly, the FTT decided to amend the original notices of appeal to include an appeal against the protective assessments. The FTT said that even if the original appeals were no longer extant, it would have allowed late appeals.
The FTT rejected HMRC’s application to have the Ashtead and Darfield appeals struck out on the ground that they had no reasonable prospect of success. The FTT commented that HMRC had sought to concede the original appeals and it would not have done so had they had no reasonable prospect of success.
Although HMRC are increasingly making applications to the FTT to have taxpayers’ appeals struck out under Rule 8 of the Tribunal Rules, given that HMRC had sought to concede the original appeals, it is surprising that in this case they chose to argue that the taxpayers’ appeals against the protective assessments had no reasonable prospect of success.
The decision is available to view here.