In Kevin Reed v HMRC [2016] UKFTT 0653 (TC), the First-tier Tribunal (FTT) dismissed the taxpayer's application for reinstatement of his appeal which had been struck out for failing to comply with directions issued by the FTT.

Background

HMRC commenced an enquiry into the taxpayer's self-assessment tax returns for the 2010/11 and 2011/12 tax years.

On 22 January 2015, HMRC closed its enquiry and issued a closure notice for 2010/11 and an assessment for 2011/12.

On 23 January 2015, HMRC issued penalty assessments for both years alleging deliberate behaviour on the part of the taxpayer.

The taxpayer accepted HMRC's amendment for 2010/11 but appealed the assessment for 2011/12 and the penalty assessments which had been issued in relation to both years.

The taxpayer's appeals were listed for a hearing before the FTT on 12 February 2016. Following that hearing, the FTT issued directions which provided, amongst other things, that unless the taxpayer provided further specified documentation to the FTT and HMRC by 26 February 2016, his appeals would be struck out.

With the exception of one of the directions, the taxpayer failed to comply with the directions and did not provide the requested documentation.

Following non-compliance with the directions, the FTT directed that the taxpayer's appeals in relation to 2011/12 be struck out. The taxpayer applied to the FTT for his appeals in relation to 2011/12 to be reinstated.

FTT's decision

In considering whether to reinstate the taxpayer's appeals, the FTT followed the approach taken by the Upper Tribunal in Data Select v HMRC[1] (and recently followed in Andrew Green v HMRC[2]), in which it was said that as a general rule, when a court or tribunal is asked to extend a relevant time limit it should ask 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 for 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 Tribunal commented that when considering an application for relief from sanction, in addition to considering the above questions, it is necessary to take into account the overriding objective contained in Rule 2 of the Tribunal Rules[3], which is to enable the FTT to deal with cases fairly and justly.

Having taken everything into account, the FTT concluded that this was not a case in which it should exercise its discretion to grant the taxpayer's application for reinstatement of his appeals.

Comment

Although appeals before the FTT are less formal than litigation conducted under the Civil Procedure Rules, taxpayers nonetheless need to appreciate that the Tribunal Rules and directions issued by the FTT have to be complied with. The Court of Appeal recently made it clear in BPP Holdings Limited v HMRC[4], that the parties to an appeal before the FTT are within the stricter approach to rules and directions as discussed in Mitchell v News Group Newspapers Limited[5].

The Judge in this case confirmed that the FTT will take a strict approach when considering non-compliance with directions. Although he accepted that the taxpayer and his adviser may not have been fully aware of the various procedural steps which it is necessary to take in relation to an appeal, he emphasised that those involved in proceedings before the FTT must provide themselves with relevant information regarding the proceedings in which they are engaged.

If a taxpayer (or his adviser) fails to fully familiarise himself with the procedural steps which are required before the FTT, there is a real risk that he will suffer the same fate as the taxpayer in this case and have his appeal struck out.

A copy of the decision can be found here.