O'Flaherty v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 04 April 2013 |
| Neutral Citation | [2013] UKUT 161 (TCC) |
| Date | 04 April 2013 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2013] UKUT 161 (TCC).
Upper Tribunal (Tax and Chancery Chamber).
Judge Roger Berner.
Nigel Ginniff, instructed by Shahabuddin & Co Limited, appeared for the Appellant.
James Rivett, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents.
Procedure - Appeal out of time - Whether First-tier Tribunal applied the correct approach in considering whether appellant had a reasonable excuse - Discretion at large - All relevant factors and circumstances to be taken into account, including merits of the case - No requirement for exceptional circumstances.
The Upper Tribunal has remitted a case to the First-tier Tribunal in Dominic O'Flaherty FTC 79/2012, ruling that the First-tier Tribunal made a fundamental error in its approach when deciding whether to permit a late appeal.
Mr O'Flaherty ran a pub and a hotel as a sole trader and in 2008 both businesses were subjected to an HMRC Employer Compliance Review. As a result of the review HMRC issued two notices of assessment to Mr O'Flaherty, one for the pub issued on 23 July 2009 and one for the hotel on 17 August 2009, both representing unpaid PAYE for the tax years 2004-05 to 2008-09. On 18 July 2011 Mr O'Flaherty made a late appeal against the assessments, explaining that the reason for the delay in the appeal was because it took considerable time to get the information from the previous accounts. HMRC did not accept the late appeal and Mr O'Flaherty therefore applied to the First-tier Tribunal for permission to make a late appeal.
The First-tier Tribunal refused to grant permission to make a late appeal in both its original decision, released on 22 November 2011, and its review of the decision. The tribunal made its decision almost entirely based on the view that Mr O'Flaherty did not have a reasonable excuse for failing to make an appeal within the proper time limits.
Mr O'Flaherty appealed to the Upper Tribunal, which allowed his appeal, remitting the case to the First-tier Tribunal, to be heard by a new panel. Mr Roger Berner decided that the issue is not whether the First-tier Tribunal has exercised its discretion properly, but "whether the tribunal has correctly identified the approach to be adopted". On this point he said "it is clear that the FTT did not apply the correct approach, and that this appeal must consequently be allowed". He said it was wrong for the First-tier Tribunal to primarily confine itself to the issue of whether there had been a reasonable excuse for the delay. He agreed that the First-tier Tribunal did not need to conclude on Mr O'Flaherty's substantive case, but it should have considered the merits of the case so that this could be taken into account as part of the balancing exercise that it should have conducted.
The Upper Tribunal also made a comment on a point made by Sir Stephen Oliver in the First-tier Tribunal case of OgedegbeTAX[2010] TC 00302. Sir Stephen said that "permission to appeal out of time would only be granted exceptionally"; this, Mr Berner said, should "be understood as saying nothing more than that permission should not routinely be given" and should not be extended to mean "exceptional circumstances are needed".
This decision does not indicate whether Mr O'Flaherty will be successful in his challenge to allow his late appeal against HMRC's notices of assessment, but merely that the First-tier Tribunal did not apply the correct approach in looking at the case. It is a reminder that, as HMRC's Appeals reviews and tribunal guidance at ir-manuals ARTG8240ARTG8240 puts it, "the tribunal has a wide discretion over whether to allow late appeals".
[1]This is an appeal by the Appellant, Mr O'Flaherty, against the decision ("the Decision") of the First-tier Tribunal (Judge David Porter) ("the FTT") released on 22 November 2011, by which the FTT refused to grant Mr O'Flaherty permission to bring certain appeals out of time.
[2]Mr O'Flaherty sought permission to appeal from the FTT which was refused. The FTT did, however, conduct a review of the Decision. It did so on the basis that it had failed to take account of the amendment to the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 which, with effect from 29 November 2010, had amended rule 20(4) so as to exclude reference to rule 5(3)(a), and consequently the FTT's case management power to extend time, in the context of a statutory power to permit the making of late appeals. In its decision in that respect ("the Review Decision") the FTT took the opportunity to clarify some aspects of the Decision. Mr O'Flaherty also criticises certain elements of the Review Decision.
[3]Following an oral hearing in this Tribunal, Judge Herrington granted permission to appeal on a number of grounds. Those grounds assert that the FTT made errors of law in finding certain facts contrary to the evidence, in failing to take into account matters it should have done and in taking into account other matters that it should not have done. The grounds of appeal also make the submission that the FTT made an error of law in not permitting Mr O'Flaherty's representative to present evidence in the form of a bundle of correspondence between Mr O'Flaherty's accountant and HMRC on the grounds that the representative did not have copies of the correspondence.
[4]HMRC's case, put shortly, is that, first, the Decision was an exercise of a discretion vested in the FTT with which this Tribunal should not (and indeed cannot) interfere in the absence of a relevant error of law; and secondly that neither the Decision nor the Review Decision contains any relevant error of law.
[5]Mr O'Flaherty was at the material time the proprietor of the Peacock Pub and the Molyneux Hotel in Liverpool. He ran those businesses as a sole trader. The pub business commenced in 2003 and the hotel business in 2004. He engaged an accountant, Mr Jones, who provided certain services to the businesses until around June 2009.
[6]In October 2008, the businesses were the subject of an Employment Compliance Review by HMRC. It was found that Mr O'Flaherty had failed to obtain certain required information and documentation when engaging staff as required by the Income Tax (PAYE) Regulations 2003.
[7]As a consequence of the HMRC review, HMRC issued two notices of assessment to Mr O'Flaherty. The notice in respect of the pub business was issued on 23 July 2009 in the sum of £21,276, which represented an estimated liability to unpaid PAYE payable on staff wages for the tax years 2004/05 to 2008/09 inclusive. The notice in respect of the hotel business was issued on 17 August 2009 for £21,200 in respect of the same periods. In each case the notices referred to the requirement that an appeal be made within 30 days of the date of issue of the assessment.
[8]The issue of each of these assessments had been preceded by letters from HMRC to Mr O'Flaherty's then accountants, Shahabuddin & Co, on 18 May 2009 and 17 July 2009. Those letters in each case informed Shahabuddin & Co that HMRC intended to issue assessments in respect of PAYE. Understandably, no reference was made in the letters to rights of appeal, or any requirement as to the exercise of those rights.
[9]Following receipt of those letters Mr Shahabuddin wrote to Mr O'Flaherty in similar terms, on 22 May 2009 in respect of the pub business, and on 22 July 2009 in respect of the hotel business. In each case Mr Shahabuddin informed Mr O'Flaherty that he was unable to answer the queries raised by HMRC as he had not acted for Mr O'Flaherty at the relevant time. The letters record that Mr O'Flaherty had told Mr Shahabuddin that he had had a previous accountant who might have all the records. Each of the letters concludes with the warning:
Unless you provide me with the records I am unable to appeal against the assessments. Please note that we have 30 days from the date of their letter to lodge an appeal.
[10]The letter from HMRC accompanying the assessment in respect of each of the pub business and the hotel business referred to Mr O'Flaherty's right to appeal within 30 days of the date of issue of the determination. It made clear that the issue of the formal charges did not preclude any appeal, and stated that any appeal would require the production of documents and records to substantiate "that petition".
[11]On 10 August 2009, Shahabuddin & Co wrote to HMRC in relation to the assessment in respect of the pub business. The letter referred to the inability of Mr O'Flaherty to obtain the relevant documents from Mr Jones, and said:
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