William Archer v The Commissioners for HM Revenue and Customs [2022] UKUT 00061 (TCC)
| Jurisdiction | UK Non-devolved |
| Judge | Mrs Justice Joanna Smith,Judge Jonathan Cannan |
| Neutral Citation | [2022] UKUT 00061 (TCC) |
| Subject Matter | 4 March 2022 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 04 March 2022 |
[2022] UKUT 00061 (TCC)
UPPER TRIBUNAL
(TAX AND CHANCERY CHAMBER)
Appeal number: UT/2020/000337
BETWEEN
WILLIAM ARCHER
Appellant
-and-
THE COMMISSIONERS FOR
HER MAJESTY’S REVENUE AND CUSTOMS
Respondents
TRIBUNAL:
MRS JUSTICE JOANNA SMITH
JUDGE JONATHAN CANNAN
Sitting in public at The Rolls Building, Fetter Lane, London on 24 November 2021
Amanda Brown QC (of KPMG LLP) and Conrad McDonnell (instructed by KPMG LLP)
for the Appellant
Michael Ripley instructed by the Solicitor’s Office and Legal Services of HM Revenue
and Customs for the Respondents
INCOME TAX – surcharges for non-payment of tax – taxpayer challenging whether closure
notices created a tax debt by way of judicial review – whether reasonable excuse for non-
payment – whether taxpayer was expected to pay tax
1
DECISION
INTRODUCTION
1. This is an appeal against a decision of the First-tier Tribunal (“the FTT”) released on 8
July 2020 (“the Decision”). The FTT dismissed Mr Archer’s appeal against notices of
surcharge pursuant to section 59C Taxes Management Act 1970 (“TMA 1970”). The
surcharges totalled £1,403,181.78. They were imposed because the respondents (“HMRC”)
contended that Mr Archer had failed to pay tax which was due and payable following enquiries
into his self-assessment tax returns for 2001-02 and 2002-03 (“the Relevant Years”). Closure
notices in relation to those enquiries were issued on 2 February 2016 (“the Closure Notices”).
2. By way of brief summary at this stage, HMRC contended that the tax due pursuant to the
Closure Notices was approximately £14m. Mr Archer did not pay that amount within the time
for payment. It was Mr Archer’s position that the Closure Notices did not make any amendment
to his self-assessments and as a result no tax was due and payable by him. HMRC threatened
bankruptcy proceedings and Mr Archer commenced judicial review proceedings (“the JR
Proceedings”) on 29 March 2016, challenging HMRC’s decision to commence bankruptcy
proceedings. Mr Archer obtained interim relief restraining HMRC from taking steps to
bankrupt him pending determination of the JR Proceedings.
3. The application for judicial review was dismissed by Jay J on 21 February 2017 following
a hearing ([2017] EWHC 296 (Admin)). Mr Archer obtained permission to appeal from the
Court of Appeal, but his appeal was dismissed on 30 November 2017 ([2017] EWCA (Civ)
1962). Mr Archer applied to the Supreme Court for permission to appeal but permission was
refused on 13 June 2018. Mr Archer then paid the tax and interest of some £22.5m on 22 June
2018.
4. HMRC can issue a tax-geared surcharge notice under TMA 1970 where tax remains
unpaid more than 28 days after the due date, and a further surcharge notice where the tax
remains unpaid more than 6 months after the due date. In this case, HMRC issued surcharge
notices on 10 May 2016, together with further surcharge notices on various dates thereafter. It
is these surcharges which are under appeal. Before the FTT, Mr Archer raised various points
as to the validity of the surcharge notices and it was accepted by HMRC that some of the
further surcharge notices were invalid because they were not served on Mr Archer. However,
the FTT found that the remaining further surcharges were valid. There is no appeal against that
decision.
5. It was Mr Archer’s case in relation to the valid surcharge notices that he had a reasonable
excuse for non-payment of the underlying tax. In summary, his grounds of appeal to the FTT
were as follows:
(1) He had a reasonable belief that no payment was due to HMRC because the Closure
Notices did not make any amendment to his self-assessments.
(2) In the alternative, he had an arguable case with a real prospect of success that no
payment was due.
(3) Fairness required that no payment of the claimed tax debt should be made until
after the conclusion of the JR Proceedings.
6. The FTT dismissed the appeal. It was not satisfied on the evidence that Mr Archer had a
reasonable excuse for not paying the tax until 22 June 2018. We will need to address the detail
of the FTT’s findings in due course.
2
THE GROUNDS OF APPEAL
7. There are four grounds of appeal to this tribunal. Mr Archer has permission to appeal
from the FTT on at least two grounds which we can summarise as follows:
(1) The Decision is affected by a fundamental error of reasoning. The FTT wrongly
considered that, as a matter of law, Mr Archer could and should have appealed the
Closure Notices to the FTT rather than seeking to challenge them by way of judicial
review. The FTT wrongly proceeded on the basis that if Mr Archer had appealed to the
FTT then it could have determined whether or not the disputed tax was due and payable
and the disputed tax would not have been postponed. This led the FTT to find that it was
not a reasonable excuse for the Appellant to have chosen the judicial review route, which
involved delaying the tax payment as a result of the interim relief ordered by the Courts.
(2) The FTT failed properly to apply the decision of the Upper Tribunal in Perrin v
HMRC [2018] UKUT 156 (TCC) as to what amounts to a reasonable excuse. It wrongly
placed sole or undue focus on Mr Archer’s subjective belief and failed to consider his
acts, the situation he found himself in and relevant external facts.
8. However, the FTT refused permission to appeal on grounds that alleged the tax was not
due and payable. It did so on the basis of what it considered to have been a concession by Mr
McDonnell, who appeared before the FTT on behalf of Mr Archer, that the tax was due and
payable, a concession to which we will have to return in due course. In circumstances where
the scope of the permission from the FTT was unclear, the Upper Tribunal subsequently gave
permission to appeal on the two additional grounds identified by Mr Archer, which may be
summarised as follows:
(3) The FTT failed to recognise that collection of the tax by HMRC prior to 14 June
2018 would have been a conspicuous and indefensible abuse of power and/or otherwise
unlawful in the circumstances of the case. As a result, the tax was not payable or was not
in practice expected to be paid prior to 14 June 2018 and, in either event, there was a
reasonable excuse for non-payment.
(4) The FTT failed to recognise that Mr Archer was entitled to rely on certain
statements made by HMRC at material times that there was no amount of tax due and
payable. Mr Archer was entitled to rely on those statements as establishing a reasonable
excuse for non-payment and/or HMRC was estopped from submitting to the contrary.
Further, the statements should be construed as HMRC exercising its power to extend the
time for payment pursuant to s 118(2) TMA 1970.
9. It is Mr Archer’s case on this appeal, that in light of these errors, the whole of the FTT’s
reasoning on “reasonable excuse” must be reconsidered by the Upper Tribunal.
RELEVANT STATUTORY PROVISIONS
10. At this stage it is convenient to set out some of the statutory provisions relevant to the
appeal which will also give some context for the various judgments in the JR Proceedings.
11. The Closure Notices were issued pursuant to section 28A TMA 1970 which provides as
follows:
28A(1) An enquiry under section 9A(1) or 12ZM of this Act is completed when an officer of the
Board by notice (a ‘closure notice’) informs the taxpayer that he has completed his enquiries and
states his conclusions.
In this section ‘the taxpayer’ means the person to whom notice of enquiry was given.
(2) A closure notice must either:
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