Peter Arnett Leisure (a firm) v Revenue & Customs

Factual and Procedural Background

This decision concerns an application to bring three appeals out of time relating to VAT repayment claims connected with the Rank litigation, which involved appeals through UK and European courts about VAT exemption for certain gaming activities.

The Appellant is a partnership operating a bingo business from multiple clubs in southern England, offering traditional mainstage bingo (MSB), mechanised cash bingo (MCB), and gaming machines (Slots). The Appellant was advised by a longstanding accounting firm, whose partner managed the VAT claims.

Following a successful VAT tribunal decision in the Rank case regarding MCB, the Appellant submitted a repayment claim for VAT incorrectly accounted for on MCB for the period 1 April 2005 to 31 March 2008, known as the MCB Capped Claim. This claim was initially rejected by HMRC but later paid after verification.

The Appellant also submitted claims for Slots and MSB income (the Capped Slots Claim and the Capped MSB Claim), which were rejected by HMRC without specific time limit information for appeal. Additionally, the Appellant submitted historical claims (Cond Nast claims) covering periods from 1973 to 1996 and Scottish Equitable claims from 1996 to 2005. The Scottish Equitable claims are not part of the current appeals.

HMRC issued various letters rejecting claims or requesting reconsideration, often with inconsistent or unclear information about the need to appeal within statutory time limits. The Appellant relied on its advisers and communications with HMRC indicating that claims should be held pending the outcome of the Rank litigation.

Eventually, HMRC paid the MCB Capped Claim and the MSB Capped Claim but maintained that the Slots Capped Claim had been rejected and not appealed in time, leading to the Appellant lodging late appeals for certain claims.

The Appellant engaged new advisers, Deloitte LLP, in late 2011, who took over the handling of the appeals and applied for permission to appeal out of time. HMRC objected to these appeals on grounds of lateness.

The appeals thus concern whether permission should be granted to appeal out of time against HMRC’s rejection of the Slots Capped Claim, the MCB Cond Nast Claim, and the Slots Cond Nast Claim.

Legal Issues Presented

1. Whether the Tribunal should exercise its discretion to grant permission for the Appellant to bring appeals out of time against HMRC’s rejection of certain VAT repayment claims.
2. What factors should be considered in exercising the discretion to extend time limits for filing appeals in the context of complex VAT repayment claims intertwined with ongoing litigation.

Arguments of the Parties

Respondents' Arguments

• Time limits for appeals are to be strictly adhered to unless good reason is shown.
• The delays for the appeals were significant: nearly two years for the Slots Capped Claim and around three years for the other two claims.
• There was no good explanation for the delay; the Appellant was informed of the need to appeal but failed to do so.
• Granting an extension would undermine certainty and finality in tax assessments and risk unexpected financial liabilities for HMRC.
• Refusing the extension would result in the Appellant losing potentially valuable claims.

Appellant's Arguments

• The interests of justice require permission to be granted as the Appellant acted reasonably throughout.
• The Appellant reasonably relied on its long-standing advisers to manage the claims and on mixed messages from HMRC that the claims were to be held pending ongoing litigation.
• The application for extension was made promptly once the issue was realized.
• The failure to appeal in time was not intentional and was caused by the Appellant's advisers, not the Appellant itself.
• The claims are complex and linked to ongoing litigation, so procedural timetables for appeals are less relevant.
• Granting relief would allow the Appellant to recover significant sums to which it is legally entitled, while HMRC would only pay what is properly due.

Table of Precedents Cited

Court's Reasoning and Analysis

The Tribunal recognized that the discretion to grant permission to appeal out of time must be exercised judicially, taking into account relevant factors established in precedent cases, notably Data Select and O Flaherty. These factors include the purpose of the time limit (certainty in government revenue), length of delay, explanation for delay, and consequences for both parties of granting or refusing an extension.

The Tribunal distinguished the more stringent approach to procedural compliance in High Court litigation (as in Mitchell and Perry) from the context of tax appeals, noting that the latter involves more complex, long-running disputes with different practical considerations.

Applying the old checklist from CPR 3.9 and the five factors from Data Select, the Tribunal found that:

• The Appellant acted promptly once aware of the need to apply.
• The failure to appeal in time was not intentional and was caused by the Appellant’s advisers, in whom the Appellant reasonably trusted.
• The explanation for the delay was credible, based on the confusing and inconsistent communications from HMRC and the ongoing Rank litigation which justified holding claims in abeyance.
• HMRC did not treat the claims as closed for a substantial period and gave assurances that claims would be considered.
• The impact on HMRC of granting relief was limited given the scale of the overall project and the nature of the claims.
• The Appellant faced significant financial loss if relief was refused, losing claims to which it had a strong legal entitlement.

Overall, the Tribunal concluded that the balance of factors favored granting permission for the late appeals despite the delays.

Holding and Implications

The Tribunal GRANTED the applications for permission to appeal out of time in relation to the three appeals.

This decision allows the Appellant to proceed with its appeals despite significant delays beyond statutory time limits. The Tribunal stayed all proceedings and extended all time limits generally until further directions. No new legal precedent was established; the decision applied existing principles flexibly to the complex factual context of long-running VAT repayment claims intertwined with ongoing litigation and inconsistent HMRC communications.