Adair & Ors v Revenue & Customs (applications for permission for late notification of appeal - reliance on advisers)

Factual and Procedural Background

In January 2019, HM Revenue & Customs (HMRC) issued Notices under Finance Act 2008, Schedule 36, paragraph 1 (Sch 36 Notices) to around 70 individuals (the Individuals) identified as administrators of various pension schemes. Each Notice required information relating to the respective pension scheme. The Individuals appointed The Independent Tax and Forensic Services LLP (ITFSL) as their agent to deal with HMRC. ITFSL appealed the Notices on behalf of the Individuals, but HMRC refused the appeals and statutory reviews upheld the Notices.

Over 20 appeals were notified to the Tribunal and proceeded, but 42 Individuals' pension schemes had been wound up. For these 42, ITFSL engaged in extensive correspondence with HMRC's case officer in an attempt to resolve the appeals without Tribunal notification. Of these, 10 settled with HMRC before the end of 2020, one was dealt with separately, and 31 (the Applicants) filed Notices of Appeal with the Tribunal on 16 and 17 January 2020, including applications for permission to notify the appeals late (the Applications).

The Tribunal directed that the Applications be case managed and heard together, with consolidated submissions and bundles provided. The Tribunal first made findings of fact regarding one Applicant as exemplar, then reviewed other Applicants' bundles for material differences, before applying relevant case law.

Legal Issues Presented

1. Whether the Tribunal should grant permission to the Applicants to notify their appeals late, given the statutory time limit for notification.
2. Whether the Applicants have demonstrated good reason for the delay in notifying their appeals.
3. How the principles established in relevant case law, including Martland v HMRC and Katib v HMRC, apply to the facts of these Applications.
4. Whether reliance on advisers provides a good reason for the delay.
5. The weight to be given to the need for litigation to be conducted efficiently and at proportionate cost versus enforcing compliance with statutory time limits.

Arguments of the Parties

Applicants' Arguments

• The Applicants argued that the delay was reasonable due to ongoing negotiations with HMRC and attempts to resolve the disputes without Tribunal involvement.
• They relied on their advisers, ITFSL and Liddell Dunbar Ltd, who advised them not to be concerned with HMRC's letters as these were being dealt with on their behalf.
• They contended that the Appeals would succeed if allowed, asserting that the Notices were invalidly issued because the Applicants were not the scheme administrators.
• The Applicants submitted that applications for Alternative Dispute Resolution (ADR) and mediation justified the delay.
• They argued that the penalties imposed were relevant to the merits of their appeals and that refusal of the Applications would cause prejudice by forcing compliance with the Notices.

Respondents' Arguments

• HMRC submitted that the delay was serious and significant, with no good reason except for a short initial period of about two weeks.
• They emphasized the statutory scheme requiring appeals to be notified within 30 days of the review decision, which the Applicants failed to do.
• HMRC rejected the Applicants' approach of treating the group of Notices collectively, insisting each appeal must be individual due to confidentiality and statutory requirements.
• HMRC argued that reliance on advisers does not constitute a good reason for delay, citing relevant case law.
• HMRC disputed the merits of the Applicants' grounds, asserting the Applicants were scheme administrators and that the Notices were valid and reasonably required.
• HMRC also rejected ADR applications as Schedule 36 Notices are generally outside the scope of ADR.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Martland v HMRC [2018] UKUT 178 (TCC)	Guidance on applications for permission to make late appeals; three-stage approach assessing delay, reasons, and balancing all circumstances with emphasis on efficient litigation and compliance with rules.	The Tribunal applied the three-stage Martland approach to assess the Applicants' delay, reasons for delay, and conducted a balancing exercise, giving particular weight to statutory time limits and efficient case management.
Katib v HMRC [2019] UKUT 189 (TCC)	Confirmed that failures by advisers are generally treated as failures by the litigant; emphasized importance of compliance with statutory time limits.	The Tribunal found that the Applicants' reliance on advisers did not provide a good reason for delay, consistent with Katib’s principles.
Denton v TH White Limited [2014] EWCA Civ 906	Set out the three-stage test for relief from sanctions under CPR rule 3.9, focusing on seriousness of breach, reasons for default, and all circumstances including efficient litigation.	The Tribunal referenced Denton in considering the seriousness of the Applicants' delay and the necessity of enforcing compliance with time limits.
BPP v HMRC [2017] UKSC 55	Endorsed the approach in Denton; emphasized efficient litigation and compliance with rules.	The Tribunal noted that the principles endorsed in BPP apply analogously to Tribunal proceedings and late appeal applications.
Romasave v HMRC [2015] UKUT 254 (TCC)	Delay over three months in notifying appeal is serious and significant.	The Tribunal held that the Applicants’ delay of nearly 14 months was clearly serious and significant.
Hytec Information Systems v Coventry City Council [1997] 1 WLR 666	Failure of advisers is ordinarily treated as failure of the litigant; court must enforce orders regardless of solicitor or counsel fault.	The Tribunal applied this principle to find that the Applicants could not rely on adviser failings as a good reason for delay.
Rashid v HMRC [2020] UKFTT 378 (TC)	Discrepancies in HMRC paperwork may weigh in favour of allowing a late appeal.	The Tribunal found no discrepancies in HMRC’s paperwork and considered Rashid not relevant to the Applicants’ case.

Court's Reasoning and Analysis

The Tribunal applied the three-stage test from Martland to the Applicants' Applications for permission to notify appeals late. First, it found the delay of approximately 14 months to be serious and significant, well beyond the statutory 30-day limit. Second, it examined the reasons for delay, dividing the period into five phases:

• Initial two weeks: A good reason existed due to awaiting HMRC's response to a novel legal argument regarding the status of the appellants.
• Eight months thereafter: No good reason; ITFSL continued to reiterate rejected arguments without notifying appeals.
• Two and a half months delay before ADR applications: Unexplained and unjustified.
• One month during ADR application and rejection: Waiting for ADR outcome was unreasonable given prior knowledge of likely rejection.
• Two months before filing Notices of Appeal: No good reason; no evidence of communication with Applicants or consent timing.

The Tribunal rejected the Applicants' reliance on their advisers as a good reason for delay, citing Katib and Hytec that adviser failures generally count as litigant failures. It found that the Applicants had sufficient warning signs, including direct HMRC communications and significant penalties, to question their advisers' approach.

The Tribunal also rejected the contention that negotiation or ADR justified the delay, noting statutory provisions require notification within 30 days post-review, and no proceedings exist before notification. HMRC's position was clear early on, and ADR applications were unlikely to succeed.

Regarding the merits, the Tribunal found no overwhelming strength in the Applicants' grounds; the legal question of scheme administrator status is mixed fact and law and not conclusively resolved by Applicants' evidence. The Notices were comprehensible and valid on their face, and the Applicants existed as recipients.

In balancing all circumstances, the Tribunal gave particular weight to the need to respect statutory time limits and to enforce compliance, which outweighed factors favoring the Applicants, such as the relative ease of consolidating appeals and the delay being caused by advisers. The repeated unexplained delays demonstrated disregard for statutory requirements.

The Tribunal considered whether one Applicant who contacted HMRC directly was distinguishable but found no material difference in outcome.

Holding and Implications

The Tribunal refused the Applicants permission to notify their appeals late.

This decision means the Applicants’ appeals against the Schedule 36 Notices will not be admitted due to non-compliance with the statutory notification time limit, except for the initial short delay for which good reason was found. The Applicants retain separate appeal rights against penalties, which are not addressed here. No new legal precedent was established; the decision applies established principles emphasizing the importance of compliance with statutory deadlines and the limited circumstances in which reliance on advisers excuses delay.