Accountant and liquidator failures not reasonable excuses for late appeal

In Kazitula Limited (in liquidation) v HMRC [2021] TC0476, the First Tier Tribunal (FTT) dismissed the appellant's request to lodge an out of time appeal against assessments and penalties for Corporation Tax and VAT on the basis that there was no reasonable excuse for the extended delay.

•  The appellant operated a restaurant business and Mr Shafique Uddin was the sole shareholder and director.
•  On 7 and 10 April 2017, HMRC notified the Appellant of VAT and Corporation Tax assessments.
• On 13 April, the Appellant was placed into Creditor's Voluntary Liquidation (CVL).
• On 20 and 26 June, HMRC issued Penalties for Deliberate inaccuracies and on 16 and 30 June, further notified Mr Uddin that he would be personally liable for the penalties.
• Mr Uddin filed a Notice of Appeal against the Appellant's Assessments and Penalties to the FTT on 19 November 2018. He had no authority to file an appeal for the Appellant as it was in liquidation. The liquidator agreed to authorise Mr Uddin to act on behalf of the company for the appeal on 11 November 2020.

The FTT found that:

• The appeals were 16-18 months Late (ignoring the later date when the liquidator gave authority to act to Mr Uddin) when the deadline for notice of appeal was 30 days. This was a significant and serious delay.
• The reasons given for the delay were:
  • The reliance on Mr Uddin's accountant, who allegedly misled Mr Uddin as to the progression of the appeal. 
  • The fact that the liquidator did not appeal on behalf of the appellant.
• There was no suggestion that the Appellant (as opposed to Mr Uddin) had been misled by the accountant and no evidence was submitted as to why the liquidator had not appealed the assessments and penalties on the Appellant's behalf.
• Despite Mr Uddin's reliance on his accountant, case law establishes that the failures of the taxpayer's adviser should be seen as the failures of the taxpayer.
• Despite the reliance, a reasonable taxpayer would have sought confirmation of the appeal and copies of what was submitted.
• Even when suspecting that things were not progressing as thought, there was still a delay of six weeks before Mr Uddin took action and four months before the appeal was filed. There was no explanation as to why there was such a delay.

The FTT held that Mr Uddin had not submitted sufficient evidence to convince the Tribunal of Reasonable delay and the appeal was dismissed.

Useful guides on this topic

Liquidation
How do you wind up (liquidate) a company? What types of liquidation are there? What are the formalities and the tax consequences of liquidation?

Penalties: Deliberate Behaviour
What penalties apply to deliberate behaviour? What is Deliberate Behaviour?

How to appeal an HMRC decision
Disagree with an HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

How to appeal a tax penalty
What are the steps in making an appeal? What should your appeal cover? What does recent case law say on this topic?

Grounds for Appeal: Reliance on an advisor or third party
When can a taxpayer appeal a penalty for late filing, late payment or for error or mistake? What are the grounds on which they can appeal?

External links

Kazitula Limited (in liquidation) v HMRC [2021] TC0476