In William Archer v HMRC [2022] EWCA Civ 626, the Court of Appeal dismissed an appeal against penalties for late payment of tax following a judicial review of closure notices. The judicial review amounted to a reasonable excuse for late payment but not throughout the period of non-payment and the delay in making payment once that excuse ended was unreasonable.

  • Following enquiries into Mr Archer's use of tax avoidance schemes, HMRC issued Closure Notices where the tax due plus interest was £22.5 million. 
  • He applied for a judicial review on the basis of procedural invalidity of the notices after HMRC threatened to start bankruptcy proceedings. He disputed the fact that the notices amended his returns as they failed to state the new tax liability, arguing that no tax was payable.
  • The judicial review was dismissed by the Court of Appeal in November 2017. The Court found that the lack of tax stated on the notices was a matter of form over substance.
  • After the Supreme Court refused permission for a further appeal Mr Archer paid the total outstanding sums, in June 2018.
  • HMRC issued tax geared surcharge notices for £1.4 million. Mr Archer appealed on the basis that he had had a Reasonable Excuse for non-payment of the underlying tax due. 
  • The Upper Tribunal (UT) found that the FTT had erred in law in concluding that Mr Archer should have proceeded with an appeal to the FTT against the closure notices instead of seeking a judicial review. In remaking the decision the UT found that:
    • A procedural invalidity of a notice could give rise to an objectively reasonable excuse for non-payment but the courts still required evidence that the reason put forward as a reasonable excuse for non-payment did actually cause the non-payment. 
    • No such evidence was provided. Without such evidence, the UT could not conclude whether there was a reasonable excuse.
    • Even if there was a reasonable excuse based on the reasonable likelihood of success of the judicial review claim, and Mr Archer had relied upon this as a reason for non-payment, this ended when the Court of Appeal upheld the validity of the notices in November 2017. There was no evidence of any further reasonable excuse lasting until the date of payment in June 2018. 

The Court of Appeal then set aside the decision of the UT remaking the decision but nevertheless dismissed Mr Archer’s appeal:

  • The UT decision was flawed: there is no requirement for a taxpayer to file witness evidence to support a claim for reasonable excuse or to give evidence to the tribunal to establish that the reason they have put forward for non-payment of tax is the real reason.
  • It is up to the court, taking account of all relevant circumstances to determine whether there are facts which, when considered objectively, amount to a reasonable excuse.
  • For the period between the issuance of the closure notices and the judicial review decision, on the balance of probabilities, Mr Archer did have a reasonable excuse for non-payment.
  • From the date of the judicial review in late 2017 and the date of payment in June 2018, there was no excuse. He should have paid the tax by mid-December 2017.
  • Therefore Mr Archer did not have a reasonable excuse throughout the period of default and his delay in paying the tax was unreasonable once the excuse had come to an end.

Useful guides on this topic

Closure Notices
When does HMRC issue a Closure Notice? Can a taxpayer demand one? Are there appeal rights? 

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: Reasonable excuse
What is considered to be a 'reasonable excuse' when a taxpayer makes an appeal against a tax compliance failure?

External link

William Archer v HMRC [2022] EWCA Civ 626


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