In Bull Brand Ltd v HMRC [2023] TC8928, the First Tier Tribunal (FTT) refused the application for an out-of-time appeal against HMRC's rejection of an error correction notice in relation to the correct VAT rate for e-cigarettes. The prejudice to the appellant did not outweigh the seriousness of the delay.

  • The appellant was a wholesale distributor of e-cigarettes and other tobacco products.
  • In August 2018, the company was advised by a major customer that they were challenging HMRC's application of the 20% VAT Standard rate. Instead, they were seeking the application of the 5% reduced rate.
  • The appellant was told to file an ECN so as to protect its position. If the customer won the dispute, HMRC may have sought repayment of the overpaid VAT from the appellant. 
  • The customer had provided details of how to claim but had not detailed what was required if an Appeal was needed.
  • The ECN was filed for a repayment of the potentially overclaimed VAT, which amounted to £237,000, in October 2018.
  • HMRC rejected the claim in December 2018, but the appellant did not receive the letter. It was assumed that the claim was stayed, falling behind other similar claims and dependent on wider litigation. The appellant did not think it was necessary to follow up with HMRC.
  • In May 2022, HMRC wrote to the company informing them that the Four-year time limit for similar claims was approaching. The letter mentioned the rejected claim and this was the first the appellant had heard of the rejection. A copy of the letter was obtained in July 2022.
  • The appellant has applied for permission to submit a late appeal against the rejection.

The FTT considered the principles of Martland [2018] UKUT 178 in considering whether to grant the appeal:

  • Length of delay: the three-year delay, without any further enquiry or follow-up, was serious and significant.
  • The reasons for the delay: the FTT did not doubt that the appellant had not received the rejection letter. Without the letter, it had been assumed that the claim was stayed and there was a lack of knowledge as to how the process worked.
  • Having regard to all the circumstances, the FTT accepted that HMRC would be barely prejudiced due to the pending claims of others, whereas the appellant would suffer financial hardship if permission was not granted and the other claims succeeded.

Despite the FTT recognising the potential prejudice to the appellant, it highlighted two points from case law:

  • In Martland, the Upper Tribunal (UT) had stated that 'the starting point is that permission should not be granted unless the FTT is satisfied on balance that it should be'.
  • In Mohammed Hafeez Katib v HMRC [2019] UKUT 189, the UT had pointed out that financial consequences were often a factor in appeals and should not be given significant weight.

On the basis that the financial consequences and lack of knowledge of the process did not outweigh the seriousness of a three-year delay, the permission was not granted.

Useful guides on this topic

Correcting VAT errors
What are the VAT error correction time limits? Can you correct errors through the VAT return? Do you have to notify HMRC?

Rates & fractions (VAT)
What is the VAT rate? What is the VAT fraction for VAT at 5% or 12.5% or 20%? How do I calculate VAT?

Appeals: Late
When can you make a late tax appeal? What conditions must be met?

External link

Bull Brand Ltd v HMRC [2023] TC8928


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