William Archer v The Commissioners For His Majesty’s Revenue And Customs

The appellant challenged surcharge notices imposed under section 59C of the Taxes Management Act 1970 for late payment of tax. The central legal question was whether the existence and course of his judicial review proceedings, together with interim relief and an agreement with HMRC, amounted to a "reasonable excuse" for non-payment and whether he paid without unreasonable delay once any such excuse ceased, in accordance with section 118(2) TMA. The court held that the Upper Tribunal was wrong to treat production of subjective witness evidence of belief as a precondition to establishing causation, but concluded that, even allowing for an objectively reasonable excuse in the initial period while the judicial review was extant, the appellant unreasonably delayed payment after the position crystallised following the Court of Appeal judgment and the refusal of further relief. Accordingly the appeal was dismissed.

Background and procedural history.

• The appellant appealed against surcharge notices issued by HMRC for failure to pay tax following closure notices. He had brought judicial review proceedings challenging the validity of the closure notices, obtained interim relief and pursued appeals up to an application for permission to appeal to the Supreme Court. The primary question was whether the judicial review and associated events furnished a "reasonable excuse" for non-payment throughout the relevant periods under section 59C(9) TMA, and if any reasonable excuse ceased, whether payment was made without unreasonable delay under section 118(2) TMA.
• At first instance the First-tier Tribunal dismissed the appellant's reasonable-excuse defence. The Upper Tribunal set aside the FTT decision and remade the decision against the appellant, holding that the FTT was right to require evidence of the appellant's subjective belief; the appellant obtained permission to bring a second appeal to this court.

Nature of the claim / relief sought. The appellant sought to overturn surcharge notices (penalties) imposed for late payment of tax, relying on the defence that a reasonable excuse existed because he had validly and actively pursued judicial review of closure notices which, he argued, meant no tax was payable until the public law proceedings and appeal rights were exhausted.

Issues framed by the court.

1. Whether the UT erred in law by treating evidence of the taxpayer's subjective belief and its causal role as a necessary precondition to establishing a reasonable excuse for non-payment.
2. Whether the fact of the judicial review proceedings (together with interim relief and an agreement not to enforce) could, as a matter of law and on the facts, constitute a reasonable excuse for non-payment.
3. Whether principles applicable to Accelerated Payment Notices (the "pay now, argue later" regime) determined the reasonableness analysis in this case, and whether postponement rules would have required payment during any hypothetical FTT appeal.

Court's reasoning and conclusions. The court analysed the statutory framework: section 59C TMA (surcharge provisions and reasonable excuse), section 118(2) TMA (remedy without unreasonable delay), the closure-notice provisions (section 28A and section 59B read with Schedule 3ZA), postponement under section 55 and the special APN regime in the Finance Act 2014. The court accepted that while tribunals must consider subjective state of mind as a fact where relevant, a taxpayer is not invariably required to file witness evidence of subjective belief; tribunals may draw inferences from objective "external" material and are not constrained to reject a reasonable-excuse case for absence of a witness statement. The UT was therefore in error to treat the absence of subjective witness evidence as fatal in limine. On the merits the court divided the relevant chronology into three periods and held:

• First period (issue of closure notices up to Jay J's decision): the appellant had an objectively reasonable excuse to defer payment because there was a live and arguable public law challenge, interim relief was granted and the judicial review could have been rendered nugatory by payment.
• Second period (Jay J judgment to Court of Appeal hand-down): the first-instance loss reduced the strength of the excuse; additional evidence for why the appellant did not pay during short gaps might have allowed a different result, but such evidence was lacking.
• Third period (Court of Appeal dismissal and subsequent Supreme Court permission phase): after the Court of Appeal dismissed the judicial review and interim relief was discharged, the appellant unreasonably delayed payment (over six months) while pursuing a second appeal; administrative forbearance by HMRC did not relieve him from paying or avoid surcharges. Payment only on 22 June 2018 was too late.

The court therefore dismissed the appeal, agreeing that the appellant did not have a reasonable excuse throughout the period of default and in any event did not remedy the failure without unreasonable delay once any excuse ceased.

This was an appeal against the Upper Tribunal’s remade decision. The Court of Appeal dismissed the appellant’s appeal. It held that the UT was wrong to require production of subjective witness evidence as a precondition to finding causation, but that on the facts the appellant only had a reasonable excuse for non-payment in the initial period while the judicial review and interim relief were live. After the Court of Appeal’s dismissal and the exhaustion of effective remedies, the appellant delayed payment unreasonably (over six months) and therefore could not succeed under section 59C(9) and section 118(2) TMA; accordingly the surcharge impositions stood.

First-tier Tribunal (Judge Bowler) dismissed the appellant's reasonable-excuse defence [2020] UKFTT 0288 (TC). The Upper Tribunal (TCC) set aside the FTT decision and remade it against the appellant [2022] UKUT 00061 (TCC). This judgment is the Court of Appeal's determination of the appeal from the Upper Tribunal: [2023] EWCA Civ 626. Prior public law proceedings included the Administrative Court (Jay J) [2017] EWHC 296 (Admin), a separate Court of Appeal decision on the closure notices [2017] EWCA Civ 1962, and a refused application for Supreme Court permission (permission refused in June 2018).