Octagon Green Solutions Limited v The Commissioners for HMRC

When deciding whether to permit a late tax appeal, the tribunal should apply the three-stage Martland approach: assess the seriousness of the delay, identify the reasons for it, and consider all relevant circumstances. The tribunal must give particular weight to efficient litigation, proportionate cost and compliance with time limits. A reasonable misunderstanding, caused by ambiguous communications from the tax authority suggesting that proceedings and procedural steps were held in abeyance, may constitute a good reason for delay. The balance may favour admitting a late appeal where the taxpayer faces substantial prejudice, the underlying case is neither obviously strong nor weak, and the tax authority’s prejudice is reduced by related proceedings.

HMRC issued Octagon with substantial Landfill Tax and VAT assessments in September 2016 while a criminal investigation was continuing. Octagon appealed in December 2020. The First-tier Tribunal refused permission for the Landfill Tax appeal to be heard out of time, although it allowed the VAT appeal. It concluded that there was no good reason for the delay between September and November 2016.

On appeal, Octagon relied on new correspondence indicating that discussions with HMRC had led it reasonably to believe that the Landfill Tax assessment, and the need to seek a review or lodge an appeal, were held in abeyance. The central issues were whether the FTT had made a material error of law and, if so, whether the Upper Tribunal should remake the decision.

1. Appeal allowed. The FTT had made a material error of law in finding that the period between 9 September and 1 November 2016 was unexplained delay. The new evidence showed that Octagon had made enquiries of HMRC and could reasonably have understood that the Landfill Tax assessment and related procedural steps were held in abeyance pending the criminal proceedings.
2. The wording of HMRC’s communications supported that understanding. The later letter of 1 November 2016 confirmed the prior position. The fact that the VAT and Landfill Tax assessments were based on essentially the same factual background also made it reasonable for Octagon to believe that they would be treated alike.
3. Octagon was additionally entitled to rely on HMRC’s statement that it would write after the criminal proceedings concluded. No such letter was sent. The period between the notification in August 2020 that no prosecution would be brought and the filing of the appeal in December 2020 was therefore also supported by a good reason.
4. Applying the three-stage test in Martland v HMRC, the delay was serious and significant, but there was a good reason for it. Considering all the circumstances, the prejudice to Octagon from being unable to contest an assessment of approximately £57 million outweighed HMRC’s prejudice. HMRC’s prejudice was reduced because the related VAT appeal involved substantially the same factual matrix.
5. Under section 12 of the Tribunals, Courts and Enforcement Act 2007, the FTT decision was set aside. The Upper Tribunal remade the decision and granted permission for the Landfill Tax appeal to be heard out of time. Any costs application was to be made under rule 10(5)(a) and (6) of the Tribunal Procedure (Upper Tribunal) Rules 2008.

• First-tier Tribunal: refused permission for Octagon’s late appeal against the Landfill Tax assessment, while granting permission in relation to the VAT assessment.
• Upper Tribunal (Tax and Chancery Chamber): allowed the appeal, set aside the FTT’s decision and remade it by granting permission for the Landfill Tax appeal to be heard out of time.