Exclusive Promotions Limited v The Commissioner for HMRC

A determination confirming an accelerated payment notice may trigger the payment period even if the taxpayer alleges that HMRC failed to consider every representation. A challenge to the lawfulness of the determination or notice is a public-law challenge which cannot be raised indirectly in an appeal against a penalty.

A taxpayer’s belief that judicial review will invalidate an accelerated payment notice will not ordinarily constitute a reasonable excuse where the notice has been confirmed. Whether an excuse is reasonable is assessed objectively by reference to the taxpayer’s proven circumstances, including relevant experience and attributes. Interim relief staying enforcement does not, without more, alter the payment date or prevent penalties.

HMRC issued two accelerated payment notices to Exclusive Promotions Limited under Chapter 3 of Part 4 of the Finance Act 2014. The company did not pay by the applicable date and HMRC imposed penalties under Schedule 56 to the Finance Act 2009.

The First-tier Tribunal dismissed the company’s appeal: [2022] UKFTT 103 (TC). It held that HMRC’s response to the company’s representations was a determination under section 222, and that the company had no reasonable excuse based on its judicial review challenge or interim relief arrangement. The company appealed on whether there had been a determination and whether it had a reasonable excuse for late payment.

1. Determination and jurisdiction. The appeal was dismissed. The statutory scheme for accelerated payment notices, considered in Beadle v HMRC [2020] EWCA Civ 562, excludes collateral public-law challenges at the penalty stage. A challenge alleging that HMRC failed to consider relevant representations is a judicial review challenge, which the First-tier Tribunal had no jurisdiction to entertain in a penalty appeal.
2. HMRC’s letter of 22 February 2017 responded to the representations made under section 222(2)(a) and (b), and clearly confirmed the notices and their amounts. It satisfied the formal requirements of section 222(4) and was therefore a determination. That determination triggered the 30-day payment period under section 55(8D) of the Taxes Management Act 1970. It was presumed valid unless successfully challenged in a court of competent jurisdiction.
3. Reasonable excuse. The question whether the statutory concept of reasonable excuse has been correctly interpreted and applied is a question of law, although the underlying findings of fact cannot be challenged merely because another conclusion might have been possible. The four-stage approach in Perrin v HMRC [2018] STC 1302 requires the tribunal to identify the asserted facts, determine which are proved, decide objectively whether they constitute a reasonable excuse and when that excuse ceased, and determine whether the default was remedied without unreasonable delay.
4. The Upper Tribunal left open the wider scope of the distinction discussed in Sheiling Properties v HMRC [2020] UKUT 175 (TCC) between substantive and procedural invalidity. On the facts, however, the company’s controlling director had no understanding of the designated-officer argument and relied only on uninformed trust in his advisers. The First-tier Tribunal was entitled to find that reliance objectively unreasonable. In any event, the belief could not reasonably persist after the Court of Appeal’s decision in R (Rowe) v HMRC.
5. The interim relief agreement merely stayed enforcement. It did not alter the payment date or prevent HMRC from imposing penalties. The director did not understand it to have that effect, and any contrary belief would not have been objectively reasonable. The First-tier Tribunal had therefore made no error of law.

• Upper Tribunal (Tax and Chancery Chamber): appeal from the First-tier Tribunal dismissed.
• First-tier Tribunal: appeal against HMRC’s penalties dismissed in [2022] UKFTT 103 (TC).