Taxpayers can’t have their cake and eat it

The recent First-tier Tribunal (FTT) case of Marie Guerlain-Desai vs HMRC highlights the importance of following the tribunal process. In this case HMRC opened an enquiry into the taxpayers’ stamp duty land tax (SDLT) return on 13 December 2021, which resulted in an additional SDLT liability of £225,250 being due. HMRC’s view was that the whole transaction, which included 12 acres of mature woodland, was of residential property. 

The enquiry was subsequently closed on 25 February 2022, which the taxpayer appealed before accepting an internal review by HMRC on 22 April 2022. To this point both the taxpayer and HMRC had followed the normal enquiry and appeal process in a timely manner.

The outcome of the internal review was provided, and Mrs Guerlain-Desai was advised to notify any appeal to the FTT within 30 days. Due to what Mrs Guerlain-Desai described as an administrative error by her agents, whereby an individual had left their employment and failed to notify the appeal, an application seeking permission to appeal out of time against the review by HMRC was submitted late on 8 July 2022. 

On 13 April 2023, almost a year later, this late appeal was granted by Judge Brown KC who found that ‘whilst the delay of 42 days was serious and significant, with no good reason having been provided for the delay, the balance of the prejudice to the appellant (taxpayer) was such that the application should be granted’. HMRC was then given 60 days to 15 June 2023 to deliver a statement of case (‘SoC').

No SoC was received by the deadline, therefore on 7 August 2023 the FTT requested a response to the direction. 

HMRC then responded the same day asking for permission to deliver the SoC by 18 August 2023. HMRC submitted this was an administrative oversight due to correspondence being submitted into the case management system and being missed by the individual assigned to the case. 

Both the delays from the taxpayer and HMRC resulted from administrative error, and in both cases the error was identified and promptly responded to.

The judge commented that ‘it is true that human error and oversight will occur but sometimes we have to live with the consequences of the error. Not realising the time and missing the train does not mean the train should have waited for me – I have missed the train and must accept the consequences of that’. 

This is applicable to the delays by both the taxpayer and HMRC, however it was noted that HMRC is an experienced litigator with considerable experience before the FTT; and with sufficient resources to conduct litigation and as such, there is no good reason for the failure to deliver the SoC. 

The judge decided to allow HMRC to submit its SoC, which was likely due to the size of the tax liability at stake and the principles of the case needed to be tested. Whilst the decision was eventually found in favour of HMRC, there had been defaults by both the taxpayer and HMRC. In other circumstances the tribunal may not be so lenient, having potential tax consequences as well as professional cost impacts for the taxpayer.