In Tajinder Pawar v HMRC [2025] UKUT 309 (TCC), the Upper Tribunal (UT) found that the First Tier Tribunal (FTT) had made an error of law when applying the Martland test. When considering a late appeal and following the approach in Medpro, the need to comply with time limits should not have been considered in the third stage of Martland.
Tajinder Pawar, a director and shareholder of First Stop Wholesale Limited (FSWL), was issued with a Personal Liability Notice (PLN) in respect of VAT errors made by FSWL.
- Following a Statutory review, the PLN was upheld in full in a letter from HMRC dated 19 November 2018.
- The letter included a section referring to the appeal process and the 30-day deadline for making an appeal.
- There was very little correspondence between Mr Pawar's adviser and HMRC between 19 November 2018 and 22 February 2022, when Mr Pawar made an Appeal to the First Tier Tribunal (FTT).
- This appeal was late, being three years and two months after the 30-day statutory deadline for appealing against a HMRC review.
The FTT applied the three-stage test set out in Martland v HMRC [2018] UKUT 178 (TCC) to determine whether to allow the appeal:
- Establish the length of the delay and whether it was serious and significant.
- Establish the reasons for the default.
- Evaluate all the circumstances of the case, which involved balancing the merits of the reason given for the delay, and any prejudice in granting or refusing the application, taking into account the particular importance of the need for litigation to be conducted efficiently and at a proportionate cost and for statutory time limits to be respected.
The FTT refused the application for a Late appeal due to the lack of a good reason for the delay and the importance of respecting statutory deadlines.
Mr Pawar appealed to the Upper Tribunal (UT) initially on three grounds, all of which were dismissed. The UT found that the FTT made no errors of law.
The UT was then asked by Mr Pawar to consider the (then forthcoming) decision in Medpro UT because of the possibility that it would overturn the general rule in Katib v HMRC [2019] UKUT 189 that failures by a litigant’s adviser should generally be treated as failures by the litigant.
- Ultimately, the UT in Medpro UT did not criticise the general rule in Katib, and it approved the three-stage approach in Martland. However, the UT concluded that no 'ex ante weight' should be given to the need to comply with statutory time limits.
- This resulted in two conflicting UT decisions on whether 'compliance with time limits' was a factor that must be given 'ex ante weight' in the balancing exercise at stage 3 of Martland.
Written representations were made by Mr Pawar and HMRC as to how the Medpro UT decision should apply to their dispute.
The UT found that:
- There were two previous decisions of the UT, one of which held the other to be clearly wrong, but it was not possible to conclude that either decision was clearly wrong or clearly right.
- HMRC were contemplating an appeal. It was possible that the conflict may be resolved at a higher level, and the UT did not want to delay this decision on that account.
- It should follow Medpro UT, being a more recent decision which expressly considered the correctness of the earlier decision.
By applying Medpro UT, the UT found that the FTT had erred insofar as it referred to the importance of the need for statutory time limits to be respected. This was a material error of law.
- The UT set aside the FTT decision and remade it, following the three-stage approach in Martland.
- When performing the Martland balancing exercise, the UT did not give special weight to the particular importance for the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected.
Like the FTT, the UT had very little evidence to support the reasons for the delay of over three years.
- As the FTT observed, the UT did not know whether Mr Pawar consulted his adviser or anyone else when he received the review decision.
- It should have been clear to Mr Pawar that an appeal against the PLN was the only appropriate course if he wished to avoid liability for the penalty.
- The UT were unable to differ from the FTT's conclusion that the reason for the delay was either that Mr Pawar ignored the review conclusion letter in the hope that the matter would go away, that he did not pay proper attention to it or that he assumed that the issue would be sorted out without his involvement.
- It seemed that it was only the subsequent service upon Mr Pawar of the statutory demand that prompted him to seek permission for a late appeal.
- The UT did not consider that the adviser's failure to advise Mr Pawar gave him a good reason for doing nothing, and there is no evidence that he did anything.
- Mr Pawar could reasonably have been expected to contact his adviser within a short period to enquire about progress.
- The UT accepted that Mr Pawar was acting in good faith in accounting for VAT how he did, but a detailed investigation would be required to establish whether or not he knew that the assertion that FSWL was entitled to reclaim the input tax was inaccurate.
- Corrective action needed to have been taken within four years. Without the corrective action, the argument that HMRC had suffered no loss of tax would not amount to a defence.
- The UT found that the prejudice to Mr Pawar of not being allowed to pursue an appeal is not sufficiently great as to outweigh more than three years of unjustified delay. This took into account the risk of bankruptcy.
- The prejudice to HMRC of allowing the late appeal was accurately described by the FTT. The UT found this to be a factor supporting their refusal of permission.
Permission for the late appeal was refused, and the appeal was dismissed.
Useful guides on this topic
Personal Liability Notices (PLNs)
A Personal Liability Notice (PLN) may be issued by HMRC in the event of a company's or a Limited Liability Partnership's (LLP's) failure to pay its tax debts or tax penalties to HMRC. A PLN will transfer all or part of the liability to pay the debt to one of its officers.
Statutory Review (by HMRC)
What is a Statutory Review? When does HMRC offer a Statutory Review? Is it automatic? What happens in a Statutory Review? Can you challenge a Statutory Review's findings? Can you influence a Statutory Review? When does HMRC offer a Statutory Review?
How to appeal an HMRC decision
Disagree with an HMRC decision? How do you appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?
Upper Tribunal sets out how to consider a late appeal
In William Martland v HMRC [2018] UKUT178 the Upper Tribunal refused permission for a late appeal against an excise duty assessment and penalties for wrongdoing totalling £34,201.
Appeals: Late
When can you make a late tax appeal? What conditions must be met?
Incompetent advice did not justify late appeal
In Mohammed Hafeez Katib v HMRC [2019] UKUT 189 the Upper Tribunal (UT) held that the incompetence of an adviser did not justify a late appeal; they overturned a decision of the First Tier Tribunal allowing the late appeal.
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