Upper Tribunal grants taxpayers permission to bring late appeals

In Medpro Healthcare Ltd & Another v HMRC [2025] UKUT 255 (TCC), the Upper Tribunal (UT) allowed the taxpayers’ appeals, finding that the First-tier Tribunal (FTT) had failed to give adequate reasons and properly apply the Martland balancing exercise when refusing permission to bring late penalty appeals.

Background

 Medpro Healthcare Ltd (Medpro) and its director, Mr Kalvinder Ruprai, sought to bring late appeals to the FTT against VAT penalties and personal liability notices issued by HMRC. The penalties imposed were in excess of £1 million.

The first notice of appeal was filed 70 days late and the second and third notices were each 5 months and 17 days late. The delays were attributed to Mr Ruprai's serious ill-health and the failures of his professional adviser, who had overlooked the appeal deadlines.

Permission to bring the appeals out of time was sought from the FTT under section 83G(6), Value Added Tax Act 1994 (VATA 1994), which grants the FTT unfettered discretion to permit late appeals. The exercise of that discretion is guided by the decision in Martland v HMRC [2018] UKUT 178 (TCC), which established the following three-stage analysis.

1. establish the length of the delay;
2. identify the reasons for that delay; and
3. consider all the circumstances in the round,  balancing them while giving particular emphasis to the importance of efficient, proportionate litigation and the prejudice that would be caused to both parties by granting or refusing permission.

The FTT refused all three late-appeal applications. The FTT said that that it was unacceptable for the professional adviser to overlook the possibility of an appeal. This failure was treated as the failure of the taxpayers in accordance with the general rule in HMRC v Katib [2019] UKUT 189 (TCC).

Medpro and Mr Ruprai appealed to the UT.

UT's decision

By the casting vote of Mr Justice Marcus Smith, the appeals were allowed.

In allowing the appeals, the UT considered that the FTT's decision contained the following material errors of law:

• The FTT failed to correctly apply the Marland test because it made no reference to Stage 3  (Ground 1).
• The FTT relied on the general rule in Katib, that failures of an adviser are treated as failures of the taxpayer, but failed to consider whether any exceptional circumstances existed that justified departing from that rule (Ground 2).
• The FTT copied from the parties' skeleton arguments but it failed to demonstrate that it had considered the applicants' submissions or exercised its own independent judgement. This breached the duty of a court or tribunal to provide adequate reasons for its decision (Ground 3).
• The rules in Martland and Katib improperly constrain the FTT's discretion and are therefore  wrong in law and the FTT erred by applying those rules (Ground 4).

Comment

The most important feature of this decision is the significant attack on the correctness of the previous UT decisions in Martland and Katib.

The taxpayers argued that the discretion accorded to the FTT to allow late appeals was different to the discretion given to the court in the context of relief from sanctions and therefore the UT was wrong to adopt, wholesale, the test in Denton v TH White Ltd [2014] 1 WLR 3926.

The test in Denton specifies that two specific factors should be given particular weight when carrying out the balancing exercise: (1) the need for litigation to be conducted efficiently and at proportionate cost; and (2) the need to enforce compliance with rules, practice directions and orders. This reflects the wording of CPR3.9, but not the wording of section 83G(6), VATA 1994, which does not attach particular weight to any specific factors.

The UT was divided on this issue. Judge Cannan's view was that Parliament, in giving discretion to the FTT, anticipated and intended that the UT would provide binding guidance on the exercise of that discretion. However, Mr Justice Marcus Smith was of the view that CPR3.9 had been specifically amended to add weight to certain factors whereas section 83G(6), VATA 1994, had not, accordingly, the UT in Martland and Katib had unjustifiably fettered the discretion of the FTT. Mr Justice Marcus Smith had the casting vote and therefore the appeal was allowed on that ground.

The approach taken by the FTT and UT to late appeals has varied since the Medpro decision. In Tajinder Pawar v The Commissioners for HMRC [2025] UKUT 00309 (TCC), the UT held that the Medpro test should now be followed as it is the more recent decision.

However, in Lands Luo Ltd v HMRC [2025] UKFTT 1207 (TC), the FTT expressly preferred the Martland test. The FTT referred back to the Court of Appeal's decision in BPP Holdings Ltd v HMRC (BPP Holdings) [2016] EWCA Civ 121, which held that there was nothing in the wording of the overriding objective of the FTT rules that is inconsistent with the general legal policy in Denton, as reflected in the Martland test.

In both of these recent decisions it was held that applying either test would produce the same result.

We may not get clarity on this issue until there is a case where each test produces a different result – watch this space.

The decision can be viewed here.