Appeal by Taxpayer Who Relied On Accountant Refused

Individual taxpayers often rely on advisors to handle their tax affairs, but it is wise to make sure they are doing everything that needs to be done. In a recent case, a man whose accountant failed to file tax returns on his behalf was refused permission to make a late appeal against the resulting assessments and penalties.

HM Revenue and Customs (HMRC) began conducting a compliance check in 2017 after discovering that the man ran a pub and received income from rental properties but had not been reporting any Income Tax. HMRC made a number of attempts to obtain the necessary information from the man and his accountant, including holding a meeting attended by them both. Finally, in October 2019, HMRC raised Income Tax assessments and penalties for several tax years.

The man found new accountants, and they notified HMRC in June and October 2022 that they intended to appeal the assessments and penalties. HMRC refused the appeal in February 2023, and the man appealed to the First-tier Tribunal (FTT).

He acknowledged that there was Income Tax to pay but contended that it was nowhere near as much as HMRC had assessed. He had put his faith in his previous accountant, and had only found out later that the accountant had not done what was necessary. He had had to isolate during the COVID-19 pandemic due to being in a high-risk group and looking after his wife.

HMRC pointed out that even if the correspondence from the accountants in June 2022 was taken as an appeal, the appeal was still more than two years and seven months out of time. They argued that the failure of a taxpayer's agent was not of itself a reasonable excuse, and observed that it had taken the man two years to find new accountants.

The FTT found that, although the man had relied on his previous accountant, this reliance was not total, as he would have been aware after the meeting with the accountant and HMRC that his tax affairs were not in a compliant state. He had appointed the new accountants in January 2021, and his inability to take any action due to COVID-19 restrictions evidently did not extend beyond then.

While noting that refusing permission to appeal would cause prejudice to the man, as there was a substantial amount of tax and interest at stake, the FTT also observed that granting permission would cause prejudice to HMRC, who had considered the case closed and would have to divert resources away from other enquiries.

Overall, the FTT did not consider that the man had established a good reason for the delay, and did not think it appropriate to grant permission to bring a late appeal.