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UK: Executors permitted to appeal 'inordinately large' tax assessment despite time bar

Thursday, 9 August, 2018

The family of businessman Mark Collins have been granted leave to appeal HMRC's assessment of his estate, even though they are nearly four years out of time to do so.

Collins was a buy-to-let property investor on a significant scale, owning and managing about 50 properties. In March 2013, he received notice that an HMRC officer, Michael Judson, had opened a Code of Practice 9 enquiry into his tax affairs. Collins indicated his willingness to cooperate, but died suddenly in August 2013.

The problem for Collins' family – in particular his widow Maria and his eldest son Laurie – was that he had managed the whole business himself without involving anybody else. His wife and son had no idea either what the business comprised or how they could find out about it. He did not leave a will, and they could not access his business computer records for some time. They could not even find out how many properties he owned (the figure of 50 cited above is an estimate), or where his bank accounts were held.

Laurie Collins took on the job of sorting out the estate, getting a grant of representation and dealing with Judson at HMRC. In the first year, he also had to deal with a legal claim alleging a debt against his father's estate, which he ultimately defeated. Further, HMRC almost immediately issued the personal representatives with a tax assessment of GBP326,000 on an estate whose net value was estimated as only GBP714,480.

Considerable correspondence followed with HMRC, who ultimately sought a county court judgment against the estate in the amount of the assessment plus heavy interest charges. Laurie Collins engaged solicitors to fight this application in June 2017, and when it came to court in September 2017, the judge noticed that Collins had never actually appealed against the assessments. By then he was time-barred from appealing, but together with his solicitors he submitted a late appeal. HMRC, which had by now won a GBP444,475 court judgment against the estate, rejected it. Collins took the matter to the First-tier Tax Tribunal, asking for leave to file a late appeal.

Case law on such late appeals had been in a confused state for some time, but it so happened that the Upper Tax Tribunal had clarified it in the recent case of William Martland v HMRC (2018 UKUT 178). The First-tier Tax Tribunal was able to use the criteria set out in this judgment to allow the application by Laurie Collins and his mother.

It ruled that Collins should have drafted a protective letter of appeal and sent it to HMRC while still in time to lodge the appeal, which would not have cost much and would have protected him against time-barring. However, the tribunal also decided that Collins has grounds to challenge the assessments. Moreover, the financial implications to the estate of a judgment debt of about GBP444,000 is very significant when compared to the amounts of the assessments of GBP326,000 – especially as HMRC had not explained the calculation of the 'inordinately large' interest charges to the tribunal's satisfaction.

'In our view the balance of prejudice weighs very heavily in favour of the appellant and...outweighs the seriousness and significance of the delay in making the appeal and the lack of explanation as to why the appeal was made so late', commented the tribunal members Popplewell and Bird. 'Accordingly, we grant the appellants' application' (Personal representative of Mark Collins v HMRC, 2018 UKFTT 395 TC).