Restaurant Company Refused Permission to Bring Late Appeals

Taxpayers should always ensure that they comply with deadlines for appealing against decisions made by HM Revenue and Customs (HMRC), even if discussions with HMRC continue after a decision is notified to the taxpayer. A recent case in which a restaurant company was refused permission to bring out-of-time appeals against Corporation Tax (CT) assessments and penalties illustrates the dangers of failing to do so.

HMRC had raised CT assessments totalling £481,399 against the company in respect of a number of tax years. Penalties of £313,547 had also been issued in respect of inaccuracies in the company's CT returns. The deadlines for appealing against the assessments and penalties were 26 August 2024 and 6 January 2025 respectively. However, appeals were not made to the First-tier Tribunal (FTT) until 7 October 2025.

The company accepted that the delay in bringing the appeals was serious and significant. However, it had believed it had been continuing to engage with HMRC in a process by which the assessments and penalties might be reviewed, revised or settled. It had not understood that the statutory process required either a request for a review by HMRC or an appeal to the FTT within the prescribed time.

The FTT accepted that correspondence from HMRC after the assessments were raised had contributed to the misunderstanding. In one case, HMRC had invited further statements and evidence if the company disagreed with HMRC's estimated cash sales and purchases and extractions of cash by directors. On the other hand, HMRC's correspondence had stated more than once that the company could request a review or appeal to the FTT. While the delay had been caused by a genuine misunderstanding, compounded by confusing correspondence from HMRC, the FTT did not consider that that amounted to a good reason.

The FTT accepted that the prejudice HMRC would suffer if permission to appeal were granted was reduced by the particular facts of the case. It was not a case where HMRC had heard nothing from the taxpayer and had reasonably proceeded on the basis that the matter had been brought to an end. The prejudice to the company if permission were refused would be very substantial. The amounts at stake were large, and the company was a family-run restaurant that had operated for many years. It might be wound up if permission were refused, with consequences not only for its shareholders but also for its employees.

The FTT observed that there were powerful factors on both sides but concluded that, in all the circumstances, the balance came down against granting permission. It reached that conclusion with some regret because of the serious consequences for the company and because HMRC's correspondence had contributed to the confusion. However, the delays were lengthy, the statutory routes had been clearly explained, and no good reason had been established for the failure to take the necessary steps in time.