John Milburn v The Commissioners for HMRC

Introduction

1. The form of the hearing was V (video) by MS Teams. Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.

2. We were provided with the following documents ahead of the hearing: (1) a hearing bundle containing both documents and authorities (336 pages); and (2) a further generic authorities bundle in relation to the High Income Child Benefit Charge (“HICBC”) (878 pages). Outline of the appeal

3. The Appellant is appealing against three discovery assessments made under section 29(1) of the Taxes Management Act 1970. The assessments were all made on 10 January 2020 and were made in respect of the following tax years and amounts: Tax year Amount of tax assessed 2015-16 £182 2016-17 £965 2017-18 £1,788 Total £2,935

4. The subject matter of the three assessments is the HICBC which is a means of clawing back through the income tax system some or all of a family unit’s Child Benefit when an adult within the family unit (usually a parent) has income in a tax year over £50,000.

5. Although the Appellant’s regular salary is below £50,000, bonuses paid to him in the years in question took his income above that threshold and brought him within the scope of the charge.

6. It is not in dispute that the Appellant’s income was such that it exposed him to the HICBC, nor that the assessments were correctly calculated.

7. Furthermore, we explained to the Appellant that we have no power to consider the late interest charges that HMRC say are due on the tax. In summary, if tax is paid late, it automatically follows that interest (calculated in accordance with the statute) is payable. In extreme circumstances, it can be possible for HMRC to waive the interest charge. We cannot comment on the likelihood that the Appellant will succeed in any application. However, we explained to the Appellant that, if we dismiss his appeal in any respect and he is therefore found to owe some or all of the tax charged by HMRC, he might wish to consider the guidance given by the Low Incomes Tax Reform Group, following the relevant link given on their website. ( https://www.litrg.org.uk/tax-nic/tax-checks-and-disputes/tax-penalties-and-interest#4 )

8. For the reasons set out below, we would ordinarily have dismissed the appeal and upheld the assessments. However, we consider this to be a case where HMRC should consider whether they wish to exercise their managerial discretion and waive the tax assessed (and, accordingly, the associated interest). The grounds of appeal

9. In his notice of appeal to this Tribunal, the Appellant makes the following observations: (1) that he was found not to be at fault (which we infer was reflected by the withdrawal of any threat of penalties); (2) that he complied with HMRC’s request for information covering four or five tax years; (3) that he asked to appeal against the assessments, he was given an address to write to and this did appear on the portal for a short while; (4) after following this up, he was asked to repeat the process online but his appeal was initially rejected as being late; (5) he had explained that he had previously appealed, had evidence thereof but this was still rejected; (6) his appeal was then declined but he was then told that HMRC were appealing those decisions in Court; (7) that he then held back and there have since been other cases where taxpayers have been told that they do not need to pay the HICBC.

10. Given that there is no dispute about the amount of the HICBC assessed, we can look only at whether or not the assessments are procedurally valid. In this case, this turns on whether or not the conditions in section 29(1) are met.

11. Furthermore, it was not doubted (and, indeed, the evidence clearly demonstrated – see ¶‎39 below ) that an officer of HMRC had made a relevant discovery in December 2019 or January 2020 prior to the making of the assessments under appeal. Thus, the only issue before us was whether the rest of section 29(1) is satisfied in the circumstances of this case. Section 29(1)

12. At the heart of this case is the fact that there are two competing versions of section 29(1). The version in place until the enactment of the Finance Act 2022 read as follows: If an officer of the Board or the Board discover, as regards any person (the taxpayer) and a year of assessment— (a) that any income which ought to have been assessed to income tax, or chargeable gains which ought to have been assessed to capital gains tax, have not been assessed, or (b) that an assessment to tax is or has become insufficient, or (c) that any relief which has been given is or has become excessive, the officer or, as the case may be, the Board may, subject to subsections (2) and (3) below, make an assessment in the amount, or the further amount, which ought in his or their opinion to be charged in order to make good to the Crown the loss of tax.

13. That was the version of section 29(1) that stood when the assessments under appeal in this case were made.

14. However, it was confirmed by the Court of Appeal in HMRC v Wilkes [2022] EWCA Civ 1612 (“ Wilkes ”) that the wording of section 29(1)(a) did not permit HMRC to assess for the HICBC because (being a standalone charge) it could not be said that there was any income that had failed to have been assessed. In the present case, the other two routes to an assessment under section 29(1) (i.e. paragraphs (b) and (c)) are not relevant. Therefore, if this case is governed by the pre-2022 wording then, as in Wilkes , the assessments must fail.

15. Following the enactment of the Finance Act 2022, however, section 29(1)(a) was amended so that section 29(1) now reads as follows: If an officer of the Board or the Board discover, as regards any person (the taxpayer) and a year of assessment— (a) that an amount of income tax or capital gains tax ought to have been assessed but has not been assessed, (b) that an assessment to tax is or has become insufficient, or (c) that any relief which has been given is or has become excessive, the officer or, as the case may be, the Board may, subject to subsections (2) and (3) below, make an assessment in the amount, or the further amount, which ought in his or their opinion to be charged in order to make good to the Crown the loss of tax.

16. It will be seen that the revised wording of section 29(1)(a) now catches situations such as the present where an individual is liable to pay additional tax, albeit that it is not actually tax on income. Accordingly, if the post-2022 provisions are applicable, then the Appellant will have greater difficulty in challenging the assessments made. It will thus be seen that the legislation has evolved since the time of Lord Macnaghten who, famously, observed: “Income tax, if I may be pardoned for saying so, is a tax on income. It is not meant to be a tax on anything else.” ( London County Council v Attorney General [1901] AC 26 at 35)

17. The Appellant can perhaps be forgiven for thinking that Parliament would not, in 2022, enact legislation that changes the tax he is required to pay in relation to the tax years from 2015-16 to 2017-18. The Appellant might be further forgiven for thinking that Parliament would not enact legislation in 2022 that could retroactively validate assessments made in 2020 for those earlier years. However, as much as one might forgive the Appellant for thinking such things, Parliament has chosen to take such steps. Our role is not to express any views on whether or not Parliament was right to do so: Parliament can legislate as it wishes. Instead, our role is to interpret the words laid down by Parliament and apply them to the facts of the case before us.

18. As we have said, Parliament decided to revise section 29 in the Finance Act 2022. Section 97 of that Act explains to what extent the revision of section 29 has retroactive effect. So far as is relevant, it reads as follows: (3) The amendments made by this section— (a) have effect in relation to the tax year 2021-22 and subsequent tax years, and (b) also have effect in relation to the tax year 2020-21 and earlier tax years but only if the discovery assessment is a relevant protected assessment (see subsections (4) to (6) ). (4) A discovery assessment is a relevant protected assessment if it is in respect of an amount of tax chargeable under— (a) Chapter 8 of Part 10 of ITEPA 2003 (high income child benefit charge), (b) section 424 of ITA 2007 (gift aid: charge to tax), (c) section 205 or 206 of FA 2004 (pensions) but only where the section is applied by Schedule 34 to that Act, or (d) section 208, 209, 214, 227 or 244A of FA 2004 (pensions), including where the section is applied by that Schedule. (5) But a discovery assessment is not a relevant protected assessment if it is subject to an appeal notice of which was given to HMRC on or before 30 June 2021 where— (a) an issue in the appeal is that the assessment is invalid as a result of its not relating to the discovery of income which ought to have been assessed to income tax but which had not been so assessed, and (b) the issue was raised on or before 30 June 2021 (whether by the appellant or in a decision given by the tribunal). (6) In addition, a discovery assessment is not a relevant protected assessment if— (a) it is subject to an appeal notice of which was given to HMRC on or before 30 June 2021, (b) the appeal is subject to a temporary pause which occurred before 27 October 2021, and (c) it is reasonable to conclude that the temporary pausing of the appeal occurred (wholly or partly) on the basis that an issue of a kind mentioned in subsection (5)(a) is, or might be, relevant to the determination of the appeal. (7) For the purposes of this section the cases where notice of an appeal was given to HMRC on or before 30 June 2021 include a case where— (a) notice of an appeal is given after that date as a result of section 49 of TMA 1970, but (b) a request in writing was made to HMRC on or before that date seeking HMRC’s agreement to the notice being given after the relevant time limit (within the meaning of that section). (8) For the purposes of this section an appeal is subject to a temporary pause which occurred before 27 October 2021 if— (a) the appeal has been stayed by the tribunal before that date, (b) the parties to the appeal have agreed before that date to stay the appeal, or (c) HMRC have notified the appellant (“ A ”) before that date that they are suspending work on the appeal pending the determination of another appeal the details of which have been notified to A. (9) In this section— “ discovery assessment ” means an assessment under section 29(1)(a) of TMA 1970, and “ HMRC ” means Her Majesty’s Revenue and Customs, and “ notified ” means notified in writing.

19. As a result, section 97(3)(a) provides that the changes were, in the main, prospective (inasmuch as assessments under section 29(1) would not generally be expected to be made for the 2021-22 tax year much earlier than the enactment of the new wording). However, section 97(3)(b) makes clear that there is undoubtedly an element of retroaction for assessments described as “protected assessments”. As will be seen, the “protection” is the cover given by Parliament to validate previous assessments made by HMRC that were, at the time they were originally made, invalid.

20. Subsection (4) tells us what a protected assessment is. In summary, it is an assessment that relates to one of the various standalone tax charges (such as HICBC) which could not be assessed under the previous version of section 29(1)(a).

21. Thus, at this stage in the analysis, the Appellant’s assessments are “protected” (meaning that the tax will be payable).

22. However, section 97(5) and (6) provide that there was some limitation to the retroaction (i.e. there were situations where Parliament decided that a previously invalid assessment would continue to be invalid, notwithstanding the retroactive changes to section 29). Our role in this appeal is to decide whether the Appellant falls within the terms of either of the exceptions provided by those two subsections.

23. Subsection (5) provides for the first exception. It deals with cases where the relevant discovery assessment was the subject of an appeal made on or before 30 June 2021. However, in such cases, it is also necessary that, on or before that date, the potential invalidity of the assessment (because of the ineffective wording of the previous version of section 29(1)(a)) was raised as an issue. The reason that that date was chosen was that that was the date on which the Upper Tribunal issued its decision in the Wilkes case.

24. The second exception is provided for by subsection (6). Again, it is predicated on there being an appeal made on or before 30 June 2021. However, unlike the first exception, this does not necessarily require the taxpayer to have had the expertise to have been able to predict the outcome of the Wilkes case. Instead, the exception requires there to have been a temporary pause “occurring” (for which we infer that this means “commencing”) before 27 October 2021. Furthermore, the exception requires that temporary pause to be (at least in part) because the ineffective wording of the previous version of section 29(1)(a) “is or might be” relevant to the determination of the appeal. That was the date on which the provisions that became section 97 were first announced.

25. The meaning of a temporary pause occurring before 27 October 2021 is restricted by subsection (8) to one of three scenarios: (1) there has been an actual stay by the Tribunal before 27 October 2021; (2) there has been an actual agreement before that date by the taxpayer and HMRC to stay the appeal; or (3) before that date, HMRC notified the appellant that they are suspending work on the appeal pending the determination of another appeal the details of which have been notified to the appellant.

26. We note that subsection (8) could be interpreted as providing an additional (as opposed to the only) scenario in which section 97(6)(b) is satisfied. Indeed, the use of the word “if” in that sense is clearly what Parliament had in mind in the Inheritance Tax Act 1984, section 64(1A). However, we note that “if” is used in the sense of “only if” in, for example, section 29(6) of the Taxes Management Act 1970. Whilst it would undoubtedly be helpful if Parliamentary drafters could use “if” and “only if” in a consistent fashion, we are of the view that section 97(6)(b) is using “if” in the “only if” sense. The heart of the dispute between the parties

27. HMRC’s case was primarily based on the fact that the earliest record that they had of the Appellant challenging the assessments in writing was in 2022. Accordingly, on HMRC’s case, there was no possibility of the Appellant falling within any of the exceptions provided for by section 97(5) and (6), meaning that his assessments would be “protected” by the retroactive legislation.

28. Whilst most of the facts of the case were undisputed, the Appellant was adamant that he had sent both an appeal and a letter of complaint to an HMRC office in Newcastle on 15 January 2020, the address having been given to him in one of the telephone conversations he had had on that day. We resolve that factual dispute below. We then proceed to consider whether that means that the assessments were “protected” or not. The facts of this case

29. We heard evidence from the Appellant and from two officers: (1) Mr Snelgrove, who was the officer who had the initial interaction with the Appellant and who was said to have made the discovery, and (2) Mr Thomas, who was able to give us information about HMRC’s procedures for ensuring that HICBC was collected from individuals from whom it might be due.

30. Each of the three witnesses was wholly credible. From their oral evidence and the documentary evidence before us, we make the following findings of fact.

31. For the relevant years, the Appellant was a taxpayer whose income was subject to PAYE. He had not been sent a notice requiring him to submit Self Assessment tax returns for any of those years.

32. His basic salary is below £50,000. However, in the years in question, he received bonuses which took his overall income above that threshold.

33. The Appellant is married with two children (the elder was born in 2007), in respect of whom the Appellant’s wife was in receipt of Child Benefit. The Appellant’s wife was not earning in the years in question. Accordingly, in the relevant years, the Appellant was the higher earner in the family unit and, given that his income exceeded £50,000, that gave rise to his liability for the HICBC (as itemised at ¶‎5 above ).

34. Until late 2019, the Appellant was unaware that his wife had claimed and received Child Benefit. The Child Benefit was paid into the Appellant’s wife’s own bank account.

35. Child Benefit is administered and paid by a unit within HMRC. On HMRC’s records, the Appellant’s wife is recorded as living at the same address as the Appellant.

36. Although HMRC would have received regular notifications from the Appellant’s employer of the taxable income he was receiving (through both Real Time Information and annual PAYE reporting), there was no regular exercise undertaken to cross-check the addresses of Child Benefit recipients with individuals with income over £50,000. As Mr Thomas explained, HMRC’s records were contained on different systems, meaning that there was no automatic identification of cases where HICBC might be payable. Furthermore, it was not something that HMRC officers could routinely check for such matters. Instead, it required an exercise to be carried out in which the data from the different parts of HMRC’s systems could be merged and checked.

37. Nevertheless, such an exercise was undertaken in late 2019. As Mr Thomas explained, HMRC had become aware of a lack of awareness of the reach of the HICBC amongst affected taxpayers and this led to his office obtaining the relevant information from the different sections within HMRC to allow potential HICBC cases to be identified.

38. In late November or December 2019 as a part of this exercise, HMRC wrote to the Appellant, effectively asking him to check whether he was liable to the HICBC. This was acknowledged by the Appellant on 18 December 2019, when he spoke to one officer who advised that the Appellant obtain his P60s and P11Ds for the year in question and then to call back with accurate records of his employment income. Later that day, the Appellant telephoned HMRC a second time and spoke with Mr Snelgrove. At the hearing before us, the Appellant praised Mr Snelgrove for the way that Mr Snelgrove handled the call and the way that he helped the Appellant identify the information needed to complete his enquiries.

39. As a result of that conversation, Mr Snelgrove acquired information to learn that the Appellant was liable for the HICBC (as outlined above) and also a charge of £35 in relation to the 2014-15 tax year. Mr Snelgrove’s assessment of what the Appellant had said led Mr Snelgrove to conclude that there should be no penalty in relation to the Appellant’s failure to notify of his exposure to the HICBC.

40. Following internal checks, the assessments under appeal were made on 10 January 2020. As the Appellant had a reasonable excuse for not notifying HMRC of his chargeability to the HICBC under section 7 of the Taxes Management Act 1970, HMRC were out of time to assess the £35 for the 2014-15 tax year. (Mr Thomas confirmed that that amount was not pursued because of time limits, rather than because it was “ de minimis ” (i.e. too low an amount to justify assessing).)

41. Upon receipt of the assessments on 15 January 2020, the Appellant telephoned HMRC again. He was less happy with his interaction on this occasion than he had been following his earlier call with Mr Snelgrove. Because of his unhappiness with the handling of his call, he telephoned a further time to complain. HMRC’s records of the second call of 15 January 2020 record that he wished both to complain about how he had been treated in the earlier call as well as to “appeal against HICBC”. The record of the call also shows that the Appellant was given information on how to do so. We formally find that it was in the course of that second call of the day that the Appellant was given the details of an address in Newcastle to which he should write.

42. It was the Appellant’s case (and we accept without hesitation) that he wrote two letters to the Newcastle address he had been provided with. One opened with the words “I would like to appeal”, the other was headed “Complaint”. The complaint concerned the nature of the 15 January 2020 conversation whereby the Appellant felt he was being financially compromised by what he saw as HMRC’s attempts to recover the HICBC from him. The “appeal” letter was (in summary) an objection to the HICBC being assessed on him for several years at once and to the interest charges which came on top. In reaching this finding, we make the following observations: (1) The Appellant’s assertions about those two letters were not challenged in cross-examination. (2) In any event, consistent with our assessment of the Appellant’s credibility, we find that the letters we have been shown, both dated “15/1/2020”, were contemporaneous. (3) Furthermore, we accept that the Appellant used an address that he would have had great difficulty in finding on the internet and that it could have been provided only by the second HMRC officer to whom he spoke on 15 January 2020. (4) We firmly reject Ms Halfpenny’s suggestion (in her closing submissions) that the Appellant might have written them at a later date so as to bring himself within the scope of the Wilkes case. We note that, had that been the Appellant’s aim, he would have spectacularly failed (see our reasoning at ¶‎48 below ).

43. We note that section 31A(1)(c) and (4)(b) of the Taxes Management Act 1970 require any appeal to be made to the officer who made the assessments, whereas the letters were sent to a different HMRC office. However, we note what Ms Halfpenny said, being that had the appeal letter been processed properly, it would have been forwarded internally to the correct team. Accordingly, we find that the appeal was not invalidated for failure to comply with section 31A.

44. We also accept the Appellant’s statements to us that he posted the letters at his local post office and that, at the time, he was unlikely to have used any form of recorded delivery. Given that the letters were properly addressed and posted, we proceed on the basis that they would have been received by HMRC, subject to any evidence to the contrary. We had no direct evidence to the contrary, besides the assertions that there was no record of the letters on HMRC’s files for the Appellant. However, we take judicial notice of the fact that not every letter sent to HMRC is properly processed. Furthermore, it was only two months later that HMRC (as did the rest of the country) encountered lockdown and increased homeworking as a part of the Covid-19 pandemic, which led to further chaos in respect of some of HMRC’s paperwork. On balance, therefore, we conclude that the letters were received by HMRC but misfiled and/or lost.

45. Beyond a few occasional telephone calls, nothing further happened on the case until April 2022. It appears that the Appellant renewed his complaint and that this was prompted by collection action from HMRC. It was in the course of his April 2022 complaint that the Appellant first referred to the Wilkes case which he had learnt of from internet research he had since undertaken (finding an article in the Guardian dated 10 July 2021).

46. The response to that complaint led to the Appellant escalating the matter to the next level of HMRC’s complaints process on 11 July 2022.

47. HMRC’s response to that (dated 26 July 2022) stated that they were treating the April 2022 complaint as the Appellant’s first attempt to appeal against the assessments. The Appellant was then invited to provide HMRC with the reasons why the Appellant’s appeal was (as HMRC saw it) late.

48. The Appellant responded by calling HMRC on 3 August 2022 referring to the Newcastle address he had been provided with on 15 January 2020 and to which he wrote. As advised on that call, the Appellant also e-mailed the information (and a copy of the 2020 appeal) to HMRC on the same day.

49. On 23 August 2022, HMRC accepted the appeal. As a result, the Tribunal has not had to consider the question of whether or not the Appellant’s appeals should be admitted late. The case was then subject to an internal review.

50. There was then a considerable delay (over a year) before the appeal was notified to the Tribunal. HMRC have made it clear that they do not oppose the admission of the late appeal. In the circumstances of the case, we formally admit the appeal under section 49G(3) of the Taxes Management Act 1970. Discussion

51. In light of our finding that the appeal was in fact made on 15 January 2020, much of Ms Halfpenny’s case fell away.

52. However, most of the Appellant’s own grounds are not able to assist him. Taking them in turn: (1) The fact that he was found not to be “at fault” meant that HMRC would not charge him penalties and would not pursue the £35 in relation to the 2014-15 tax year. A discovery assessment is the method by which HMRC seek to collect tax that should have been paid at an earlier date but which (for whatever reason) was not paid at the time. There is no question of fault being relevant. Tax does not cease to be payable simply because a taxpayer has acted impeccably. A taxpayer’s conduct might be relevant in looking at how far back HMRC can look to collect old tax liabilities. However, a taxpayer who is not at fault can generally be asked for tax going back four years (Taxes Management Act 1970, section 34). In January 2020, HMRC sought tax from the Appellant going back to the 2015-16 tax year, i.e. they did not go back more than four tax years. (2) The fact that he complied with HMRC’s request for information covering four or five tax years is not a reason to be forgiven the tax that was payable in those years. The fact that the Appellant was co-operative in responding to HMRC’s questions does not affect how far back HMRC can go. However, it no doubt helped HMRC reach the conclusion that he was not “at fault” (and, thus, helped the Appellant avoid the risk of penalties and the additional £35 charge for the earlier tax year). Furthermore, it also reinforced our impression of the Appellant as a responsible citizen which led to us having no doubt that he had made his appeal back in January 2020. (3) We will return below to the fact that he asked to appeal against the assessments back in January 2020. (4) The fact that the Appellant then repeated the exercise later becomes irrelevant given our finding that he actually appealed in January 2020. (5) Similarly, it becomes irrelevant that he then had difficulties persuading HMRC to admit what they considered to be a late appeal. (6) The fact that other cases were being appealed (in particular, the Wilkes case) does not directly help the Appellant because Parliament decided that the only cases that could get the same treatment as Mr Wilkes were those that met the conditions in section 97(5) or (6) to which we turn next. (7) that he then held back and there have since been other cases where taxpayers have been told that they do not need to pay the HICBC again does not impact upon our consideration of whether the Appellant met the conditions in section 97(5) or (6).

53. As we have found that the appeal was made on or around 15 January 2020, this opens up the possibility that the Appellant can come within one of the exceptions created by section 97(5) and (6).

54. In particular, when the Appellant learnt of the success enjoyed by Mr Wilkes, he unsurprisingly wished to obtain a similar outcome. It is fair to say that this became an issue in the appeal and, thus, satisfies the condition in section 97(5)(a). However, section 97(5)(b) is clear in that the issue had to have been raised on or before 30 June 2021. Without the benefit of expert tax knowledge or time travel (neither of which was claimed before us and both which we view to have been extremely unlikely), the Appellant cannot bring himself within the terms of section 97(5).

55. To Ms Halfpenny’s considerable credit, her Statement of Case referred us to this Tribunal’s decision in the case of Fera v HMRC [2023] UKFTT 961 (TC), the facts of which are similar to the present and where the taxpayer’s appeal was allowed. Ms Halfpenny submitted that it should not be followed because (contrary to the decision of the Tribunal in Fera ) the interpretation of Mr Fera’s letter did not properly satisfy the condition in section 97(5)(b).

56. We are grateful to Ms Halfpenny for bringing to our attention a decision that is unhelpful to HMRC’s case; such conduct complies with the overriding objective in the Tribunal’s rules of procedure.

57. We are minded to agree with Ms Halfpenny that the Tribunal read section 97(5)(b) too broadly although our role is to interpret what the present Appellant wrote in his appeal rather than what Mr Fera might have written. We find it impossible to suggest that either of the Appellant’s letters of 15 January 2020 satisfies the statutory test. To the extent that this requires departing from the decision in Fera , we respectfully do so (noting that we will not be the first constitution of this Tribunal to take that approach).

58. Section 97(6) might have given the Appellant slightly more hope. He satisfies paragraph (a) given our finding that he made his appeal in January 2020. It might even be possible to conclude that the fact that HMRC did not actively pursue the Appellant for what they considered to be an unappealed assessment for over two years was at least partly on the basis that a Wilkes -type argument might be relevant to the determination of the appeal (as required by paragraph (c)). However, for the reasons we now explain, we consider it to be a stretch of language to say that the condition in paragraph (b) is satisfied.

59. At face value, paragraph (b) looks as if it is in fact satisfied. It merely requires the appeal to have been subject to a temporary pause which occurred before 27 October 2021. However, this is a case where we cannot look only at the words of section 97(6)(b) in isolation. The phrase in that paragraph is actually defined in subsection (8). (See ¶‎26 above .)

60. Accordingly, the Appellant would need to show that one of the following three situations is satisfied: (1) the appeal was stayed by the Tribunal before 27 October 2021, (2) the parties to the appeal agreed before that date to stay the appeal, or (3) HMRC notified the Appellant before that date that they are suspending work on the appeal pending the determination of another appeal.

61. However, as this case was not before the Tribunal until long after 27 October 2021 and HMRC were not even aware of the appeal by that date (and so could not have agreed anything with the Appellant at the time, nor could they have notified the Appellant that they were suspending work on his case), we have to conclude that the Appellant does not come within the terms of section 97(6) either.

62. Furthermore, the slight relaxation given by the deeming provision in section 97(7) is insufficient to come to the Appellant’s benefit. That is because it is predicated on there being a notice of appeal after 30 June 2021 (section 97(7)(a)), whereas our conclusion is that the appeal was given before that date.

63. For these reasons, we have to conclude that the assessments are “protected” by the Finance Act 2022.

64. The outcome might not appear just and we fully understand that the Appellant is likely to be disappointed by this conclusion. However, we repeat what we say at ¶‎17 above . In addition, the Appellant should note what we say in the next section. Invitation to HMRC to exercise their managerial discretion

65. During the hearing, Ms Halfpenny made the candid observation that, had HMRC properly processed the 15 January 2020 appeal, the Appellant’s case would have been placed on hold, pending the outcome of the Wilkes litigation. In other words, the Appellant would then have found himself within the scope of section 97(6) (when read with section 97(8)(c)). That would have meant that, following the conclusion of the Wilkes litigation, either HMRC or this Tribunal would have reached the conclusion that the Appellant’s assessments were not “protected” and the Appellant’s appeal would have been allowed.

66. The only reason therefore why the Appellant is not in that position is because (as we have found) the Appellant’s letter of appeal dated 15 January 2020 was not properly processed by HMRC.

67. Furthermore, we consider that this is a case that might also come within the terms of HMRC’s Extra-statutory concession (ESC) A19 which reads as follows (with punctuation and bullets added for clarity): The Low Incomes Tax Reform Group’s discussion of ESC A19 is available at https://www.litrg.org.uk/tax-nic/how-tax-collected/pay-you-earn-paye/paye-hmrc-errors#1. Arrears of income tax and capital gains tax may be given up if they result from the failure of HMRC to make proper and timely use of information supplied by: • A taxpayer about his or her own income, gains or personal circumstances, Or • An employer, if the information affects a taxpayer's coding, Or • The Department for Work and Pensions (DWP), about a taxpayer's state retirement, disability or widow's pension. Tax will normally be given up only if the taxpayer: • Could reasonably have believed that his or her tax affairs were in order, And • [Either] ◦ Was notified of the arrears more than 12 months after the end of the tax year in which HMRC received the information indicating that more tax was due, Or ◦ Was notified of an over-repayment after the end of the tax year following the year in which the repayment was made In exceptional circumstances arrears of tax notified 12 months or less after the end of the relevant tax year may be given up if HMRC: • Failed more than once to make proper use of the facts they had been given about one source of income, And • Allowed the arrears to build up over two whole tax years in succession by failing to make proper and timely use of information they had been given.

68. For these two reasons, we consider that HMRC should be given the opportunity to exercise their managerial discretion and, despite our conclusion at ¶ ‎47 above, consider cancelling the assessments. To allow that process to take place, we direct as follows: (1) No later than 28 days after the release of this decision, HMRC to notify the Appellant and this Tribunal whether or not they have chosen to cancel the assessments. (2) At the same time, HMRC propose to this Tribunal (copied to the Appellant) further case management directions to provide for the final disposal of this appeal.

69. Our reasoning for allowing the case to return to the Tribunal is the recognition that, whilst the traditional approach has been to say that the Tribunal does not have jurisdiction over HMRC’s exercise of discretionary powers, that approach has been questioned in a number of cases over the past 20 years. We consider that it would be helpful (should the need arise) for the Tribunal to retain ownership of the case to at least give the parties the opportunity to consider such arguments within the framework of this existing appeal. Of course, depending on how HMRC choose to proceed, that might not prove necessary, as we might instead be asked simply to allow the appeals. Right to apply for permission to appeal

70. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 12 February 2026