A Complaint Response Is Not a Decision: Mountrail Company Holdings Ltd v HMRC

Mountrail Company Holdings Ltd (the “Appellant”) appealed to the First-tier Tribunal against HMRC’s alleged refusal of its claims for relief from the Annual Tax on Enveloped Dwellings (ATED) for 2013/14 to 2016/17, and against a number of penalties.

HMRC objected that the appeals were out of time. The hearing therefore concerned whether the appeals could proceed at all, a “simple summary” which, as the Tribunal observed, “belies the complexity of the factual and legal issues that arise in this case”.

On the central relief issue, HMRC’s argument that the appeal was late failed at an earlier stage. HMRC had never communicated a decision on the relief claims. The only document it could identify was a response from its complaints team. The Tribunal held that “the response to a complaint which sets out the narrative history of the matter cannot be treated as a decision on the validity of the claim”.

The Tribunal went further and highly criticised HMRC’s evidence and handling of the matter as "shambolic," ultimately allowing the appeals for eight late filing penalties and three late payment penalties that had been previously cancelled.

However, the judge refused permission for a late appeal regarding other 2014/15 penalties, citing a lack of good reason for the significant multi-year delay.

UK Property Accountants represented the Appellant before the Tribunal. Drawing on that experience, this note considers the facts that led to that conclusion, the arguments advanced and the Tribunal's reasoning. The penalty appeals are considered more briefly at the end. They illustrate both the practical importance of the decision and its limits.

The Appellant is a non-UK company, with a non-UK director, which owns a UK residential property within the scope of ATED. It filed ATED returns for 2013/14 to 2016/17 within the applicable filing deadlines, as HMRC’s complaints team later confirmed, although the tax was not paid on time. HMRC issued six late-payment penalties, three relating to 2013/14 and 2014/15 and three relating to 2015/16 and 2016/17.

In August 2018 HMRC demanded £93,027.41. On 15 August 2018 it then warned of winding-up proceedings in respect of £93,102.04, consisting principally of the 2014/15 ATED charge, interest and the three earlier late-payment penalties.

In August 2021 the company’s then agents submitted further ATED returns for 2013/14 to 2016/17, claiming relief from ATED for each year. HMRC treated those returns as late and issued eight late-filing penalties totalling £6,400.

The agents wrote to HMRC on 24 March 2022 appealing against the penalties. That letter was apparently not received until it was resent on 25 July 2022 with a complaint concerning HMRC’s delay and an ATED1 form requested by HMRC.

On 25 August 2022 HMRC referred the matter internally to its Wealthy and Mid-Sized Business Compliance (WMBC) department “for them to formally approve the change from liability to relief”. HMRC upheld the late-filing penalties on 21 September 2022.

On 28 September 2022 HMRC’s complaints team responded to the complaint. In recounting the history, it said that the WMBC referral “has been rejected” because the relief returns had been submitted out of time. It also stated that “[t]he letter is not a valid claim for overpayment relief”.

The document was, however, framed throughout as a complaint response. It directed the company towards tier 2 of HMRC’s complaints process if it remained dissatisfied. It did not identify any separate communication by WMBC notifying the Appellant of its decision.

Further correspondence followed. On 22 December 2022 HMRC wrote that “no further amendments are required in order to claim relief for 2013/14 – 2016/17 as this was covered by the relief returns submitted on 12 August 2021”.

In September 2023 the agents wrote asking to put the company’s case before a tribunal. On 10 November 2023 an HMRC officer, signing as “Review Officer”, replied in a letter headed “Appeal against penalties for late filing of ATED Returns”. The officer explained that the company had to appeal to the Tribunal itself and that, because the 30-day deadline had expired, it would need to apply for permission to appeal late.

The Appellant notified its appeal to the Tribunal on 12 February 2024. It sought repayment of £392,400; a figure derived from an HMRC schedule originally prepared in connection with the 2018 demand.

HMRC’s lateness objection to the relief claims depended on the proposition that HMRC had already refused those claims in 2022, so that the statutory appeal period had expired long before February 2024.

The Tribunal therefore had to confront a logically prior issue: had HMRC actually communicated a decision on the relief claims against which the Appellant could appeal?

HMRC’s Case

HMRC advanced two principal objections concerning the relief claims.

First, it argued that the Tribunal lacked jurisdiction because HMRC was entitled to rely on Case A in paragraph 30 of Schedule 33 to the Finance Act 2013. Case A applies where the amount of tax paid is excessive because of “a mistake in a claim” or “a mistake consisting of making, or failing to make, a claim”.

Secondly, HMRC argued that it had already refused the claims and that the period for appealing that refusal had expired.

When the Tribunal directed HMRC after the hearing to identify the relevant decision, HMRC referred to “a letter dated 22nd August 2022”. No such letter existed. The Tribunal understood HMRC to be referring to the complaint response dated 28 September 2022. HMRC accepted that this letter related to only one of the claims but maintained that the same reasoning applied to them all.

The Appellant’s Case

The Appellant submitted that the September 2022 complaint response was not a formal decision capable of starting the appeal period.

It emphasised that the letter was framed as part of HMRC’s complaints process rather than as an appealable decision. It did not identify itself as a statutory decision, explain a right of appeal to the Tribunal or state a statutory time limit for doing so.

That approach was said to be consistent with the observation of the Upper Tribunal in Martland v HMRC [2018] UKUT 178 (TCC) that HMRC’s appealable decisions generally contain a reasonably clear explanation of the relevant appeal rights.

The Appellant also relied on HMRC’s later correspondence. In particular, the letter of 22 December 2022 said that no further amendments were required to claim relief because the relief returns already submitted covered the relevant years. The Appellant argued that HMRC’s correspondence was therefore ambiguous and contradictory.

Reliance was also placed on Octagon Green Solutions Ltd v HMRC [2023] UKUT 268 (TCC), where the Upper Tribunal took into account the extent to which prejudice relied upon by HMRC was “somewhat self-inflicted” because HMRC’s own communications had been ambiguous.

The Appellant’s primary submission was that time began to run, at the earliest, on 10 November 2023. Alternatively, it asked for permission to appeal late, relying on HMRC’s confusing correspondence, continuing engagement with HMRC, and disruption caused by the death of the company’s director and the illness and subsequent death of an adviser.

The Tribunal regarded the character of the 28 September 2022 letter as clear. It was a complaint response and referred expressly to HMRC’s two-tier complaints procedure.

The letter showed that the question whether relief could be granted had been referred to WMBC. What was missing was evidence that WMBC’s decision had itself been communicated to the taxpayer.

The Tribunal stated:

It also observed that HMRC’s inability, even after being given a further opportunity, to identify anything beyond the complaint letter as an example of its decision suggested that clear correspondence was not available.

The Tribunal therefore concluded:

The point is narrower than the headline suggests. The Tribunal did not hold that a complaint letter can never communicate an appealable decision; it held that a complaint response which merely narrates the internal history cannot be treated as one. Its conclusion depended on the nature of this particular correspondence. The September letter narrated an internal history, including WMBC’s reported rejection of the referral, but there was no evidence that HMRC had communicated WMBC’s substantive decision to the Appellant.

Late-Filing Penalties

The late-filing penalties exposed a separate problem.

HMRC had imposed eight penalties on the further returns submitted in 2021. However, the original ATED returns had been filed on time. HMRC’s own complaints correspondence confirmed that position.

The Tribunal held that the fact that those original returns were now said by the taxpayer to have been incorrect did not invalidate their original filing. The later penalty notices had therefore been issued on an incorrect basis.

Although the hearing had principally concerned whether late appeals should be admitted, the Tribunal decided that it was proportionate and in the interests of justice, consistently with rule 2 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, to determine the substantive penalty issue without further delay or cost.

It allowed the appeals against all eight late-filing penalties, describing HMRC’s presentation of the issue as “nothing short of shambolic.”

Late-Payment Penalties

The late-payment penalties show the limits of the decision.

HMRC disclosed after the hearing that the three later penalties, relating to 2015/16 and 2016/17, had been cancelled in 2017. HMRC invited the Tribunal to allow the appeals against them. The Tribunal did so and directed HMRC to ensure that appropriate credit was given if amounts relating to those penalties had nevertheless been paid.

The three earlier penalties were different.

The Tribunal found, on the balance of probabilities, that the relevant penalty notices had been received by the Appellant in 2014. They were therefore decisions against which the company could have appealed at the time.

Applying the principles in Martland, the Tribunal regarded a delay measured in years as plainly serious and significant. The explanations relied upon by the Appellant related principally to much later events and did not explain the earlier period of delay.

Permission to appeal those penalties out of time was therefore refused.

HMRC’s confused correspondence in 2022 and 2023 could not undo the consequences of appealable penalty decisions that the Tribunal found had been communicated years earlier.

Mountrail is principally a case about communication.

An internal HMRC conclusion is not, without more, the same thing as communicating a decision to the taxpayer. On the facts of this case, a complaint letter reporting that an internal referral had been rejected did not establish that HMRC had issued the Appellant with the substantive decision required to found an appeal.

That distinction mattered because the late-appeal jurisdiction assumes that there is an appealable decision and an appeal period capable of expiring. Here, in relation to the relief claims, the Tribunal found that there was no communicated decision against which the Appellant could have appealed.

The penalty decisions provide a useful contrast. Where an actual penalty decision had been communicated and the appeal period had expired years earlier, later confusion in HMRC’s correspondence did not prevent the Tribunal from applying the ordinary Martland principles.

For advisers, the practical lesson is therefore twofold. Before analysing whether an appeal is late, identify precisely the statutory decision against which the appeal is said to lie and the document by which that decision was communicated. But where a genuine appealable decision has already been issued, continuing correspondence with HMRC should not be assumed to suspend or restart the statutory appeal period.

UK Property Accountants acted for the Appellant. The parties’ submissions are described as recorded in the decision and in the Appellant’s written submissions to the Tribunal. This note is for general information only and is not advice on any particular case. The decision is a First-tier Tribunal decision and does not bind other tribunals.