Chatting on bridge

Javed And Azra Mughal - Tribunal considers the rules relevant to "hardship" applications

21 September 2016. Published by Constantine Christofi, Senior Associate

In Javed and Azra Mughal (Partnership) Trading as Dallas Chicken and Ribs v HMRC [2016] UKFTT 456 (TC), the First-tier Tribunal (FTT) has considered the extent of information necessary for a "hardship" application.


HMRC originally assessed Javed and Azra Mughal (the Appellants) for unpaid VAT in the sum of £127,951. This was reduced following a review to £99,719. The Appellants appealed against the assessment, however, they had not paid or deposited the disputed tax and they made an application for hardship. 

Under section 84(3) of the Value Added Tax Act 1994, an appeal shall not be entertained unless the amount notified by the assessment has been paid or deposited with HMRC. This obligation is subject to section 84(3B), which permits an appeal to be entertained without payment or deposit of the VAT either:

(1) if HMRC is satisfied, on application by the appellant, that the requirement to pay or deposit the amount determined would cause the appellant to suffer hardship; or

(2) where (1) is not the case, but the FTT decides that the requirement to pay or deposit the amount determined would cause the appellant to suffer hardship.

In May 2013, HMRC applied for a stay of the Appellants' appeal while it considered the Appellants' application for hardship. On 17 June 2013, HMRC gave notice that it opposed the Appellants' application for leave to appeal without payment or deposit of the tax. HMRC argued that the FTT should not consider the appeal as the appeal was against a notice of assessment for VAT, and the Appellants had not paid to HMRC the amount determined by HMRC to be payable.

HMRC therefore applied to the FTT for the appeal to be struck out on the grounds that the disputed amount remained unpaid.

On 23 September 2013, the FTT directed that the appeal should be stayed pending the FTT's decision of the hardship application. The parties then entered into ADR discussions, and HMRC agreed to reduce the assessment to £21,048.00.

In April 2014, the Appellants sent a letter to HMRC indicating that they wished to appeal against the assessment in the sum of £21,048. HMRC responded stating that a decision could only be reviewed once and the case had already been reviewed.

As part of their hardship application, the Appellants referred to a number of sets of accounts of Dallas Chicken and Ribs in the name of W Mughal. HMRC understood that W Mughal was a relative of the Appellants who had taken on the business. There was nothing in the accounts to show any connection with the Appellants. Further accounts were provided by Mr Javed Mughal as an individual. HMRC's hardship officer's original decision was made on the basis that there was nothing to connect any of these accounts either with Mr Mughal or with the Appellants.

HMRC therefore argued that the Appellants had not provided substantive evidence to support their claim to hardship and requested that its decision to refuse the Appellants' hardship application be upheld.

FTT's decision

The FTT considered whether sufficient information had been provided for the application for hardship to be granted.

It noted the substantial amount of time which had passed since the application was made. The FTT considered R (ToTel Ltd) v First-tier Tribunal (Tax Chamber) [2012] EWCA Civ 1401, in deciding whether the issue of hardship should be determined by reference to the position at the time of the hardship application or at some earlier time. In the view of the FTT, the question to be determined is whether the Appellants currently have the resources to pay the VAT which has been assessed as due.

The FTT noted that HMRC had written to the Appellants requesting further information, but that it had not received a reply. Given the absence of relevant information the FTT concluded that there was insufficient information to satisfy it as to the financial position of the Appellants, and it therefore refused the Appellants' application for hardship.


This decision demonstrates that in cases where the issue of hardship is in contention, it is important that the appellant has up-to-date and cogent evidence to place before the FTT. The onus of proof in such cases is on the taxpayer to demonstrate hardship and without persuasive evidence such applications are unlikely to succeed.

A copy of the decision can be found here.