Archer: No reasonable excuse

19 August 2020

In William Archer v HMRC [2020] UKFTT 0288 (TC), the First-tier Tribunal (FTT) confirmed that surcharge notices had been validly issued and that the taxpayer did not have a 'reasonable excuse' for non-payment as a result of his related judicial review claim.


In 2016, HMRC issued closure notices to Mr Archer in respect of disputed tax liabilities relating to the tax years 2001/02 and 2002/03.  Mr Archer considered that the closure notices were not validly issued and therefore made no payment and did not appeal the closure notices to HMRC. HMRC warned that bankruptcy proceedings would be commenced to recover the alleged debt resulting from the closure notices, which was in excess of £22.5 million. 

Mr Archer commenced judicial review proceedings, challenging the ability of HMRC to threaten bankruptcy proceedings against him on the basis of what Mr Archer claimed were invalid closure notices. His application was dismissed by the High Court and his appeal to the Court of Appeal was unsuccessful. An application for permission to appeal to the Supreme Court was subsequently refused. Seven days after the Supreme Court’s decision, Mr Archer paid the underlying amount of tax.

During the judicial review proceedings, HMRC issued surcharge notices under section 59C, Taxes Management Act 1970 (TMA), for amounts totalling £1,403,181.78. Mr Archer contended that not all of the surcharge notices were validly issued. HMRC conceded that some of the surcharge notices had not been validly issued.

HMRC sent Mr Archer a manually created set of second surcharge notices after it became apparent that he had not received some of those originally created by HMRC's computer system. HMRC also sent Mr Archer an additional first surcharge notice in respect of an adjustment to his liability for 2001/02. Mr Archer argued that the manually issued and additional surcharge notices were not validly issued. In relation to all of the surcharges, Mr Archer contended that he had a reasonable excuse for the late payment of the unpaid tax as a result of the judicial review proceedings, an undertaking provided by HMRC and HMRC’s entries in his on-line self-assessment account.

Mr Archer's appeal came before the FTT for determination.

FTT decision 

Other than in relation to those surcharge notices in respect of which  HMRC had conceded had not been validly issued, the appeal was dismissed and the imposition of surcharges in the amount of £1,403,181.70, was confirmed.

In determining the appeal, the FTT was required to consider the following:

1. were the surcharge notices validly issued (Mr Archer contended that HMRC could not validly issue more than one surcharge notice in respect of the same period and the same matter); and

2. did Mr Archer have a 'reasonable excuse' for non-payment, as a result of his extant judicial review claim. 

Issue 1

The FTT rejected the taxpayer's argument that the surcharge notices were invalid because it was not possible to issue more than one surcharge notice in respect of the same tax year. In the view of the FTT, section 59C, TMA, does not prevent HMRC from issuing a second notice, provided there is a 'sufficient nexus' between surcharge imposition and the actual issue of the surcharge notice to the taxpayer (there being a distinction between imposition and notice of that imposition). On the facts of the case, the FTT concluded that one set of surcharge notices (dated 8 February 2019) were issued sufficiently proximate to the imposition of the surcharges (on 31 August 2018).

Issue 2

Mr Archer did not submit a witness statement in the proceedings. His witness statements which had been prepared for the purpose of the judicial review proceedings were provided. On the second issue, the FTT held that, absent evidence of the taxpayer's belief or understanding about the strength of his judicial review case, it could not find that Mr Archer had a 'reasonable excuse'. Additionally, in the view of the FTT, neither HMRC's agreement to refrain from pursuing bankruptcy proceedings, nor entries in Mr Archer's online statement indicating the suspension of collection of amounts due, constituted a reasonable excuse for non-payment.


The FTT's conclusion that it was unable to find that Mr Archer had a reasonable excuse because he failed to submit a witness statement confirming his views, is surprising. 

Notwithstanding the absence of a witness statement from Mr Archer regarding his subjective belief, the evidence of the High Court and Court of Appeal decisions do suggest that, viewed objectively, Mr Archer pursued a reasonable course of action in making his application for judicial review. Mr Justice Kerr decided that there was a strong prima facie case in the judicial review and Lord Justice Henderson decided that the case raised important points of principle and had a real prospect of success on appeal. Indeed, the substantive issue in the judicial review proceedings was decided in Mr Archer's favour but, unfortunately for Mr Archer, HMRC was able to rely on section 114, TMA, to 'cure' the defects in the closure notices and the application was therefore dismissed. 

Other taxpayers, in a similar position to Mr Archer, may wish to provide a witness statement confirming their beliefs to reduce the risk of the FTT making a similar finding. 

It remains to be seen whether an appeal will be pursued to the Upper Tribunal, but given the sums involved and the reasoning of the FTT, that must be a distinct possibility.   

The decision can be viewed here.

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