Meydan Asset Management Ltd v The Commissioners for HMRC

The leading authority on the limits of the Tribunal’s jurisdiction in penalty appeals arising from accelerated or partner payment notices is Beadle v HMRC (Court of Appeal) [2020] EWCA Civ 562 (“Beadle CA”)

HMRC rely upon David Beadle v HMRC (FTT) [2017] UKFTT 0829 (TC) where Judge Rupert Jones explained the scope of the Tribunal’s task in a penalty appeal:

At [204], relevant for these purposes, Judge Rupert Jones stated:

Those passages are relied upon as confirming that a penalty appeal is not a vehicle for challenging either the validity of the APN itself or the amount of tax specified in it.

Both parties rely upon paragraphs [48]–[50] of the judgment of Simler LJ, where the Court of Appeal endorsed the approach in Beadle FTT:

Both parties rely upon Perrin as setting out the general approach to “reasonable excuse”. The relevant passages are paragraphs [69]–[76], and [81]:

The Appellant relies expressly on paragraphs [51]–[53] and [58] of the First tier Tribunal decision:

At [58], relevantly for these purposes, Judge Jonathan Richards stated:

The Respondents rely upon paragraphs [81] and [84] of the Upper Tribunal’s decision, where the UT approved the FTT’s approach:

HMRC rely upon paragraphs [101]–[102], where Judge Vos explained the Tribunal’s limited role when considering special circumstances:

The Appellant relies on paragraphs [72]–[74], where the Upper Tribunal described the threshold for intervention:

The Appellant relies upon paragraphs [52]–[71]. In those paragraphs, the Tribunal emphasised the need for HMRC to engage with the taxpayer’s explanations and evidence, and that a failure properly to do so may render a penalty decision unsustainable.

Both parties referred us to paragraphs [128] and [151]–[157]:

HMRC rely on Fraser, where Judge Cannan reiterated:

From the above case law we derive the following principles.

 First, Beadle confirms that Parliament deliberately confined the Tribunal’s role in relation to APNs. A penalty appeal is not a forum for challenging the validity, correctness, or underlying lawfulness of an APN. Permitting collateral challenges in penalty proceedings would undermine the statutory “pay now, dispute later” scheme.

Secondly, Perrin establishes that the reasonable excuse test is objective but contextual. The Tribunal must ask whether a reasonable taxpayer, having the attributes and circumstances of the appellant, would have acted as it did. An honest or sincerely held belief is insufficient unless it is objectively reasonable when judged in its statutory context.

Thirdly, Sheiling UT makes clear that in the APN context a belief in invalidity may amount to a reasonable excuse only in a narrow category of cases. That category is confined to circumstances where procedural defects are apparent on the face of the notice and incontrovertible. Where the alleged defects depend on contested legal arguments, detailed statutory interpretation, or judicial review proceedings, they are unlikely to found a reasonable excuse defence.

Fourthly, Fraser confirms that the mere existence of judicial review proceedings challenging an APN does not suspend the statutory obligation to pay, nor does it, without more, render HMRC’s penalty decision flawed. Arguments based on alleged APN invalidity, including reliance on judicial review, cannot ordinarily constitute reasonable excuse or special circumstances as that would be inconsistent with the statutory scheme.

Finally, Edwards together with Advanced Scaffolding and White, establishes that the Tribunal’s role in relation to special circumstances is supervisory only. The Tribunal may intervene only if HMRC’s decision is flawed in a public law sense. Mere disagreement with the outcome, or with the weight attached to particular factors, is insufficient to justify substitution of the Tribunal’s own view.

The Appellant’s submissions are summarised as follows.

The submissions proceed on three principal grounds: (1) that the Appellant had a reasonable excuse for non‑payment of the APNs due to HMRC’s procedural failures; (2) that independently and additionally, the Appellant had a reasonable excuse because of severe financial constraints attributable to matters outside its control; and (3) that even if no reasonable excuse existed, the penalties should be reduced to nil pursuant to paragraph 9 of Schedule 56 FA 2009 because HMRC’s special‑circumstances decision was flawed in law. The Appellant does not challenge the validity of the APNs themselves, correctly accepting the jurisdictional limit established in Beadle.

The Appellant submits that HMRC’s conduct of the APN process was sufficiently defective to constitute a reasonable excuse under paragraph 16 of Schedule 56. The Appellant identifies a series of alleged procedural failures: HMRC did not provide pooling notices, Bound Arrangement Opinion Notices (“BAONs”), Notices of Binding (“NoBs”), or calculation workings explaining the APN amounts; HMRC failed to supply critical statutory materials despite explicit written requests; and HMRC’s correspondence contained assertions unsupported by documentary evidence.

The Appellant “was not sitting on its hands” and it actively sought clarification from HMRC from December 2022 onward. The Appellant wrote on 22 December 2022 asking for GAAR Panel Opinion Notices, GAAR Notices, and other documents, yet HMRC never provided the statutory materials it considered to have been previously issued. When the Appellant received HMRC’s letter of 2 February 2023, it arrived only after representations had already been submitted, and crucially, did not include the documents requested. This demonstrated that “HMRC had not cured the defects, nor made it possible for a reasonable taxpayer to verify the liability.”

Only one pooling notice is in the bundle, which is addressed to Mr Esse and not the Appellant . This is a core statutory deficiency, since Condition C under s219 FA 2014 depends upon correct and timely service of prerequisite notices. Sheiling permits procedural matters to form part of a reasonable excuse where they are not dependent on complex public‑law determinations. The Appellant maintains that its concerns were practical rather than jurisdictional: a reasonable taxpayer would not pay a multimillion‑pound disputed liability “blind”, where HMRC had failed to supply the documents that allegedly grounded the assessments.

The Appellant further submits that HMRC’s one‑year delay in responding to representations (from 8 February 2023 to 2 February 2024) was itself unreasonable this delay “compressed the payment window to less than 30 days” after HMRC’s confirmation letter, creating procedural unfairness. HMRC made it impossible to engage meaningfully as the APNs were confirmed without addressing any of the substantive matters raised. HMRC’s response letter contained wording such as “I understand” and “we believe the figures are correct” evidencing that the review process was lacking in investigation or objectivity.

Perrin confirms that reasonableness must be assessed contextually, considering the taxpayer’s attributes and circumstances, Sheiling confirms that procedural defects, even if short of invalidity, may constitute a reasonable excuse where they render the situation practically opaque.

The Appellant’s second ground concerns severe financial constraints attributable to events outside its control, principally arising from the director’s divorce proceedings. The Family Court orders required very substantial payments to the director’s former spouse as well as legal fees exceeding £1.3 million. These constraints were compelling, unavoidable and externally imposed and left the Appellant without access to liquid funds.

Mr Esse’s assets, including the family home, a French chalet and a yacht, were sold or transferred, with proceeds directed by court order to the ex‑spouse. Mr Esse retained only a limited residual amount from the yacht sale and further court‑ordered lump sums were due in 2025 and 2026. These constraints meant that raising the £4.4 million demanded by the APNs by 8 March 2024 was impossible without breaching court orders or triggering insolvency.

These circumstances fall squarely within Sheiling’s acceptance that financial inability caused by events outside control may constitute a reasonable excuse, provided the taxpayer acted reasonably. The Appellant acted reasonably by proposing a detailed TTP arrangement supported by cashflow evidence, offering an immediate £50,000 followed by structured quarterly payments. HMRC refused this proposal on 7 March 2024. The TTP proposal was commercially realistic and represented the maximum feasible payment plan given the ongoing court restrictions.

Finally, the Appellant argues that the penalties should be reduced to nil for “special circumstances”, relying on Barry Edwards, Advanced Scaffolding, White, and Bluu Solutions. HMRC had failed to consider relevant matters when deciding whether to exercise the special‑reduction power, including:

HMRC’s analysis of the special circumstances were cursory, undocumented and unsupported by reasons, contrary to the approach mandated by White and Bluu Solutions. The absence of recorded reasoning renders HMRC’s decision flawed in the judicial review sense, enabling the Tribunal to substitute its own decision.

HMRC’s submissions are summarised as follows.

HMRC’s submissions advance four core propositions: (1) the Tribunal lacks jurisdiction to consider any challenge to the validity of the APNs; (2) the penalties were correctly issued under Schedule 56 FA 2009; (3) the Appellant had no reasonable excuse for non‑payment; and (4) no special circumstances exist warranting any reduction. HMRC emphasises that the Appellant’s case improperly attempts to recast APN validity challenges as penalty‑jurisdiction arguments.

Jurisdiction: The Tribunal Cannot Entertain Challenges to APN Validity

HMRC assert that the Tribunal has no jurisdiction to revisit, reconsider, or determine the validity of APNs. The Court of Appeal decision in Beadle established conclusively that Parliament did not provide any right of appeal against the issuing or confirmation of APNs. The Appellant’s remedy for alleged procedural defects would have been judicial review, not a penalty appeal.

HMRC note the Appellant’s repeated assertions of “procedural deficiencies”, but these are irrelevant to the Tribunal’s function. Any assertion that Conditions A, B or C of s219 FA 2014 were not met falls outside the Tribunal’s jurisdiction. The Appellant is attempting to “shoehorn” APN validity complaints into a reasonable excuse argument.

HMRC reiterated that nothing in the Appellant’s evidence identifies any procedural defect that is “gross and obvious” in the Sheiling sense. Sheiling does not permit a penalty appeal to become a disguised challenge to the validity of an APN; rather, it recognises only a narrow category of cases in which procedural defects are apparent on the face of the notice and incontrovertible, none of the Appellant’s allegations reach that threshold.

Validity of Penalties Under Schedule 56

HMRC have discharged their initial statutory burden under paras 1 and 3 of Schedule 56 FA 2009. They rely on documentary evidence showing:

The Appellant does not dispute these core factual elements.

The statutory notices such as pooling notices, PAONs, BAONs and NoBs were properly issued in previous years and sent to the Appellant’s recorded address - “The Barn …”, . There is no record of post being undelivered and returned and the documents were also sent to Shaw Gibbs, the representative. This demonstrates that the statutory preconditions for APNs were met and that any assertion to the contrary is an impermissible attempt to reopen APN validity.

No Reasonable Excuse: Procedural Matters Do Not Assist the Appellant

Turning to the question of reasonable excuse under para 16 Sch 56, HMRC submits that the procedural deficiency arguments are legally irrelevant as the arguments about missing pooling notices, unclear GAAR reasoning, or lack of detailed calculations are not relevant because:

The Appellant was aware of the potential liabilities since the time of the Reg 80 determinations, which were issued from 2018 onwards, and subsequent GAAR Notices of Final Decision. The APNs were issued in November 2022 giving the Appellant more than a year before the 2024 payment deadline. The inability to pay reflected business choices and priorities not external constraints.

HMRC submits that whilst the one‑year delay in responding to representations was regrettable, it did not excuse non‑payment. The statutory deadline under the APN regime is not contingent upon HMRC’s speed in concluding representations. Once the APNs were confirmed, payment was due.

The Appellant’s attempt to rely on TTP is misconceived. No TTP agreement was ever reached. Paragraph 10 Sch 56 applies only where a TTP agreement is in place before the due date. Here, HMRC refused the proposed arrangement on 7 March 2024, before the due date, and therefore para 10 cannot apply.

The Appellant’s financial constraints cannot amount to a reasonable excuse because:

It was Mr Esse that was getting divorced and not the Appellant and thus it was not within the statutory meaning of events outside its control.

The Appellant has not demonstrated any special circumstances as:

We make the following further findings of fact. Prior to confirmation that UHY RB were instructed, Shaw Gibbs acted as the Appellant’s authorised tax agent in its dealings with HMRC, including in relation to the Reg 80 determinations, GAAR related notices, the APNs and subsequent correspondence and appeals.

 HMRC confirmed to the Appellant that its records showed that Shaw Gibbs held a valid and continuing agent authorisation (form 64-8) in respect of the Appellant throughout the relevant period. There is no evidence before the Tribunal that that authority was withdrawn, restricted, or otherwise qualified prior to or during the period in which the APNs and related statutory notices were issued.

We find that Shaw Gibbs’ role was not limited to the passive receipt of correspondence. On the contrary, Shaw Gibbs actively acted on the Appellant’s behalf, including filing appeals against the Notices of Determination and Decision for multiple tax years and corresponding with HMRC in relation to those appeals.

The suggestion that Shaw Gibbs acted merely as a “postbox” arose for the first time during Mr Esse’s cross-examination. No such characterisation appears in Mr Esse’s witness statement and no contemporaneous document describes Shaw Gibbs’ role in those terms. We therefore treat that description as a later rationalisation rather than as a contemporaneous account of Shaw Gibbs’ function.

In a letter dated 9 February 2023, the Appellant suggested that “Shaw Gibbs may have had no authority to receive these documents on our behalf”. We find that this suggestion was tentative in nature and was not pursued. It was not repeated in subsequent correspondence, was not developed in the Appellant’s skeleton argument and was not relied upon as a substantive point at the hearing.

In any event, the evidence establishes that Shaw Gibbs did in fact act with authority on the Appellant’s behalf during the relevant period. We therefore find that HMRC was entitled to treat service of notices on Shaw Gibbs as service on the Appellant, and that any alleged communication difficulties between Shaw Gibbs and the Appellant do not affect the validity of service or the Appellant’s responsibility to comply with statutory notices.

We further find that the Appellant was professionally represented throughout the relevant period and that the existence of an authorised agent acting actively on the Appellant’s behalf reinforces, rather than undermines, the conclusion that the Appellant was aware of the existence and significance of the APNs and the obligations they imposed.

We have considered the Appellant’s reliance on financial constraints as a basis for reasonable excuse. In doing so, it is necessary to distinguish clearly between financial pressures experienced by Mr Esse personally and those affecting the Appellant company as a separate legal entity. We accept that, as a matter of commercial reality, the Appellant’s finances were closely intertwined with those of its sole shareholder. However, FA 2009, Sch 56, paragraph 16(2)(a) requires the Tribunal to focus on causation and attribution as a matter of law and on that footing the distinction remains material.

We find that the financial constraints relied upon by the Appellant arose from Mr Esse’s personal financial position and not from events affecting the Appellant company itself. The divorce proceedings, the substantial lump-sum payments ordered by the Family Court, and the very significant associated legal costs were obligations imposed on Mr Esse in his personal capacity. Those matters undoubtedly placed acute pressure on his personal finances. However, no evidence was provided that Mr Esse was subject to legal restrictions such that they prevented the Appellant’s ability to meet its statutory obligations.

We have also considered the documentary evidence relating to Mr Esse’s divorce proceedings. While the hearing bundle contained correspondence and material describing the financial consequences of those proceedings, it did not include the Family Court orders themselves. We therefore proceed on the basis of Mr Esse’s description of their effect, rather than on the precise legal terms of the orders. Even accepting that substantial lump-sum payments were required, there was no evidence before the Tribunal that any order prohibited Mr Esse from advancing funds to the Appellant or that doing so would necessarily have placed him in breach of a court order. In the absence of such evidence, we make no finding as to the precise legal terms of any Family Court order beyond what is evidenced; it proceeds on the basis that no order expressly prohibiting funding of the company was demonstrated.

In any event, any dependence by the Appellant on Mr Esse for funding would have been as a consequence of its own corporate structure and historic decisions, rather than the result of any supervening external event. By the period with which this appeal is concerned, the Appellant had ceased trading, held no liquid cash reserves and owned only illiquid assets. That position was longstanding and pre-dated both the issue of the APNs and Mr Esse’s divorce proceedings. The absence of alternative sources of funding, such as external borrowing, or assets capable of timely realisation, was therefore the product of the Appellant’s chosen arrangements and business history.

We have considered carefully the Appellant’s contention that HMRC failed properly to consider whether there were special circumstances justifying a reduction of the penalties, and that HMRC’s decision making in this regard was flawed.

We find that HMRC did in fact identify, consider, and assess the matters relied upon by the Appellant as potential special circumstances, but reached the evaluative conclusion that those matters did not justify the exercise of the special-reduction discretion under paragraph 9 of Schedule 56. We are satisfied that those matters were consciously rejected as insufficiently exceptional, rather than overlooked or ignored.

This finding is based on the contemporaneous correspondence and review documentation. HMRC’s View of the Matter letter and subsequent Review Conclusion letter make clear that HMRC was aware of, and took into account, the procedural history of the APNs, including the representation process and the timing of HMRC’s response; the Appellant’s assertions regarding missing or misdirected statutory documents; the Appellant’s financial representations, including the absence of liquidity and reliance on Mr Esse as a funding source; the existence and impact of Mr Esse’s divorce proceedings; and the later withdrawal of one APN relating to 2015 NICs.

We do not accept the Appellant’s submission that the relative brevity of HMRC’s reasoning demonstrates a failure to consider those matters. The statutory test does not require HMRC to provide a detailed narrative justification for every matter raised, nor to explain at length why each factor does not amount to a special circumstance. What is required is that the decision-maker addresses the representations put forward and reaches a conclusion that is rational and within the scope of the discretion conferred.

Here, the evidence shows that HMRC treated the matters relied upon by the Appellant as falling within categories which Parliament has either expressly excluded from “special circumstances” (such as ability to pay), or which commonly arise in the administration of the APN regime and do not, without more, meet the threshold of exceptionality required. We are satisfied that HMRC’s decision reflects a judgment that these were not circumstances taking the case outside the normal and intended operation of the statutory penalty regime.

We therefore find that HMRC’s special-circumstances decision was the result of an evaluative assessment carried out within the correct statutory framework. The Appellant’s disagreement is with the outcome of that assessment, rather than with the lawfulness of the decision-making process itself. On the evidence, there is no basis for concluding that HMRC failed to consider relevant matters, took account of irrelevant matters, or reached a conclusion that no reasonable decision-maker could reach.

The burden of proof in this appeal lies on the Appellant. While HMRC must establish that the penalties were validly imposed, it is for the Appellant to satisfy the Tribunal that there was a reasonable excuse within paragraph 16 of Schedule 56, or that HMRC’s decision on special circumstances was flawed in law. The standard of proof is the ordinary civil standard on a balance of probabilities.

Before turning to the individual grounds relied upon by the Appellant, we address two preliminary matters emphasised in HMRC’s submissions. First, this is a penalty appeal only; the Tribunal has no jurisdiction to determine the validity of the APNs or whether the statutory conditions for their issue were met. Secondly, the statutory penalty regime under Schedule 56 operates by reference to objective facts. Once it is established that an amount was due and not paid by the prescribed date, a penalty arises unless a statutory defence is made out. Those features of the legislative scheme inform the approach the Tribunal must take to the Appellant’s arguments.

Jurisdiction and the relevance of alleged defects in the APN process

The Tribunal’s jurisdiction must be considered first, because it frames the extent to which the Appellant’s criticisms of the APN process can be taken into account at all in this appeal.

It is common ground between the parties that the Tribunal has no jurisdiction to determine the validity of the Accelerated Payment Notices themselves, nor to determine whether Conditions A, B or C in section 219 of the Finance Act 2014 were satisfied. That position follows from the decision of the Court of Appeal in Beadle v HMRC [2020] EWCA Civ 562 and is properly accepted by the Appellant. As Beadle makes clear, Parliament deliberately withheld a right of appeal against the issue or confirmation of an APN, and challenges to their validity lie, if at all, by way of judicial review. We would add that the commencement of judicial review proceedings does not suspend the operation of the APN or penalty regimes, absent interim relief, which was not sought or obtained in this case.

The significance of Beadle for present purposes lies not merely in that exclusion of jurisdiction, but in the Court of Appeal’s explanation of why collateral challenges are impermissible. To permit arguments about APN validity to be ventilated indirectly through penalty appeals would undermine the statutory scheme, which is explicitly designed to require disputed tax to be paid up-front, with challenges to follow later. The Tribunal must therefore be careful not to allow arguments framed as “context” or “procedural concerns” to amount in substance to a challenge to APN validity.

Against that background, the Appellant did not frame its case as a direct challenge to APN validity. Rather, it sought to rely on a series of alleged procedural deficiencies, most notably the asserted absence or late provision of pooling notices, GAAR notices, Notices of Binding and detailed calculation workings, as forming part of the factual context in which the decision not to pay was taken. It submitted that these matters bore on the question of reasonable excuse, because a reasonable taxpayer could not be expected to pay substantial sums “blind” without being put in possession of the material said to justify the demand.

The Appellant also placed weight on the fact that certain GAAR related notices were not included in the hearing bundle and invited the Tribunal to infer from their absence that they had not been issued or validly served. We do not accept that submission. The composition of the hearing bundle reflects the material selected and collated by the parties for the purposes of this appeal; it is not a definitive record of all documents issued during the course of the underlying tax and GAAR processes. The absence of particular documents from the bundle does not, without more, establish that they were never issued or served. In the present case, HMRC asserted that the relevant notices were issued and relied on contemporaneous correspondence and records to that effect. We are not satisfied that the mere absence of documents from the bundle justifies drawing any adverse inference against HMRC, particularly where the Appellant was professionally represented throughout and did not pursue timely challenges to service at the relevant stages.

We accept as a matter of principle that factual features of the APN process may be considered insofar as they explain the taxpayer’s conduct. Beadle does not require the Tribunal to pretend that the APN process took place in a vacuum. However, Beadle and the subsequent authorities make it clear that this is so only indirectly. The Tribunal must be vigilant to ensure that arguments framed as “context” do not, in substance, amount to a collateral challenge to APN validity.

In the present case, we find that the Appellant’s decision not to pay the APNs was not caused by the asserted absence or late provision of procedural material, but by its settled position that the APNs should be challenged rather than complied with. That finding is based on Mr Esse’s evidence taken as a whole. Although the Appellant did seek further information from HMRC and expressed continuing dissatisfaction with the material provided, there was no evidence that payment would have been made had the requested documents been produced earlier or in a different form. Non-payment pre-dated HMRC’s confirmation letter of 2 February 2024 and continued unchanged thereafter.

That finding is critical to our jurisdictional analysis. Once it is accepted that non-payment was driven by a substantive belief that the liabilities should not be paid pending challenge, the asserted procedural deficiencies cannot be treated as explanatory of the Appellant’s conduct. To give them decisive weight in those circumstances would require the Tribunal to embark on an assessment of whether the alleged procedural steps were, in fact, required and whether their absence undermined the APNs. That would be to trespass directly into the forbidden territory identified in Beadle.

The position is reinforced by our findings concerning service and agency. We have found that Shaw Gibbs acted as the Appellant’s authorised agent throughout the relevant period; that they actively corresponded with HMRC and filed appeals on the Appellant’s behalf; and that HMRC was entitled to treat service of statutory notices on Shaw Gibbs as valid service on the Appellant. The suggestion that Shaw Gibbs acted merely as a “postbox” arose late, was unsupported by contemporaneous evidence, and was not pursued as a substantive point. Any internal communication shortcomings between the Appellant and its agent are therefore matters internal to the Appellant’s arrangements and cannot affect the validity or transparency of the APN process as a matter of law.

HMRC also relied on the fact that its records did not show any relevant correspondence sent to the Appellant as having been returned undelivered. While it does not prove actual receipt by an individual recipient, it is consistent with proper service in the ordinary course of post. In circumstances where correspondence was sent both to the Appellant and to its authorised agent, and where there is no documentary evidence of non-delivery to the Appellant and evidence that correspondence was received by the authorised agent, we are persuaded that the absence of actual receipt by the Appellant has been established.

The Appellant also relied on Sheiling Properties Ltd v HMRC in support of the proposition that procedural defects may, in some cases, give rise to a reasonable excuse. We accept that Sheiling recognises a narrow category of cases in which procedural defects that are apparent on the face of the notice and incontrovertible may be capable of being taken into account. However, we are satisfied that this case does not fall within that category. The matters relied upon by the Appellant are neither apparent on the face of the APNs nor incontrovertible; they depend on contested assertions about the existence, service, and sufficiency of earlier statutory notices and on legal argument as to their effect. Such matters lie squarely outside the limited Sheiling exception.

Accordingly, we conclude that the alleged procedural deficiencies form part of the historical background but do not provide a permissible basis for questioning the payment obligation in this appeal. To treat them otherwise would be inconsistent with Beadle and the statutory scheme.

Reasonable excuse for non-payment of the APNs

The central issue in the appeal is whether the Appellant has established a reasonable excuse for non-payment within paragraph 16 of Schedule 56.

We accept that the Appellant’s failure to pay the APNs was not inadvertent. Payment was withheld deliberately during a period when the Appellant was professionally advised and because the Appellant believed that the APNs were unlawful and would ultimately be set aside. We also accept that Mr Esse genuinely held those beliefs. However, as the Upper Tribunal explained in Perrin v HMRC [2018] UKUT 156 (TCC), the test of reasonable excuse is objective. The question is not whether the taxpayer acted honestly or in good faith, but whether a reasonable taxpayer, having the attributes and circumstances of the Appellant, would have acted in the same way.

The appropriate comparator in this case is a reasonable corporate taxpayer in the Appellant’s position, aware of the APN regime, the absence of any right to postpone payment, and the statutory consequences of non-payment. Such a taxpayer is also taken to understand that APNs are deliberately designed to require payment notwithstanding genuine dispute and pending litigation.

Viewed through that lens, we are unable to accept that the Appellant’s belief in the unlawfulness of the APNs constitutes a reasonable excuse. The Upper Tribunal’s decision in Sheiling makes clear that a belief in invalidity may, in principle, amount to a reasonable excuse only in a narrow category of cases where procedural defects are obvious, incontrovertible, and apparent without detailed legal analysis. We have already found that the present case does not fall within that category. The Appellant’s position depended on complex and contested arguments about GAAR notices, agency, service, and the interpretation of statutory conditions. These are precisely the matters which Parliament intended to be resolved separately from the payment obligation.

We place particular weight on the fact that non-payment both pre-dated and continued after the provision of further material by HMRC, and that no evidence was given that payment would have followed had additional documents been supplied. In those circumstances, we are satisfied that the absence of documentation was not causative of the failure to pay.

The Appellant also relied heavily on financial constraints, contending that non-payment was the consequence of severe liquidity pressure caused by Mr Esse’s divorce proceedings and associated court-ordered payments. We have carefully considered this evidence and do not underestimate its seriousness. However, the statutory question posed by paragraph 16(2)(a) is not whether payment would have been difficult or painful, but whether insufficiency of funds was attributable to events outside the taxpayer’s control.

On our findings, the financial constraints relied upon were personal to Mr Esse and not attributable to events affecting the Appellant company itself. The divorce proceedings, lump-sum obligations and legal costs were imposed on Mr Esse personally. While they had indirect consequences for the company because of its dependence on him, there was no evidence that any court order prohibited him from advancing funds to the company, nor that doing so would have placed him in breach of an order as opposed to worsening his overall financial position.

We have also found that the Appellant’s dependence on Mr Esse for funding was a product of its own corporate structure and historic decisions. By the relevant period, the Appellant was a non-trading company with no liquid reserves and only illiquid assets. That position was longstanding and pre-dated both the APNs and the divorce proceedings. The absence of alternative funding options therefore reflected the Appellant’s chosen arrangements rather than a supervening external event. In those circumstances, the statutory exception in paragraph 16(2)(a) is not satisfied.

The Appellant further relied on the submission and refusal of a TTP proposal shortly before the due date. We accept that the proposal was made and that HMRC refused it. However, that proposal did not demonstrate an ability to pay the APNs by the due date beyond a very limited initial sum and was contingent on uncertain future events. No binding TTP agreement was in place, and there is no basis on which the refusal of the proposal could convert an inability to pay into a reasonable excuse under paragraph 16.

Taking these matters together, and applying the principles in Perrin and Sheiling, we conclude that the Appellant has not established a reasonable excuse for non-payment.

Special circumstances and HMRC’s decision-making

We turn finally to the Appellant’s reliance on paragraph 9 of Schedule 56 and its contention that the penalties ought to be reduced to nil on account of special circumstances.

The Tribunal’s task in this respect is limited. As explained in Barry Edwards v HMRC [2018] UKUT 134 (TCC) and Advanced Scaffolding, the Tribunal does not stand in HMRC’s shoes. It may intervene only if HMRC’s decision on special circumstances is flawed in a public-law sense, for example because relevant matters were not considered, irrelevant matters were taken into account, or the decision was one which no reasonable decision maker could reach.

We have carefully examined the correspondence and review documentation. It has found that HMRC was aware of, and did consider, the matters relied upon by the Appellant as potential special circumstances. Those matters included the procedural history of the APNs, the timing of HMRC’s response to representations, the Appellant’s financial representations, the divorce proceedings affecting Mr Esse, the TTP and the later withdrawal of one NICs related APN.

The Appellant placed particular reliance on the later withdrawal of the 2015 NICs APN. However, that withdrawal occurred after the payment deadline had passed. The penalty regime operates by reference to circumstances existing at the time payment was due and a later change in HMRC’s position does not retrospectively render earlier non-payment reasonable or exceptional. We do not consider that HMRC acted unreasonably in treating that matter as insufficient to engage paragraph 9.

The Appellant criticised the wording of HMRC’s response to the representations, placing particular emphasis on phrases such as “I understand” and “HMRC’s view is”, which it submitted demonstrated a lack of independent analysis. We do not accept that submission. Decision makers frequently summarise competing contentions before explaining why they do not accept them. The use of such language does not, of itself, indicate that matters were misunderstood or disregarded. When the response is read as a whole and in context, it is clear that HMRC identified the representations made, addressed them by reference to the statutory framework, and reached evaluative conclusions. We are not persuaded that the phraseology relied upon undermines the integrity or lawfulness of the representations review.

We do not accept that the relative brevity of HMRC’s reasoning demonstrates a failure to consider relevant matters. The statute does not require HMRC to provide a detailed narrative explanation for each point raised. What matters is that the decision maker engaged with the representations and reached a rational conclusion within the scope of the statutory discretion. On our findings, that is what occurred in this case.

Ultimately, the Appellant’s challenge to HMRC’s special circumstances decision amounts to a disagreement with the evaluative outcome, not to the identification of a flaw in the decision making process. The authorities do not permit the Tribunal to substitute its own view in those circumstances.

We also note that the penalties imposed were those fixed by statute at 5% of the unpaid amounts. They were not increased by HMRC, nor applied selectively or inconsistently. In those circumstances, no issue of disproportionality or irrationality arises.

For the above reasons, the Appellant’s appeal should be dismissed. The penalties are affirmed.

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.