SNM Pipelines – Are you not entertained?

United Kingdom

In SNM Pipelines Limited v HMRC [2022] UKFTT 231 (TC), the First-tier Tribunal (Tax Chamber) (“FTT”) held that the taxpayer’s notice of appeal was valid, notwithstanding the fact that the disputed amount of VAT had not been paid and that a hardship application had not been made.


If a taxpayer disagrees with a decision made by HMRC, such as a notice of assessment, in most cases a challenge may be ultimately brought by way of appeal to the FTT.   There are strict time limits for lodging appeals (usually 30 days) and late appeals will only be accepted in limited circumstances.

In contrast to the position for direct taxes, VAT legislation provides that an appeal will not be “entertained” unless either: (i) the amount of disputed tax has been paid; or (ii) the taxpayer successfully demonstrates on application to HMRC (or, failing that, the FTT) that paying the disputed amount would cause it to suffer hardship.

The facts

Following a missing trader investigation, HMRC decided that the taxpayer was not entitled to certain repayments of input tax and issued assessments for approximately £312,000.  In August 2017, the taxpayer’s representatives submitted a notice of appeal within the prescribed 30-day time limit.  However, the FTT returned the notice of appeal a few days later on the basis that the disputed tax had not been paid and no hardship application had been made.  The notice of appeal was quickly re-submitted (outside the 30-day time limit) but again returned for the same reason.  Unfortunately, the FTT used an incorrect email address and the returned notice of appeal was never received by the taxpayer’s representatives. 

That mistake was not discovered until around August 2020, when HMRC’s debt collection team tried to recover the disputed VAT.  Having heard nothing further from HMRC or the FTT in relation to the dispute in the three years since re-submitting its notice of appeal, the taxpayer had apparently assumed that its appeal had been successful.

In October 2020, the taxpayer’s new representatives submitted another notice of appeal (together with an application for permission to appeal out of time) but this was yet again returned on the basis that the disputed tax had still not been paid nor any hardship application made.  In December 2020, a hardship application was finally made and a subsequent notice of appeal was duly accepted by the FTT (at the fourth attempt).  HMRC accepted the hardship application but nevertheless filed an objection to the late appeal.


The FTT determined that previous decisions concerning the meaning of the word “entertained”, including that of the Inner House of the Court of Session in HMCE v Hubbard Foundation Scotland [1981] STC 593, suggested that a tribunal only begins to “entertain” an appeal when it is listed for hearing (rather than when the tribunal receives/acknowledges a notice of appeal).  On that basis, the fact that an appeal cannot be “entertained” should not mean that it has not been validly made.  However, such decisions were made in the context of the old procedural rules of the VAT Tribunal, a predecessor of the FTT.  The question was therefore whether the current procedural rules of the FTT (the “FTT Rules”) produced a different answer.

Rule 22 of the FTT Rules applies in respect of hardship applications.  Rule 22(1) refers to an “appeal proceeding”, which the FTT decided is essentially synonymous with the term “entertained” used in VAT legislation.  Although Rule 22(2) refers to certain steps being required when “starting proceedings”, the FTT held that this should be interpreted so as to be consistent with VAT legislation and Rule 22(1).  On that basis, the FTT decided that the original notice of appeal was validly made in 2017 and, given HMRC had now accepted the hardship application, that the appeal should proceed towards a hearing.


In practice, the taxpayer’s victory in this case may be of limited wider benefit in VAT disputes.  Even if a notice of appeal were lodged without the taxpayer paying the tax or making a hardship application, the appeal could not proceed beyond that point without one of those steps being taken (and the appeal would be struck out if the taxpayer did not do so within a reasonable period of time).

The case highlights the importance of making appeals within the time allowed and following all necessary procedural steps.  It is not clear, for example, why it took over three years to make a hardship application in this case (given an application was later accepted), despite notices of appeal being repeatedly rejected on that basis and why no steps were taken in that significant period of time to check on the status of the appeal.  Commenting on those points, the judge in this case made clear that he would have had no hesitation in refusing permission for a late appeal if he had not concluded that the 2017 appeal was validly made.  Given the strict time limits for commencing any form of tax litigation, it is critical to seek specialist legal advice as soon as any potential dispute arises.

CMS Tax Disputes & Investigations

As part of the CMS global network with tax capability in over 70 offices, the CMS Tax Disputes & Investigations team is well-placed to advise on all forms of (direct and indirect) contentious tax matters.  Our dedicated specialists have a wealth of experience guiding both individuals and corporates (across a wide range of sectors) through all aspects of tax dispute prevention, management and resolution. 

Where a dispute cannot be resolved to the parties’ satisfaction, our team is well-placed to advise on pursuing the matter through the judicial system.  At CMS, we have experience litigating a wide range of (direct and indirect) tax matters at all levels from the tax tribunals to the Supreme Court.  Where applicable, we can work alongside any existing tax advisers or accountants to ensure that suitable preparations are made for litigation while discussions with HMRC continue.  

For more information, please contact a member of our team or click here.