Postponing Payment During An Appeal: How Section 55 TMA 1970 Works

You have appealed your tax assessment, so HMRC cannot chase you for the money while the appeal is pending. Right?

Wrong. Filing an appeal changes nothing about when the tax is due (section 55(2) TMA 1970). Unless you take the separate step of applying for postponement, HMRC can pursue the full amount—including through debt collection, county court proceedings, distraint (seizing goods), and even bankruptcy or winding-up petitions. The courts have confirmed that a pending tax appeal does not prevent HMRC from taking enforcement action (see e.g. Parkwell Investments Ltd v Wilson [2014] EWHC 3381 (Ch)). One exception: HMRC's power to take money straight from your bank account can't touch tax you've appealed in time while the appeal is open, unless it's under an accelerated or partner payment notice (how).

This guide explains how to apply for postponement under section 55 TMA 1970, what the test is, what happens to interest and penalties while you wait, and how the rules differ for VAT.

Note: Section 55 applies to direct taxes—income tax, capital gains tax, and corporation tax. For VAT and other indirect taxes, see the separate section on the hardship test below.

The Default Rule: Your Tax Is Still Due

Section 55(2) TMA 1970 sets the starting position: tax is "due and payable as if there had been no appeal." An appeal on its own does nothing to delay the payment obligation.

If you do not apply for postponement:

• HMRC's debt management team can take enforcement action on the full amount
• Late payment penalties accrue on the normal schedule
• Interest runs from the original due date at 7.75%

The risk is real and immediate. HMRC will not necessarily wait for your appeal to be heard before pursuing collection—particularly for larger sums.

How To Apply For Postponement

What You Need

There is no HMRC form for postponement applications. You apply by writing to HMRC at the address on your assessment or closure notice. Your letter must state:

• That you are applying under section 55 TMA 1970
• The amount of tax you believe has been overcharged
• The grounds for believing the overcharge—why you think the assessment or amendment is wrong

The grounds for your postponement application will usually mirror your grounds of appeal. If you are disputing only part of the tax, you can apply for partial postponement—pay the amount you accept and postpone the rest.

The 30-Day Deadline

You must apply within 30 days of the date on the notice of amendment, assessment, or closure notice (section 55(3) and (10A)). The simplest approach is to include your postponement application in the same letter as your notice of appeal.

A Simple Assessment works differently, because you must query it before you can appeal. Ask HMRC to postpone the disputed amount when you query it; HMRC can do so while it considers your query (section 31AA(6)). HMRC's guidance says that postponement ends with its final response, and that if you then appeal and want the tax to stay postponed, you "must apply for that postponement under s55(3)" (ARTG2515). So apply in your appeal letter, even if the assessment is more than 30 days old by then.

Late applications are possible under section 55(3A) if a change in circumstances gives you grounds to believe you are overcharged, or if HMRC or the tribunal accepted a late appeal. HMRC's own guidance (ARTG2520) says that refusing a late postponement application alongside an accepted late appeal is "expected to be rare".

What HMRC Decides

Once HMRC receives your application, three things can happen:

1. HMRC agrees the full amount—the tax is postponed, confirmed in writing
2. HMRC agrees a partial amount—some tax is postponed, the remainder is payable immediately
3. HMRC disagrees entirely—a formal notification letter states the amount HMRC says is payable

There is no right to a statutory review of HMRC's postponement decision (ARTG2530). The only route to challenge a refusal is to the tribunal.

If HMRC Refuses

If HMRC refuses your application (in full or in part), you have 30 days from HMRC's notification to apply to the First-tier Tribunal to determine the postponement amount (section 55(3)(b)). You must make the referral yourself.

The tribunal's decision on postponement is final—section 55(6A) provides that there is no right of appeal to the Upper Tribunal on the postponement question, regardless of the normal appeal rights under sections 11 and 13 TCEA 2007.

The "Reasonable Grounds" Test

The statutory test is in section 55(6): the tribunal must postpone tax to the extent that there are "reasonable grounds for believing that the appellant is overcharged to tax."

The Court of Appeal considered what this means in Williams (Inspector of Taxes) v Pumahaven Ltd [2003] EWCA Civ 700. The key principles:

You do not need to prove your case. The Special Commissioner (approved by the Court of Appeal) held that the appellant "does not have to prove all the facts or succeed in all the legal arguments which will have to be proved or established at the hearing." But there must be "some firm basis for believing that the Appellant has been overcharged"—supported by evidence, not bare assertion.

Only obviously hopeless arguments fail. Park J (also approved by the Court of Appeal) said the only case where an argument could be dismissed without evaluation was if it was "palpable nonsense." Anything above that threshold deserves proper consideration.

This is a judgment, not a discretion. Peter Gibson LJ held that the evaluation of whether reasonable grounds exist is "a responsibility allocated to the Commissioners." If the grounds are reasonable, postponement must be directed—the tribunal has no residual power to refuse.

The threshold is deliberately lower than proving the appeal itself. But your application still needs substance—you must explain what you think is wrong with the assessment and why. A bare assertion that you "disagree," without reasons, is unlikely to satisfy the test.

Interest And Penalties During Postponement

Interest Runs From Day One

Postponement protects you from enforcement—it does not stop interest accruing. Schedule 53, paragraph 4 of FA 2009 is explicit: the interest start date is "the date which would have been the late payment interest start date if there had been no appeal."

Say the rate is 7.75%, and you postpone £20,000 of disputed income tax for 18 months and lose the appeal: interest for those 18 months alone comes to approximately £2,325. But interest runs from the original due date, not from the date of the assessment. If the assessment came long after that date, as closure notices after an enquiry and discovery assessments often do, you also owe interest for the earlier period, whether you postpone or pay.

But Penalties Are Suspended

This is the key benefit of postponement. Schedule 56, paragraph 1 (Item 18) of FA 2009 provides that the penalty date for postponed tax is 30 days after the date the tax becomes payable following the appeal. In other words:

• During postponement: no late payment penalties accrue on the postponed amount
• After the appeal ends: you get a fresh 30-day window to pay before any late payment penalties are triggered
• Non-postponed amounts: tax you did not postpone remains subject to normal penalty dates

If you are in Making Tax Digital for Income Tax, the new late payment penalties in Schedule 26 FA 2021 apply instead to tax for the year you join and later years; tax for earlier years stays under the rules above. The government has announced (not yet law) that the new penalties will apply to everyone who files a personal Self Assessment return from April 2027, in MTD or not; if the regulations follow the MTD ones, for people who join then that means tax for the 2027/28 tax year onwards. Postponed tax still attracts no penalty while it stays postponed, but once it becomes payable you have 15 days to pay before a penalty is charged (HMRC's guidance allows 30 days in your first year under the new rules).

The penalty suspension only applies to the postponed amount. If you disputed £50,000 but only obtained postponement for £30,000, late payment penalties run on the remaining £20,000 in the normal way. If you cannot afford to pay the non-postponed portion, you can apply to HMRC for a Time to Pay arrangement for that amount—TTP prevents late payment penalties and manages cash flow, though interest continues.

Changing the postponed amount: If the circumstances of the case change during the appeal, either you or HMRC can seek a new postponed amount under section 55(4): you to postpone more, or HMRC to make more of the tax payable. If you cannot agree a new figure, whichever of you wants the change can ask the tribunal to decide it, at any time before the appeal is determined. You do not need to start the process from scratch.

A note on penalties themselves: Penalties (as opposed to the underlying tax) cannot be formally postponed under section 55. For inaccuracy, failure-to-notify, late filing and late payment penalties, the rules that treat a penalty appeal like a tax appeal do not require you to pay the penalty before the appeal is decided (Schedule 24 paragraph 16(2)(a) FA 2007, with the same rule in Schedule 41 paragraph 18 FA 2008 and Schedules 55 and 56 FA 2009). In practice, HMRC operates an informal "standover" system (ARTG2570)—when you appeal a penalty, HMRC will normally suspend collection pending the appeal outcome.

Pay Upfront Or Postpone?

This is a financial decision that depends on your circumstances. Neither option is right or wrong.

If you pay upfront and win: HMRC refunds the tax with repayment interest at 2.75%.

If you postpone and lose: you owe late payment interest from the original due date at 7.75%.

The 5-percentage-point gap between these rates means postponement has a real cost if you lose. On the other hand, paying upfront ties up money you may need elsewhere—and if HMRC takes months to process the refund after a successful appeal, you bear the opportunity cost of that delay.

Here is a worked example, assuming late payment interest at 7.75%, repayment interest at 2.75%, and an original due date that fell when the appeal began:

The longer the appeal takes, the larger the gap. For a full explanation of how interest is calculated and the rate asymmetry, see our interest on unpaid tax guide.

When The Appeal Ends

Once the tribunal determines your appeal—or you settle the case with HMRC—the postponement ceases. Under section 55(9):

• Any tax still payable is due 30 days after HMRC issues notice of the total amount due
• Late payment penalties begin only if the tax is still unpaid 30 days after that due date (Schedule 56, Item 18), or 15 days after it under the new regime (Schedule 26 FA 2021, item 1)
• Any overpaid tax is repaid by HMRC

If you appeal further to the Upper Tribunal, section 56 TMA 1970 applies: the tax remains payable in accordance with the First-tier Tribunal's determination, despite the further appeal. There is no fresh postponement at the UT stage. If the Upper Tribunal or a higher court then changes the assessment so that more tax is due (for example because HMRC win their appeal), the extra tax is due 30 days after HMRC send you a notice of the total amount payable (section 56(3)(b) TMA 1970). If that extra tax becomes payable on or after 1 April 2026, late payment penalties now apply to it on the same clock as postponed tax: 30 days after its due date under Schedule 56, or 15 days under the new regime (section 264 of the Finance Act 2026).

VAT And Indirect Taxes: The Hardship Test

Section 55 applies only to direct taxes. For VAT, customs duty, and excise duty, the rules are fundamentally different. Customs and excise duty have their own rule in section 16(3) FA 1994: the tribunal will not hear an appeal about duty HMRC say is payable unless you have paid or deposited it, or HMRC have accepted security for it (or less or no security because of hardship), or the tribunal decides they should have. The rest of this section is about VAT.

Under section 84(3) VATA 1994, the tribunal cannot hear most appeals about a VAT assessment or the amount of VAT due unless you have first paid or deposited the VAT HMRC say is payable. This is a jurisdictional requirement, not a procedural one. The exception is hardship under section 84(3B): ask HMRC first, and if they are not satisfied, ask the tribunal. Hardship lets the appeal go ahead without payment, but it doesn't change when the VAT is due: late payment interest and penalties keep building up until you pay (ARTG3320). A Time to Pay arrangement can stop further penalties, though interest still runs.

The hardship test is much harder to satisfy. Under section 55, you show your appeal has a solid basis. Under section 84, you must prove that paying the disputed tax would cause you actual financial hardship—having the money but preferring not to pay is not enough. In HMRC v Elbrook (Cash & Carry) Ltd [2017] UKUT 181 (TCC), the Upper Tribunal held that available borrowing facilities must be taken into account when assessing hardship.

Important: You can still file a VAT appeal without paying first—the distinction is between making the appeal (preserving your 30 days deadline) and the tribunal entertaining it (proceeding to a hearing). File first, then deal with payment or hardship.

Accelerated Payment Notices

If you have received an accelerated payment notice (APN) under FA 2014, s.219, section 55 cannot help you. Section 224 FA 2014 restricts the power to postpone tax where an APN has been given. If tax was already postponed when the APN is given, the postponement ends at that point: the tax is due within 90 days of the notice or, if you make representations, by the later of the end of those 90 days and 30 days after HMRC tell you their decision on them (s.55(8B)–(8E) TMA 1970). APNs apply to participants in tax avoidance schemes notified under DOTAS or subject to a GAAR counteraction. You cannot appeal against an APN itself: the only challenges are written representations to HMRC within 90 days of the notice and, after that, judicial review (see our guide to accelerated payment and follower notices). If you have received an APN and are unsure of your position, this is a situation where professional advice is particularly important.

Template: Postponement Application Letter

Below is a template you can adapt. Send it to HMRC at the address on your assessment or closure notice, ideally at the same time as your notice of appeal.

[Your name]
[Your address]

[Date]

[HMRC office address from your notice]

Your reference: [UTR / HMRC reference]

Dear Sir or Madam,

Application for postponement of tax under section 55 TMA 1970

I write further to the [amendment / closure notice / assessment] dated [date] in respect of [tax year / period]. I appealed this decision on [date of appeal / I am appealing separately by letter of today's date].

Under section 55(3) of the Taxes Management Act 1970, I apply for postponement of [£amount] of the tax charged, being the amount by which I believe I have been overcharged.

Grounds for believing I have been overcharged:

[Set out your reasons—these should mirror your grounds of appeal. Explain briefly why you believe the tax is wrong, referencing the specific issue in dispute.]

I request that this amount be postponed pending the determination of my appeal.

Yours faithfully,

[Your name]

Key Legislation And Resources

Legislation

• Section 55, TMA 1970—postponement of tax pending appeal
• Section 56, TMA 1970—payment where there is a further appeal
• Section 84, VATA 1994—hardship test for VAT
• Section 16, FA 1994—pay-first rule and security for customs and excise duty appeals
• Schedule 53, FA 2009—interest during postponement
• Schedule 56, FA 2009—late payment penalty dates (Item 18)
• Section 224, FA 2014—APN restriction on postponement

HMRC Guidance

• ARTG2500–2570—postponement of tax pending appeal
• ARTG8930—payment after tribunal decision

Related Guides On This Site

• How to appeal to the tax tribunal—the appeal process, including where postponement fits
• Interest on unpaid tax—full interest framework and rate asymmetry
• Discovery assessments—challenging s.29 assessments
• After your tax tribunal decision—what happens when the appeal ends
• Writing grounds of appeal—your grounds double as postponement grounds
• Settling your tax tribunal case—what happens when the appeal resolves by agreement
• HMRC says you've underpaid tax—Simple Assessments, where you query first and postpone in two stages

This article is for informational purposes only and does not constitute legal or tax advice. For advice specific to your situation, consult a qualified tax adviser, accountant, or solicitor.