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)).

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.

Late applications are possible under section 55(3A) if there has been a change in circumstances, or if HMRC accepted a late appeal. HMRC's own guidance (ARTG2520) says that refusing a late postponement application alongside an accepted late appeal "would 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.

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."

If you postpone £20,000 of disputed income tax for 18 months and lose the appeal, you owe 18 months of interest from the original due date at 7.75%—approximately £2,325.

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

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 your circumstances change during the appeal—for example, you discover additional grounds for challenge, or HMRC amends the assessment—you can apply to vary the postponed amount under section 55(4). This requires agreement with HMRC or a further tribunal determination. 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. However, 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:

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 only begin running after that 30-day window (Schedule 56, Item 18)
• 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.

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.

Under section 84(3) VATA 1994, the tribunal cannot hear your appeal unless you have first paid or deposited the disputed VAT—unless you obtain hardship relief under section 84(3B). This is a jurisdictional requirement, not a procedural one.

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 issued, the postponement ceases immediately (s.55(8B)–(8E) TMA 1970). APNs apply to participants in tax avoidance schemes notified under DOTAS or subject to a GAAR counteraction. 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 indirect taxes
• 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

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.