Where taxpayers and HMRC cannot agree then the case can be heard at the Independent First Tier Tribunal (FTT), commonly known as the Tax Tribunal. In a recent case the Tribunal decided that HMRC had acted unreasonably – and were ordered to pay the taxpayer’s costs of taking the appeal.
If an appeal is designated as “complex” then both the taxpayer and HMRC can agree in advance of the hearing that the winner may be awarded costs by the Tax Tribunal. However, the taxpayer has the right to opt out of this before any hearing, so that they cannot be faced with having to pay HM Revenue and Customs’ costs. In non-complex cases costs can only be awarded where one of the parties has acted “unreasonably”. Last month the FTT decided that HMRC had acted unreasonably in a case brought by Nathanial and Rebecca Roden. The Tribunal therefore awarded costs against HMRC.
Mr & Mrs Roden had won an appeal to the FTT in September 2012, after HMRC had wrongly withheld a repayment of over £70,000 of VAT. They then applied for HMRC to pay their costs of taking the appeal – on the grounds that the taxman had “acted unreasonably” in defending the appeal.
Counsel for the Rodens argued successfully that HMRC should not have defended the appeal, as the VAT inspector’s interpretation of the relevant tax law was unsustainable. However, the Tribunal did caution that not every case which is lost by HMRC is suitable for awarding costs. The Tribunal judge approved an earlier decision which stated “it cannot be that any wrong assertion by a party to an appeal is unreasonable”. However, the judge went on to say that persisting in the face of an “unbeatable argument” would be unreasonable. The VAT inspector had persisted despite the fact that HMRC as a whole (and not just the individual officer concerned) ought to have known that they had “no reasonable prospect of success”.
What does this mean for me?
If you feel a tax inspector is pursuing a line of argument that is untenable in law, or based on a completely unreasonable interpretation of the facts, you may wish to have the matter tested at Tribunal. Generally, HMRC’s case will then be considered by a number of people within the department. However, that does not always prevent HMRC taking cases to the Tribunal that really should not to have gone there. In those instances it may be possible to not only win the main appeal, but also to get the taxman to pay your costs.
How can Lynam Tax dispute experts help me?
Our tax dispute experts have a massive amount of experience in negotiating settlements with HMRC, and also in taking cases through the relevant appeal channels: including the Tax Tribunal. We have also made a number of successful compensation claims against the taxman. If you wish to pursue an appeal to the Tribunal, or claim costs from HMRC, then you need specialist help.
*For a free, confidential chat about your tax affairs, don’t delay, call Paul Lynam now on 0845 643 9997
or Andrew Nutbrown on 07718 778710