A taxpayer was awarded costs against HMRC in respect of an aborted Tax Tribunal hearing, because even though HMRC had withdrawn their intention to fight the appeal: they had done this two weeks too late, and therefore the taxpayer had incurred additional costs. However, despite this win by the taxpayer, the First Tier Tribunal issued a strong wording that in future the boot could be on the other foot, and HMRC may claim expenses against taxpayers or their advisers in similar situations.
The decision by the Tribunal judge, Kevin Poole, was issued on 13 January 2014. in respect of a taxpayer, Mr Ping Kom Lam. Mr Lam’s appeal was due to be heard by the Tribunal. His advisers gave HMRC new information in December 2012, which persuaded HMRC to withdraw from the appeal. The Tax Tribunal judge decided that HMRC needed a reasonable period of time to consider the new material, but said they should have done so by 31 January 2013. Therefore, he concluded that the Mr Lam’s costs in the first 2 weeks of February had been incurred unnecessarily – due to HMRC’s delay. Mr Lam had made a claim for costs of £350, but the Tribunal decided that reasonable costs would have been £150: and ordered HMRC to pay that to him within 56 days.
At first glance this looks like a win for the taxpayer: albeit in respect of a very small sum. However, the judgement came with a strong warning. Judge Poole wanted HMRC and taxpayers and advisers to be aware that if they delayed in providing information to the other side in appeal cases before the Tribunal, and that once that information was supplied it led to the withdrawal of the other party from the hearing: then the side which had delayed providing the information could be penalised: whether that be HMRC or the taxpayer, or the adviser.
Judge Kevin Poole stated: “I should sound a note of warning to Appellants and their advisers. If it could be shown that an appellant was in possession of information or evidence that would have persuaded HMRC to withdraw its defence of an appeal, but for whatever reason that appellant withheld that information or evidence, and as a result put HMRC to the unnecessary effort and expense of continuing with the appeal until a much later date, HMRC may well have a claim for their own costs in respect of the appellant’s unreasonable conduct in doing so, even though the appeal itself is successful as a result of their withdrawal upon the eventual production of that information or evidence. In such circumstances, a wasted costs order might also be made against an adviser personally under section 29 4) of the Tribunals, Courts and Enforcement Act 2007, if the Tribunal found that adviser guilty of an improper, unreasonable or negligent act or omission”.
What does this mean for me?
Taking an appeal to the Tribunal can be a very effective way of bringing a tax enquiry or tax dispute to a conclusion. Taxpayers have a very good track record of winning appeals at the Tribunal. However, in carrying out the very detailed preparation necessary for a Tribunal hearing it frequently happens that one party or the other comes across information which may be crucial to the outcome of the case: and which had not previously been drawn to the attention of the other side. The judge is now warning that if this information is not brought to the other party’s attention at an early stage, then the Tribunal may award costs against the person who fails to share the information: if failing to do so means that the other party incurs unnecessary costs. HMRC use specialist appeal teams. Preparing for and taking a case to the Tribunal can be very worthwhile, but it is not an easy undertaking for unrepresented taxpayers or from tax advisers and accountants with little experience in this area. This recent decision comes as a warning that there is now an additional risk that taxpayers and advisers who don’t prepare for the hearing in a thorough and professional way could now also face having to pay some of HMRC’s costs: as well as experience showing that they are more likely to lose the hearing as well.
How Can Lynam Tax Appeal Experts Help Me?
HM Revenue & Customs use ‘Appeals’ specialists to present its cases at Tribunal. Lynam Tax Dispute Specialists have decades of experience in handling contentious tax appeals, and can assist taxpayers and their accountants and advisers; getting them the best results.
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