TC09510 - [2025] UKFTT 00501 (TC)

The first question for this Tribunal, before considering the Tarafdar questions, is what is the relevant period of time (and therefore the relevant actions) to consider when applying the Tarafdar questions.

The Appellant contends that the conduct that should be judges to be unreasonable starts when Officer King raised the question of whether the Appellant should apply for ADR, as this ‘influenced or caused the actions of the appellant to pursue the appeal proceedings via review and then the appeal process’.

I find quite plainly, given the extremely clear decision on this matter in Distinctive Care in the Upper Tribunal, that the relevant time period starts at the earliest from the time that the Appellant made the appeal to the Tribunal. The Upper Tribunal stated [41] (see above) ‘there is, in our view, no warrant in Rule 10(1)(b) for extending its clear wording to include an assessment of a respondent’s conduct prior to commencement of proceedings before the FTT – even if that conduct effectively forces an appellant to commence proceedings which should not reasonably have been necessary’.

The next matter to decide is when the relevant date is that the appeal came within the jurisdiction of the Tribunal – was it on 30 November 2023 when appeal was lodged, or some later date up to the latest date of 17 April 2024 when the Tribunal confirmed it had received the hardship approval from HMRC.

It is clear that the Tribunal does not have jurisdiction to consider an appeal until the payment has been made or hardship confirmed. This is made clear in the legislation ‘it shall not be entertained unless...’

The Upper Tribunal in Distinctive Care quoted with approval from Marshall & Co v HMRC [2016] UKUT 0116 (TCC) (which in turn quotes from Bulkliner Intermodal Limited v HMRC [2010] UK FTT 395 (TC)) saying:

I therefore consider that the period for which I need to consider the behaviour of the Respondent is the period after which the Tribunal had jurisdiction to hear the appeal. This period of time started on 14 March 2024, which is when HMRC confirmed they had accepted the hardship appeal.

Accordingly, I am considering the period between 14 March 2024 and the withdrawal by HMRC on 22 April 2024.

I then go on to consider the questions posed in Tarafdar:

The reason given by the Respondent is ‘The Respondents undertook a rigorous review of the decisions under appeal and concluded that it should not be defended. Following this review the Respondents exercised their right to withdraw from proceedings. The Respondents notified the parties of their intention to withdraw from proceedings in good time, 5 days later on 22 April 2024 prior to the filing of any defence.’

Whilst this sets out what happened, I do not consider it provides a complete answer as to why to Respondent withdrew. A complete answer would have explained exactly what it was that the ‘rigorous review’ found, that made the Respondent withdraw.

However, given questions b and c, I do not believe that this incomplete answer from the Respondents makes any difference to the outcome of the decision in this matter.

‘Could the party have withdrawn at an earlier stage in the proceedings?’

HMRC emailed the Tribunal, copying in the HMRC litigator of the appeal, on 14 March 2024. They wrote to the Appellant on the same date and this letter was received by post on 20 March 2024.

Given that the skeleton argument for the Respondents mentions the ‘rigorous review’ happening after the confirmation by the Tribunal to both parties on 17 April that as hardship had been approved the appeal could now proceed, it would appear that HMRC did not do anything in this matter between 14 March and 17 April.

It was of course possible for HMRC to have withdrawn from the appeal at any point after 14 March 2024. The answer to this question is therefore yes, HMRC could have withdrawn (slightly) earlier than they did.

‘Was it unreasonable for that party not to have withdrawn at an earlier stage?’

Omission to do something, as well as an actual action, can of course amount to unreasonable conduct.

In this case it appears that HMRC omitted to carry out a review for around 1 month, and then when the Tribunal confirmed that HMRC had 60 days to produce a statement of case, HMRC did review the case and withdrew within 4 working days.

I do not consider that the omission/delay of around 1 month in reviewing the case amounts to unreasonable conduct. It is reasonable for HMRC to wait for a short period of time for confirmation from the Tribunal of expected timelines before commencing such a review.

I note that HMRC were at the same time corresponding with the appellant about setting up ADR. That conduct appears to be entirely reasonable; there is nothing in the correspondence other than routine updates about where matters were regarding setting up the file.