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The Appellant’s costs application to the Tribunal
The Appellant’s costs application to the Tribunal
On 21 August 2024, Mr Moran emailed the Tribunal, as follows:
I am sorry for coming back to you guys however I feel the need to inform you before we go legal.
Mr Moran set out his understanding of the resolution reached with HMRC, and continued:
Anyway, [the Appellant] incurred a number of Legal costs and personal costs along the way, I have since tried to recover these costs through your Complaints team both tier 1 & 2 and they have refused. I do think they HMRC complaints team have struggled to grasp the seriousness of this case and how close we was to going to a tribunal last time.
My accountant tried to work with HMRC complaints team on the redress of these costs without going down the legal route and not only claiming the redress costs back but also claim the damage to both business and personal with my legal team. My legal team have a file ready to take to the courts with all emails and messages during the period.
As your complaints team do not agree with the redress I have but no choice but to take this down the legal route.
Please can you advise an address to send the letter to for a court hearing to reclaim the redress and damage caused to [the Appellant].
It is unclear whether the Tribunal sent a reply to this email.
On 9 October 2024, Mr Moran emailed the Tribunal again. This email was headed with the Appellant’s name and “Treat as Costs Application”. Mr Moran wrote:
I don’t believe that HMRC have been fair throughout this process. HMRC admitted fault on repaying a VAT repayment before we were about to proceed with a tribunal. I accepted the repayment of the VAT. However, there was additional legal costs involved with Legal representation, VAT experts and accountant who worked on this. I tried to cooperate with HMRC complaints team without going back down the legal route for the redress for the costs I incurred. There was also damage to business and personal route I can take this down with my legal team if we choose to go down this route. I am trying to work with HMRC and asks for a redress and the damages to personal and business will be forgotten about.
However, at this stage if the redress will not be paid then I have no choice but to take this legal again. I am quite happy to come to the tribunal as we were prepared last time with our case.
I look forward to hearing back from you with a the best route you want to take this?
I am happy to go through my legal counsel with a tribunal on the redress.
Or we can go down the courts route on redress & Damages to Business & Personal damages.
As HMRC were not copy recipients, the Tribunal forwarded this email to HMRC. While it was unclear whether Mr Moran’s email was intended for the Tribunal or for HMRC, given the heading of the email, the Tribunal asked HMRC to make representations on the Appellant’s email.
On 8 November 2024, HMRC replied to the Tribunal and to the Appellant’s accountant. In this email, HMRC noted that the application for costs was out of time. HMRC also stated that they were unable to respond to the application on the basis that it was out of time, the Appellant had given no reasons as to why it considered HMRC had acted unreasonably in their conduct of proceedings and there was no schedule of the costs claimed. HMRC also noted that the complaint made to HMRC related to issues concerning delay in the repayments. HMRC provided copies of the complaint letters issued by HMRC on 8 June 2023, 26 October 2023 and 7 August 2024.
On 10 December 2024, the Tribunal issued a letter on my instructions. In that letter, I drew the Appellant’s attention to Rule 10 of the Tribunal Rules. I explained that the Appellant must set out in writing to the Tribunal and HMRC the basis on which it considered that HMRC had behaved unreasonably in their conduct of the proceedings. I also required the Appellant to provide a schedule setting out the costs that it said it had incurred as a result of that unreasonable behaviour, and to make an application for permission to apply for costs out of time, explaining its reasons for the delay in making the costs application. The appellant was given 28 days to provide all of this information and material (i.e., until 7 January 2025). I informed both parties that HMRC would have 21 days thereafter to respond.
On 9 January 2025, Mr Moran asked for more time to respond on the basis that he had post-concussion syndrome, and found it hard to retain information, read emails and send emails. Mr Moran sent another email on 14 January 2025. The Tribunal acknowledged these emails on 17 January 2025, and reminded the Appellant that all communications sent to the Tribunal must be copied to the other party.
On 27 January 2025, the Appellant emailed again asking for an update. On 28 January 2025, the Tribunal sent a further letter on my instructions. I explained that although Mr Moran had asked for an extension of time, he had not explained how much longer he would require to provide the information. I explained that, to give Mr Moran more time but to also give all parties certainty, I would impose an unless order so that the application for costs would be struck out if the information was not provided by the deadline in the Unless order. The deadline selected was 9 May 2025, which was two years after the deadline by which the Appellant’s complete costs application should have been made to the Tribunal.
Later on, on 28 January 2025, Mr Moran emailed the Tribunal:
First of all I thank you very much for the extension of time, I hope we can complete this swiftly as it has dragged on for a number of years now.
Please find attached a schedule of costs in a spreadsheet along with invoices and bank statements etc.
These have been to submitted to HMRC previously and I do apologise as I thought the Tribunal and HMRC worked together, hence the reason you may not of seen these costs.
Mr Moran set out his understanding of the underlying dispute, and continued:
A lot of time effort and damage to [the Appellant]’s business happened in this period whilst HMRC held our business’s cash flow back.
I hope we can recover the costs and expenses incurred through the tribunal during this terrible time for our business and our family personally. I appreciate the tribunal cannot look at Damage to Business or Personal damage however my Barrister has the files for this separately. As mentioned previously I have post concussion syndrome so struggle to write and retain information to the standard I once did, again the doctors have put my fall down to stress due to this awful period of my life and still on going with HMRC.
Happy to work with you moving forward if you require anything else.
Attached to this email was a schedule which listed invoices with dates between January 2023 and March 2024 for two firms of solicitors and three accountants. 12 such invoices were included. Some of these invoices referred to the preparation and submission of accounts and CT returns; some invoices referred to work undertaken several months before, or several months after, the time of the Tribunal proceedings; and one invoice lacked sufficient detail for it to be possible to know what work had been undertaken or when.
The Appellant also included a list of payments described as “director loan” which appeared to show loans Mr Moran had made to the Appellant. With this schedule were several pages of the Appellant’s bank statements for the period 1 August 2022 – 31 July 2023.
The Appellant did not provide an explanation of why the Appellant’s application for costs had not been made by 10 May 2023. The Appellant also did not explain why it considered HMRC had acted unreasonably in its conduct of proceedings.
On 14 January 2025, the Tribunal wrote to the Appellant noting that there was no explanation for the delay in making the costs application, and stating that this should be provided as soon as possible. The Appellant was also asked to state whether it wished to have its application decided on the papers or at an oral hearing.
Later on, on 14 February 2025, Mr Moran emailed the Tribunal as follows:
Thank you very much for your email and sorry for any confusion on this. Throughout this long drawn out case my legal team have always broken this into three phases.
Phase 1 was the repayment of the VAT by HMRC which they admitted fault and repaid.
Phase 2 is the phase we are currently in, this is the reimbursement of costs that was incurred during this period of time with all expenses incurred recovered.
Phase 3 is damaged to business and personal during this time. We do have a case to take this into phase 3 with our legal counsel however I know this does not involve your good self’s at this time.
So to answer your questions on the attached email. Whilst this case has been going on since 2022 my business and health deteriorated drastically with the stress and worry. I found myself in hospital in the January 2023 having a blood / iron transfusion which they believed to be stress related. June 2023 I then collapsed and had a serious head injury and was diagnosed with Post Concussion Syndrome which has been the hardest 18 months of my life and only just returning to full capacity in work in 2025.
As this is personal circumstances I would prefer not to share my personal health records with HMRC. However, if Judge Bailey requests these then I have no problem gathering this information from my Hospital and Neurologist to present to Judge Bailey.
Mr Moran emailed the Tribunal on 17 February 2025, with copies of three medical letters. Unfortunately, the image of the first letter is blurred so cannot be read properly, but none of these letters appear to refer to post-concussion syndrome. The letters reveal that Mr Moran was admitted to hospital on 10 January 2023, and that he self-referred to hospital in June 2023. The reason for that self-referral is not discernible but I accept it was as the result of a collapse, as Mr Moran says.
The Tribunal wrote again to Mr Moran on my instructions on 20 February 2025. I noted the sensitivity for Mr Moran in sharing his personal information but explained that HMRC could comment only if the information provided had been shared. I gave the Appellant a further seven days to provide an explanation for the delay that it was willing to copy to HMRC. Upon receipt of this email, Mr Moran emailed the Tribunal to state that he had forwarded his emails to HMRC.
On 25 February 2025, Mr Moran emailed the Tribunal, with a copy of the HMRC complaints letter of 7 August 2024. Mr Moran wrote:
The reason my accountant could not submit VAT returns during the period of dispute was because no one knew if we should be charging 20% VAT (which HMRC was incorrectly stating) or 0% which we was found to be correct.
HMRC admitted fault and offset the monies owed to myself before we was about to attend the Tribunal last time out. A lovely lady called Sophie Jones from HMRC could see they was incorrect and authorised the money to be paid.
The work involved was not day to day costs as you can see from the spreadsheet previously attached, which included Legal, Accountants, VAT experts and Directors loans to the business. This is not day to day costs. All HMRC have done on each occasion has forced me down the avenue of the Tribunal wasting all parties time and money.
As stated on my previous email this is only phase 2 of recovering the costs that I personally incurred during this time. I am happy to take this to the high court including damage to business & personal if required.
On 11 March 2025, HMRC responded to the Appellant’s late claim for costs. HMRC noted that the Appellant had not fully complied with the Directions of 10 December 2024 as no explanation had been provided for why the Appellant considered HMRC to have acted unreasonably in their conduct of the Tribunal proceedings. HMRC stated:
The Appellant has not detailed why the respondents have been unreasonable in litigation. For reference the original late appeal was received by HMRC on 29 November 2022, hardship was granted on 6 January 2023, a late appeal hearing was scheduled for 17 April 2023 however the Appellant withdrew their appeal on 4 April 2023 after resolving the matter with the Respondents. The Respondents considered their actions in the conduct of the proceedings to be reasonable and the Appellant has confirmed this on numerous occasions including their withdraw letter dated 4 April 2023 attached. The Appellant’s view of the Respondents conduct prior to litigation is not relevant for a costs claim under Rule 10, and this has already been referred and dealt with by HMRC’s complaints department.
HMRC noted that the schedule of costs provided by the Appellant was not compliant with Rule 10, and that some of the costs appeared to have been claimed twice. HMRC continued:
The schedule contains huge amounts for things that are pre litigation or are not relevant to the proceedings, e.g., over £100,000 pounds of the costs refer to Director Loan account with such items as “covid kits test invoice” and “subcontractors and employee salaries” which are not recoverable. There is not sufficient detail in the schedule to determine what relates specifically to the appeal. The Respondents also contend that the costs claimed are not proportionate. The Appellant has claimed £166,771.69 for a late appeal that was settled before any preliminary matters were carried out.
In respect of the Appellant’s reasons for not making an application for costs by 10 May 2023, the Respondents noted:
Whilst the Respondents are sympathetic to the Appellant’s position with his health issues which have been detailed in the emails dated 17 and 20 February 2025, the Appellant was engaged in correspondence with the complaints team between April and October 2023 and then again in April 2024. The Respondents therefore contend that the Appellant has not explained the impact of his illness on his ability to make a valid costs claim to the Tribunal before 9 October 2024, and to date
Later on, on 11 March 2025, Mr Moran emailed the Tribunal to make the following points:
The email attached was thanking Sophie Jones for her hard work and that we had agreed the VAT was correct, let’s not get confused with the redress that was owed.
…
I appreciate Sophie’s timelines below but skirting around the main issue in which is recovering the costs for the work that was carried out by my legal representatives and monies I had to pay throughout whilst waiting for the VAT to be repaid by HMRC.
My Barrister has a large file with the Negligence to both Business & Personal which is phase 3 in our approach to all this. Phase 2 at this stage is recovering the costs that I incurred at the time and the redress so can we please focus on this.
I have previously been days away from attending a tribunal to recover the VAT and HMRC admitted fault, so I know how they like to keep kicking the can down the road and delaying thinking it will go away. I can assure you I am not going away until Justice is provided.
If there is double invoices for work done, there will be a reason behind this from my accountant I am pretty sure. If it is a double invoice submitted then we will apologise and we can deduct this from the redress.
I really do appreciate Sophie Jones and her hard work she does for HMRC, but for someone to question my integrity of my illness, I find this absolutely disgusting. I am happy to meet Miss Jones with my Neurologist and she can go through how horrendous the last two years of my life has been with my struggles.
To finalise, you can see Sophie’s email has slightly angered me this evening. I am a hard working man who has served my country and integrity is at the forefront of everything I do. Sophie has wrote a lot on her email, but we are here to recover the costs I incurred and for justice in the redress of my hard earned money. I am trying to move on with my new business… which is already two years behind due to VAT being held back and me having to use my hard earned money to cover invoices during the period of time HMRC held VAT monies back.
Judge Bailey, I thank you and I think there is enough evidence from both parties. Please can you make your decision.
On 21 March 2025, the Tribunal issued a letter dictated by me. This letter stated:
I appreciate that Mr Moran would like this issue resolved so that he can progress his business. However, looking through the papers that have been submitted on behalf of the Appellant in respect of this costs application, I cannot see where the Appellant has explained how HMRC’s conduct in the Tribunal proceedings is said to be unreasonable. The email sent by Mr Moran to the Tribunal on 4 April 2023 (provided by HMRC with their email of 11 March 2025) suggests that, at that stage at least, the Appellant had no complaint at all about the way HMRC conducted itself in their conduct in the proceedings before the Tribunal.
If Mr Moran still wishes me to decide the Appellant’s application now then I will do so. However, before I do that, I want the Appellant to clearly understand that, in the absence of any explanation of why the Appellant believes that HMRC’s conduct in the Tribunal proceedings was unreasonable, then the Appellant’s application for costs will inevitably fail.
The appellant has a further 14 days, either to:
confirm that it wishes to have its application for costs decided on the papers currently available to the Tribunal, or
provide the Tribunal and HMRC with a written statement providing the information sought at point 1 of the Tribunal’s letter of 10 December 2024, i.e. setting out the basis on which it considers that HMRC behaved unreasonably in their conduct of the proceedings, or HMRC’s representatives behaved improperly or negligently in the Tribunal proceedings.
If the Appellant chooses option (b), then HMRC will have 14 days from receipt of the Appellant’s explanation, to provide their response.
On 28 March 2025, Mr Moran emailed the Tribunal with further documents:
an invoice dated 2 August 2022, from the Appellant’s solicitor to Mr Moran;
the Tribunal Notice of hearing dated 13 March 2023, listing the lateness application;
the Appellant’s draft accounts for the year ended 31 July 2023;
a complaints letter dated 29 April 2024, from one of the Appellant’s agents to HMRC’s complaints team with an accompanying statement that the Appellant wished to claim £3 million from HMRC as compensation for the business and personal loss;
an MP letter dated 13 September 2022, seeking more time for the Appellant to avoid a winding up petition;
an email dated 16 January 2023, from the Appellant’s agent to the Tribunal;
an email dated 13 September 2022, from the Appellant’s supplier relating to the VAT treatment of their own supplies;
an email dated 19 July 2022, from the Appellant’s solicitor to the Appellant, advising that an appeal to the Tribunal would be late but, on the information supplied by Mr Moran, the Appellant would:
probably struggle to convince the Tribunal that you are eligible for VAT exempt status for the supply of the goods … I do not think that there is a good chance of you succeeding in the tax tribunal, and therefore the vat assessments and penalties are likely to stand. It may be that an appeal to the tax tribunal on the current facts would literally just delay the inevitable;
a further schedule setting out director’s loans; and
an email dated 16 October 2023 from Mr Moran to an agent, with points to add to the agent’s email to the HMRC complaints team.
In his covering email of 28 March 2025, Mr Moran wrote to the Tribunal:
I have attached a number of documents and copies of emails and what happened throughout the initial process where we had a date set for the tribunal to recover the VAT. As you were aware HMRC pulled out of the previous Tribunal before the trial thanks to Sophie Jones great work and admitted HMRC was at fault.
My point of view.
The un-care, un-cooperation, self centered nature of rare HMRC VAT officers, results in a complete meltdown of a good company’s cash flow into a financial crisis. It destroys a fine company’s future and a director’s hard work and loss in finance and mind.
Without the special professional help like solicitors, VAT claims specialist ongoing works the £300,000 VAT repayments would have been lost forever. [The Appellant] would have faced bankruptcy fully.
For HMRC finally accepted the errors to release the £300,000 VAT repayments, we paid out more than £67,000 to solicitors and specialists and further close to 100k in directors loans, this is the reason for the claims.
Judge Bailey – this is a legal expenses claim that is rightly and correctly within my rights. This is not compensation as HMRC suggested in their reply for their rejection. The only expenses accepted by HMRC was a goodwill offer of £250 of telephone bills to cover the hundreds of hours phone calls.
Without paying the specialist costs of over £67,000, we would have lost the £300,000 VAT repayment. We had the right to reclaim our legal fees as all businesses in the UK. We claim these Correctly and rightly. Not a compensation claim HMRC tried to make it be.
On 2 April 2025, HMRC emailed the Tribunal and the Appellant to state that they did not consider it was clear whether the Appellant was choosing option a) or b) as there was still no explanation of how it was said that they had acted unreasonably in the conduct of the proceedings.
Later on, on 2 April 2025, Mr Moran emailed the Tribunal and HMRC:
As you are aware I am not a legal expert and just a businessman trying to recover my expenses and my money I feel I am owed by HMRC.
Reference to the 21st of March 2025 email, I give Judge Bailey my legal right and my full authorisation to act and to make the right decision to recover my expenses. I hope the information submitted on the 28th of March by myself, there is enough information for you to make your final decision.
I believe the best of my knowledge I have sent enough evidence along with the valid costs and throughout this tribunal I believe that HMRC thought it was a compensation claim and not a legal Expense claim.
On 10 April 2025, the parties were informed that the Appellant’s application for costs would be decided on the papers, on or after 25 April 2025.
- Heading
- Introduction
- Outcome
- Background facts
- The Appellant’s dispute with HMRC
- The Appellant’s appeal to the Tribunal
- The Appellant’s complaints to HMRC
- The Appellant’s costs application to the Tribunal
- The requirements of Tribunal Rule 10
- The lateness of the application
- Whether the Respondents acted unreasonably
- Conclusions