TC09532 - [2025] UKFTT 00568 (TC)

The Tribunal does not have the costs jurisdiction of the higher courts. Other than appeals allocated to the Complex category, there is no general rule that the unsuccessful party to Tribunal proceedings will pay the costs of the successful party. The Appellant’s appeal was allocated to the Standard category where, usually, each party bears their own costs of the proceedings. Tribunal Rule 10(1)(b) gives the Tribunal the power to make an order for costs against a party in Standard category appeals, but only if it considers that that party has acted unreasonably in bringing, defending or conducting the proceedings.

When considering whether a party has acted unreasonably, the test I should apply is what a reasonable person would reasonably have done, or not done, in the circumstances of this appeal.

I consider that HMRC did not take an unreasonable time to agree the Appellant’s hardship application in this appeal. HMRC did not act unreasonably in not objecting to the lateness of the Appellant’s appeal to the Tribunal. It was the Appellant (not HMRC) who asked the Tribunal to list a hearing to formally decide the Appellant’s application to make a late appeal. Although the Appellant asked for this hearing on the basis that no discussions could take place until the issue of lateness was resolved, HMRC did not wait for the Tribunal to decide lateness before acting upon the fresh information provided by the Appellant in its notice of appeal. That fresh information led to the resolution of the substantive dispute, and the withdrawal of the Appellant’s appeal. In the circumstances, I do not consider that HMRC acted unreasonably in any aspect of these proceedings. In his email of 4 April 2023, withdrawing the Appellant’s appeal, Mr Moran seems to agree with this conclusion.

I can see that Mr Moran considers the Appellant had to spent considerable amounts in order to secure repayment of VAT. However, it is relevant to note that the Tribunal proceedings lasted only from 13 October 2022 to 12 April 2023. The behaviour that the Appellant complains about is HMRC’s original refusal of the claim in January 2022, and the time that HMRC took to repay the VAT claimed after the appeal was withdrawn on 4 April 2023. Neither of these actions are part of the Tribunal proceedings. The Appellant may consider that it had to file a Tribunal appeal in order to have a route to provide HMRC with the additional information that then resulted in HMRC’s change of view, but that does not mean that the way HMRC conducted the Tribunal proceedings was unreasonable.

It is for these reasons that I concluded that the Appellant had no likelihood of demonstrating that HMRC acted unreasonably in defending or conducting the proceedings.