TC09655 - [2025] UKFTT 01206 (TC)

We now come to the balancing exercise taking into account the foregoing circumstances and the overriding objective. We have taken the view that there will be considerable prejudice caused to HMRC if LP is permitted to give evidence again at a reinstated hearing. There will be prejudice both financial and reputational to the appellant both directly and to the sale of the business. However, this is prejudice of which the appellant was entirely aware both before and at the time of withdrawing the appeal, and we are not satisfied that any prejudice would be as catastrophic as suggested by Mr Borthwick.

The appellant was advised throughout by a firm of solicitors and by counsel, and it was on the basis of their advice that it withdrew the appeal. We have set out above our misgivings concerning Mr Borthwick’s evidence as to the reasons for that withdrawal. We consider that it is just as likely that it was because he was advised that the first day did not go well as it was because of his anxiety about ongoing litigation should HMRC be successful.

Furthermore, that anxiety must still be there. Although his evidence was that he thinks that he will get the “right result” if the appeal is reinstated (presumably on the advice of Dr Willets) the company still runs the risk of ongoing litigation should that result go against it. Mr Borthwick was unimpressive when faced by this possibility. He simply said that he would deal with it if that situation arose. Presumably that is something which he could have done if the company had continued with its appeal in December 2024 once the decision in that appeal had been released.

We have assessed the merits of the case and do not consider that the appellant has such a high prospect of success as to warrant Mr Paulin’s submission that the appellant has a right to property which attracts the protection of the ECHR.

But even if it does and thus attracts the “protection” of the doctrine of proportionality, it is clear to us that proportionality lies at the heart of the Rule 2 principle that we must deal with cases fairly and justly. So the appellant benefits from a consideration of proportionality in any event.

The prejudice to HMRC cannot be compensated for by an award of costs. The appellant has known about the implications of being successful or unsuccessful in his appeal since it first made its appeal in 2022. It was advised by counsel and a firm of solicitors throughout its preparation for and its attendance at the hearing. It was advised whether it should withdraw by those same legal advisers. It is our view that it was fully aware of the consequences of withdrawal at the time that it decided to do so. The financial and reputational consequences of that withdrawal, therefore, are of its own making.

We have considered all of the circumstances of this case and we have considered Rule 2. We have undertaken the relevant balancing exercise. We have concluded that, on balance, it would not be appropriate to reinstate the appeal.