Upper Tribunal Tax and Chancery Chamber

UT (Tax & Chancery) UT/2022/000099 - [2024] UKUT 00184 (TCC)

Fecha: 24-Abr-2024

Introduction and summary

Introduction and summary

Ulster Metal Refiners Limited (“the Appellant” or “UM”) is a company based in Northern Ireland of which Mr Henry Donaldson is the director. The Appellant appealed to the FTT against a decision made by HM Revenue & Customs (“HMRC”) to deny credit for input tax on the basis that it knew or should have known that the transactions in question were connected with fraud. On 12 August 2021, the FTT issued its decision (“the FTT Decision”) allowing the Appellant’s appeal in relation to around 90% of the VAT denied.

The Appellant’s appeal had been allocated as “complex” under the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (“the FTT Rules”), and the Appellant had not opted out of costs. On 7 September 2021, the Appellant applied to the FTT for an order that its costs be paid by HMRC.

On 7 April 2022, the FTT issued a decision (“the Costs Decision”) refusing that application on the basis that:

(1)

there was no “clear winner”;

(2)

some of Mr Donaldson’s evidence had been untruthful; and

(3)

Mr Donaldson had conducted the litigation “tactically” and failed to act with candour.

The UT (Judge Jonathan Richards, as he then was) granted the Appellant permission to appeal against the Costs Decision on the following ground:

“The FTT erred in concluding that there was ‘no clear winner’ of the substantive appeal. It should have concluded the Company was the ‘clear winner’ and gone on to consider whether the criticisms it made of the Company’s conduct of the litigation (when weighed against the criticisms it made of HMRC’s conduct) justified an exception to the general rule that the Company should have its costs of the substantive appeal.”

For the reasons explained in the main body of this judgment, we find that the Appellant was the “clear winner” because it had succeeded in relation to around 90% of the disputed VAT, and that the FTT had therefore made an error of law. From that starting point, we reduce the Appellant’s costs to take into account the fact that HMRC had been successful in part, and make a further reduction to reflect Mr Donaldson’s conduct. Overall, we award the Appellant 40% of its costs.