Upper Tribunal Tax and Chancery Chamber

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

Fecha: 24-Abr-2024

Submissions and discussion

Submissions and discussion

33.

On behalf of HMRC, Mr Puzey and Mr Millington submitted that Judge McNall had begun from the correct starting point because:

(1)

he had acknowledged the “general rule” that “the unsuccessful party will be ordered to pay the costs”;

(2)

he had recognised the Appellant as being the “arithmetical” winner; and

(3)

he had said (emphasis added) that it was “fair and just, to deprive UM (despite its success in relation to a large proportion of the deals of the ability to recover any of its costs”. In HMRC’s submission, the use of the term “deprive” only made sense if Judge McNall had first recognised that the Appellant was the “clear winner”.

34.

We acknowledge that Judge McNall began by setting out the general rule, and that he also recognised that the Appellant had succeeded in relation to around 90% of the disputed invoices. However, he also explicitly stated that “it does not seem to me as if the substantive appeal did produce a clear winner”, and he explained that conclusion as follows:

“Neither party really got what they wanted. UM ended up paying more tax than it wanted to (ie not getting back its input tax claimed on the Magee and PCB deals); and HMRC failed to get as much as it wanted (ie having to pay UM the input tax claimed on purchases from Irwin Enterprises Ltd). It does not seem to me as if the exact figures, and the fact that one may over-top another, really matter for the purposes of this analysis.”

35.

It is clear from this passage that Judge McNall began his analysis from the position that the Appellant was not the successful party. We have no hesitation in agreeing with Mr Bedenham that this was incorrect. Although the CPR does not apply in the FTT, and a more nuanced and flexible approach may be appropriate where both parties have succeeded in part, in this case there was no basis for departing from the normal starting point. The dispute related to specific identifiable deals; the Appellant succeeded in relation to 90% of those transactions, and HMRC in consequence applied a credit of £427,278 to its VAT account. On a common sense view, the Appellant was the overall winner, and the FTT should have begun its consideration of the costs position from that starting point. The fact that Mr Donaldson was dishonest does not change that: see Hutchinson cited above.

Conclusion on the starting point

36.

The FTT failed to begin its consideration of the costs position from the starting point that the Appellant was the clear winner, and this was an error of law.