Upper Tribunal Tax and Chancery Chamber

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

Fecha: 24-Abr-2024

The parties’ submissions

The parties’ submissions

49.

Mr Bedenham submitted that it was HMRC’s conduct that was relevant, and had HMRC properly assessed their evidence about the Irwin deals, the Appellant would not have incurred any related costs. Although he did not seek to go behind the FTT’s findings about Mr Donaldson’s dishonesty or his litigation conduct, Mr Bedenham submitted that none of this would have arisen had HMRC recognised that their case could not succeed. In particular, any findings about dishonesty relating to the Irwin deals were of little or no relevance, given that the burden of proof rested on HMRC and they had failed to prove the deal chains. Mr Bedenham also said that Mr Donaldson’s conduct did not increase the costs of the appeal “in any material way”.

50.

Mr Puzey’s main submissions in response, with which we agree, were that:

(1)

There is a significant difference between HMRC’s failure to make good their case and Mr Donaldson’s conduct: HMRC had completely reviewed the evidence to support the tracing, and the officers in question gave honest evidence, whereas Mr Donaldson was untruthful, unreliable, unsatisfactory and improvisatory.

(2)

It is correct that the issue of whether Mr Donaldson “knew or should have known” the Irwin deals were connected with fraud only arose for determination if HMRC had first proved the deal chains. However, both issues formed part of a single hearing, and HMRC spent considerable time before the hearing reviewing Mr Donaldson’s multiple witness statements in the context of the rest of the evidence; preparing and carrying out cross-examination, and generally preparing HMRC’s case on the “knew or should have known” issue. Had Mr Donaldson given honest, straightforward evidence, that time and the related costs would have significantly reduced. Any sum awarded to the Appellant should therefore reflect the “unwarranted increase” in time and costs caused by Mr Donaldson’s conduct.

51.

In addition to those main points, Mr Puzey also submitted that a person such as the Appellant, who had dishonestly sought to obtain money from public funds by making a fraudulent VAT repayment claim, deserved an additional costs sanction so as to reflect the public interest and to act as a deterrent.