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Can I win costs against HMRC?

25th Oct 2013
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With the change of Tribunal rules a few years ago, the automatic right to costs in the event of a successful Appeal was abolished.

However, a taxpayer can apply for costs against HMRC under Rule 10 of the Tribunal Procedure (FTT) Rules (SI 2009/273). A recent case provides helpful guidelines for the situation where HMRC acted unreasonably in defending their decision.

The underlying decision was whether the supply of hotel accommodation should be standard rated irrespective of the recipient of the supply, and whether or not the recipient would actually occupy the room. The Tribunal found that HMRC should have realised its case did not have a reasonable prospect of success. In reaching this decision, the Tribunal took into account:

  • No authority even by analogy was presented;
  • Unless expressly stated in the legislation, the identity of the recipient of a supply is irrelevant to the status of the supply
  • Exceptions to exemptions are not interpreted narrowly
  • There was nothing in the wording of either the UK legislation or EU Directive which implied that the identity of the recipient was significant;

 For other taxpayers seeking to use this argument, they would have to provide a good argument that HMRC have been unreasonable. Additional guidance can be found in two previous cases; Bulkliner Intermodal Ltd (http://www.bailii.org/uk/cases/UKFTT/TC/2010/TC00677.html) and Thomas Holdings Ltd (http://www.bailii.org/uk/cases/UKFTT/TC/2011/TC01498.html). On other occasions, the Tribunal has denied such applications.

HMRC can, of course, seek to use the same Rule against the taxpayer. However, you might note that the Tribunal did take into account the resources available to HMRC. Comparable resources are available only to the very largest taxpayers.

(Roden; [2013]UKFTT 523; http://www.bailii.org/uk/cases/UKFTT/TC/2013/TC02911.html)

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