Client Appealing Penalties attached to Investigation Settlement. In my opinion his arguments are weak, and have already been rebuffed by HMRC internal review; but client is now seeking FTT appeal. The case might arguably be classed as a "complex matter" due to client's permanent mental health condition, which is backed up by medical evidence. Settlement Agreement last year covered inter alia failure to submit tax returns for 8 years, as well as overclaims on tax returns that he had submitted, and penalties range from 12.5% to 35% and total £10k+
My questions are:
1. Costs: Assuming the case were to be classed as "complex", am I correct in assuming the client will not be awarded any costs whatsoever because he was indisputably at fault for at least one of the (rare) years in which he had submitted a tax return, by overclaiming tax relief (he prepared cash basis accounts for self-employment, but claimed £000s of sideways tax relief)? It's my (possibly misguided) understanding that tribunal costs awards are all or nothing; that such partial fault will render him ineligible for any award of costs for the other years even if his appeal against those other years' penalties succeeded.
2. Penalties: HMRC's internal reviewer alluded to the relatively light penalty percentages under the circumstances (which privately I agree with). Is there a danger HMRC might seek to increase those penalties, either at ADR, FTT level, or beyond? I've not been able to find any instance of a tribunal not only upholding a HMRC decision, but also varying it in the Revenue's favour. But this client has unusual circumstances, and frankly has been let off rather lightly thus far.
Any advice welcome on either or both of the above matters. As you may have gathered, I'm wholly opposed to taking this case any further; but have a litigous client whose mental condition promotes spurious decisions. I need to be certain of the above matters, as the client will devote the rest of his week searching vigourously for a precedent or statute to disprove anything he doesn't agree with.
Replies (10)
Please login or register to join the discussion.
My first concern would be to make sure you're not going to lose out as far as fees are concerned. Are we talking about narcissistic personality disorder by any chance? If so, it's only a matter of time before you become the subject of his wrath. I'd disengage in a flash if it was me.
Looks like a nightmare scenario that's almost certainly not going to end well. Solicitors spend a lot of their time defending the indefensible providing they get paid up front and take instructions however misguided.
I don't think accountant/client relationships work the same way - certainly I wouldn't take the sort of instructions that your client seems to be wanting you to take.
There might be some fall-out but I'd disengage now and subject to monies outstanding walk away with the reason that you can't fight a case that you believe is unwinnable.
His M.E. will hopefully prevent him from fighting you as well as HMRC. If he's going to fight you as well you may as well get the aggravation over and done with.
Worth mentioning, it's not just that he could be out his own costs, but - complex route - he could be on the hook for HMRC's costs too... that might damen his ardour somewhat...
He can of course opt out of the FTT costs regime (but if he's a narcissist, will he? Usually costs follow the event, but I think sometimes judges will split it into separate issues and allocate costs accordingly. However if he only wins on 1 point out of (say) 6, I'd have thought there's every chance he would be paying rather than receiving costs)... the only FTT costs decision I've seen recently was Mr Warren ...
http://www.bailii.org/cgi-bin/format.cgi?doc=/uk/cases/UKFTT/TC/2017/TC0...(warren)
Correct. The FTT does have the power to increase penalties, and has used it on a number of occasions.
Part of your (or your Advocate's) preparation is to review the penalties, and try to gauge whether this is a possible outcome.