Latest from the courts
In the First Tier Tribunal (FTT) case of Eurolaser IT Ltd regarding Kittel and Mecsek assessments and penalties:
- whether an agent knew or should have known of fraud in supply chain – yes
- whether such knowledge/means of knowledge to be attributed to Appellant – yes
- whether Mecsek requires HMRC to show reasonable steps not taken by Appellant – yes
- whether reasonable steps taken – no
- unsurprisingly, the appeal was refused
one interesting aspect was the award of costs.
Generally, in FTT cases the rule is that each party will usually bear its own costs.
However, it is worth recapping how the award of costs works via The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. In this instant case, the Appellant had not ‘opted out’ of the costs protection regime set out in rule 10(c)(ii) of the Rules. Consequently, the FTT ordered that Eurolaser must pay HMRC’s costs – a sting in the tail. So, what are the rules? (Where relevant here)
Orders for costs
“10.—(1) The Tribunal may only make an order in respect of costs (or, in Scotland, expenses)—
(a) under section 29(4) of the 2007 Act (wasted costs) [and costs incurred in applying for such costs];
(b) if the Tribunal considers that a party or their representative has acted unreasonably in bringing, defending or conducting the proceedings;
(c) if—
(i) the proceedings have been allocated as a Complex case under rule 23 (allocation of cases to categories); and
(ii) the taxpayer (or, where more than one party is a taxpayer, one of them) has not sent or delivered a written request to the Tribunal, within 28 days of receiving notice that the case had been allocated as a Complex case, that the proceedings be excluded from potential liability for costs or expenses under this sub-paragraph”
So, in “Complex” cases, an Appellant must submit a request that the case is excluded from the potential liability of costs being awarded, and HMRC must request repayment of its costs incurred in defending the case.
What are Complex cases?
These are complicated cases which:
- require lengthy or complex evidence
- require a lengthy hearing
- involve complex or important principles or issues
- involve large amounts or tax or penalties
such cases are allocated to a ‘track’ within the FTT system.
Other cost awards
It is also worth remembering that costs can be awarded if the appeal is brought unreasonably. This usually means that it is vexatious or frivolous, so proper advice should be sought when considering an appeal.