In Bulkliner Intermodal Ltd v HMRC (TC00677 – 27 September), a company (B) discovered that another company had been using its VAT registration number. It informed HMRC of this, and took court proceedings against the other company. However HMRC issued assessments charging output tax in respect of invoices which the other company had issued. B appealed, and HMRC subsequently withdrew the assessments. B applied to the First-Tier Tribunal for costs, contending that HMRC had acted unreasonably in issuing the assessments. The Tribunal dismissed the application. Judge Berner held that the effect of Tribunal Procedure (First-Tier Tribunal) (Tax Chamber) Rules, SI 2009/273, was that the Tribunal’s jurisdiction was ‘limited to considering actions of a party in the course of “the proceedings”, that is to say proceedings before the Tribunal whilst it has jurisdiction over the appeal.
It is not possible under the 2009 Rules, any more than it was under the Special Commissioners’ regulations, for a party to rely upon the unreasonable behaviour of the other party prior to the commencement of the appeal, at some earlier stage in the history of the tax affairs of the taxpayer, nor, even if unreasonable behaviour were established for a period over which the Tribunal does have jurisdiction, can costs incurred before that period be ordered.’ On the evidence here, while it was arguable that HMRC had acted unreasonably in issuing the assessments, it had not acted unreasonably in defending or conducting the proceedings, and ‘the decision to withdraw the assessment was taken and notified in a timely fashion in the context of the commencement of the appeal process’.
Why it matters: This decision shows a weakness in the power of the First-Tier
Tribunal to award costs. The Tribunal can only award costs against HMRC where it has acted unreasonably after the appeal has been made. The Tribunal has no power to award costs where HMRC acted unreasonably in issuing an assessment, unless the unreasonable behaviour has continued after the appeal has been lodged.
In Bulkliner Intermodal Ltd v HMRC (TC00677 – 27 September), a company (B) discovered that another company had been using its VAT registration number. It informed HMRC of this, and took court proceedings against the other company. However HMRC issued assessments charging output tax in respect of invoices which the other company had issued. B appealed, and HMRC subsequently withdrew the assessments. B applied to the First-Tier Tribunal for costs, contending that HMRC had acted unreasonably in issuing the assessments. The Tribunal dismissed the application. Judge Berner held that the effect of Tribunal Procedure (First-Tier Tribunal) (Tax Chamber) Rules, SI 2009/273, was that the Tribunal’s jurisdiction was ‘limited to considering actions of a party in the course of “the proceedings”, that is to say proceedings before the Tribunal whilst it has jurisdiction over the appeal.
It is not possible under the 2009 Rules, any more than it was under the Special Commissioners’ regulations, for a party to rely upon the unreasonable behaviour of the other party prior to the commencement of the appeal, at some earlier stage in the history of the tax affairs of the taxpayer, nor, even if unreasonable behaviour were established for a period over which the Tribunal does have jurisdiction, can costs incurred before that period be ordered.’ On the evidence here, while it was arguable that HMRC had acted unreasonably in issuing the assessments, it had not acted unreasonably in defending or conducting the proceedings, and ‘the decision to withdraw the assessment was taken and notified in a timely fashion in the context of the commencement of the appeal process’.
Why it matters: This decision shows a weakness in the power of the First-Tier
Tribunal to award costs. The Tribunal can only award costs against HMRC where it has acted unreasonably after the appeal has been made. The Tribunal has no power to award costs where HMRC acted unreasonably in issuing an assessment, unless the unreasonable behaviour has continued after the appeal has been lodged.
