Judgment summary
This is a decision on costs following the Tribunal's substantive decision in [2025] UKFTT 902 (TC), in which the Appellant's appeal was dismissed after no-one attended on its behalf at the hearing on 8 July 2025 (paras 2-6).
HMRC applied for costs against the Appellant under Rule 10(1)(b) for unreasonable conduct, and for wasted costs against the Appellant's representative, F4Tax Ltd, under Rule 10(1)(a) (para 8).
The Tribunal found that the Appellant's conduct, including that of its representative, had been unreasonable, and ordered the Appellant to pay HMRC's costs, summarily assessed at £13,000 (paras 20-34, 63-64). The Tribunal found that F4Tax Ltd was the Appellant's representative and that its conduct was negligent in the Ridehalgh sense, but declined to make a wasted costs order because HMRC had not established a causative link between F4Tax's conduct and any specific costs incurred (paras 46-56).
Background
The underlying appeal concerned a notice of enquiry issued in respect of the Appellant, as nominated partner of Coronation Film Partners LLP, relating to over £1m (para 32). The sole ground of appeal was that no valid notice of enquiry had been issued to the nominated partner in accordance with TMA 1970 section 12AC(1)(a) (para 3).
HMRC had in fact sent two letters: a 'Defective Letter' sent to the wrong entity, and a 'Company Secretary Letter' correctly addressed to Sovereign Corporate Limited (SCL) at the correct address (paras 4-5). The Appellant focused exclusively on the Defective Letter and ignored the Company Secretary Letter, meaning the appeal was, in the Tribunal's view, always bound to fail (paras 4-6).
At the final hearing on 8 July 2025, no-one attended on behalf of the Appellant. Mr Gary Clarkson, named as the Appellant's representative since 2022 and later corresponding on F4Tax Ltd's headed notepaper as a 'consultant' with that firm, did not appear, and telephone enquiries to F4Tax on the day produced inaccurate or incomplete information (paras 21-24, 31).
Core dispute
The dispute was whether the Appellant had acted unreasonably in conducting the proceedings under Rule 10(1)(b), such that a costs order should be made against it, and whether F4Tax Ltd, as the Appellant's alleged representative, should be liable for wasted costs under Rule 10(1)(a) and section 29(4) of the Tribunals, Courts and Enforcement Act 2007 (paras 8, 14, 37).
A subsidiary dispute was whether F4Tax Ltd had in fact acted as the Appellant's representative at all, F4Tax's director, Mr Farley, denying any representative involvement and asserting that Mr Clarkson, not F4Tax, was the relevant representative (paras 39-41).
A further issue, once negligence was found, was whether HMRC could establish a causative link between F4Tax's conduct and specific costs incurred by HMRC, as required for a wasted costs order (paras 50-56).
Court findings
The Tribunal held that the Appellant's conduct was unreasonable within Rule 10(1)(b): it pursued for several years a ground of appeal that was, on the face of the correspondence, always going to fail, and it failed, without good reason, to attend or ensure representation at the final hearing (paras 20, 29, 32).
The Tribunal found that F4Tax Ltd was the Appellant's representative, based on Mr Clarkson's use of F4Tax's headed notepaper, his description of himself as a consultant with the firm, and the responses received from F4Tax when telephoned on the hearing day (paras 43-46).
The Tribunal found that F4Tax's conduct was unreasonable and, alternatively, negligent in the Ridehalgh v Horsfield [1994] Ch 205 sense, given the failure to ensure continuity of representation, attend the hearing, or communicate promptly and candidly about any issues (paras 47-49).
However, the Tribunal held that HMRC had failed to discharge the burden of identifying specific costs caused by F4Tax's negligent conduct, since the hearing on 8 July 2025 proceeded despite the Appellant's absence, and no postponement had been sought (paras 50-55). Accordingly, no wasted costs order could be made against F4Tax Ltd (para 55-56).
Outcome
The Tribunal ordered that HMRC's costs be paid by the Appellant, Sovereign Corporate Ltd, under Rule 10(1)(b) (para 34, 36).
The costs were summarily assessed at £13,000, after adjustments reflecting the fact that the February 2025 adjournment was not anyone's fault and that some of HMRC's costs related to arguments not engaging with the obvious point in the appeal (paras 57-63).
The costs were ordered to be paid within 28 days of service of the decision on Sovereign Corporate Ltd (para 64).
The application for a wasted costs order against F4Tax Ltd under Rule 10(1)(a) was dismissed, notwithstanding the finding of negligence, due to the absence of a demonstrated causative link to HMRC's incurred costs (paras 50-56).
The Tribunal noted that this might be a Pyrrhic victory for HMRC, as SCL is a Jersey registered company which, according to Jersey Companies House online records, had recently ceased to exist, and the Tribunal was not told whether the LLP had another nominated partner (para 65).
Major issues / areas of contention
- Whether the Appellant acted unreasonably in bringing, defending or conducting the proceedings under Rule 10(1)(b), including by failing to attend the final hearing.
- Whether F4Tax Ltd was, as a matter of fact, the Appellant's representative for the purposes of a wasted costs application, despite F4Tax's denial of any representative involvement.
- Whether F4Tax Ltd's conduct was improper, unreasonable or negligent within the meaning of section 29(4) of the Tribunals, Courts and Enforcement Act 2007 and the Ridehalgh v Horsfield test.
- Whether HMRC had established a causative link between F4Tax Ltd's conduct and specific costs incurred, as required for a wasted costs order under Rule 10(1)(a).
- The proper approach to summary assessment of costs, including adjustments for overlapping preparation between an adjourned hearing and the final hearing.