Judgment summary
This is a decision of the Upper Tribunal (Tax and Chancery Chamber) on a renewed application, following an oral hearing, for permission to appeal a First-tier Tribunal costs decision. The FTT had ordered the Applicant, Strauss Phillips & Co Ltd, a firm of accountants, to pay HMRC's costs of £13,068.42 for wasted costs and unreasonable conduct in representing a taxpayer, Gary Elden, in his appeal against closure notices (1).
Judge Rupert Jones had already refused permission on the papers on all eight grounds pursued. The Applicant renewed the application for an oral hearing, relying on the same eight grounds (11-14).
Following the hearing on 2 October 2026, the Tribunal refused permission to appeal on every ground, finding no realistic prospect of success and no arguable error of law in the FTT's Costs Decision (97).
Background
Mr Elden's underlying appeal concerned closure notices issued to him by HMRC on 15 February 2021 under section 28A(1B) and (2) of the Taxes Management Act 1970, for the tax years 2013-14 and 2014-15 (6).
In a strike out decision dated 8 January 2026, Gary Elden v Revenue and Customs [2026] UKFTT 41 (TC), the FTT refused HMRC's application to strike out Mr Elden's appeal under rule 8(3)(b) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2020, but criticised the Applicant's conduct in representing Mr Elden (7). That strike out decision was never appealed by either party and Mr Elden's substantive appeal remains ongoing (9).
In its Costs Decision released on 15 April 2026 (Gary Elden v Revenue and Customs TC/2023/09420), the FTT refused HMRC's application for costs against Mr Elden under Rule 10(1)(b) of the FTT Rules, but granted costs against the Applicant under Rule 10(1)(a) (wasted costs) and Rule 10(1)(b) (unreasonable conduct), based on the Applicant's conduct prior to the strike out hearing (4-5).
The FTT found that case summaries in the Appellant's skeleton argument had been produced using AI and had not been verified for accuracy with sufficient care, and identified further specific instances of unreasonable conduct, including a letter of 2 December 2024, continued false assertions about documents provided, shifting positions on a witness statement, a letter of 30 October 2023, an application for further and better particulars, and multiple missed Tribunal deadlines (27, 32-35 of the Costs Decision as reproduced).
The FTT made a wasted costs order of £2,043.30 for costs caused by the inaccurate AI-generated case summaries, and a further summary assessment of 80% of the remaining £13,781.40 (after excluding £861.80 for bundle preparation), giving a total costs award of £13,068.42 against the Applicant alone (27, 31, 37, 40, 43).
The FTT refused permission to appeal the Costs Decision on 2 July 2026. The Applicant renewed its application to the Upper Tribunal on 10 July 2026, and Judge Jones refused permission on the papers on 24 August 2026 on all eight grounds. The Applicant then sought reconsideration at an oral hearing, held on 2 October 2026 (11-15, 19).
Core dispute
The dispute concerned whether the FTT's Costs Decision disclosed an arguable error of law such that permission to appeal should be granted, on eight grounds advanced by the Applicant.
The grounds were: (1) failure to identify an adequate evidential foundation for serious findings; (2) failure to apply the correct legal threshold for negligence and professional incompetence; (3) failure to apply the correct approach to causation; (4) failure to identify the recoverable loss; (5) failure to explain the rejection of the Applicant's explanation and the basis for findings of professional negligence; (6) failure to distinguish between professional error, negligence and unreasonable conduct; (7) positive findings of fact not supported by identified evidence; and (8) that the earlier refusals of permission did not engage with the grounds advanced (30-86).
A procedural issue also arose at the hearing concerning the identity of the Applicant's representative, Mr Josh Marsh, after HMRC's representative suggested he recognised Mr Marsh's voice as that of Mr Bradley Strauss (also referred to as Mr John Smith) (16, 20-22).
Court findings
The Tribunal was satisfied it was just and fair for Mr Marsh to represent the Applicant, having provided an address as required by Rule 11(2) of the UT Rules, and declined to investigate HMRC's objection as to his identity, treating the matter as irrelevant to the permission application (18, 22).
On Ground 1, the Tribunal found the FTT had identified the evidential material relied upon, including the AI-generated case summaries and the findings in the strike out decision, and that the Applicant's submissions amounted to no more than disagreement with the FTT's fact-finding (34-49).
On Ground 2, the Tribunal found the FTT had correctly identified and applied the legal thresholds for wasted costs and unreasonable conduct, citing specific paragraphs where the tests were applied to the facts (53-59).
On Ground 3, the Tribunal found the FTT had correctly applied the causation test, both for the £2,043.30 wasted costs award, supported by HMRC's costs schedule, and for the 80% summary assessment of the remaining £13,781.40, which was a reasonable and proportionate assessment given the moderate sums involved (61-68).
On Ground 4, the Tribunal found the Costs Decision did identify which elements of HMRC's costs were additional to its ordinary costs and arose from the Applicant's criticised conduct (71-73).
On Ground 5, the Tribunal found the FTT had given sufficient reasons for rejecting the Applicant's explanation regarding use of AI, and that the Applicant had been afforded procedural fairness throughout (75-78).
On Ground 6, the Tribunal found the FTT had properly applied the differing tests for professional error, negligence, professional incompetence and unreasonable conduct (80-82).
On Ground 7, the Tribunal found the FTT's positive findings of fact were supported by identified evidence and reasons (84-85).
On Ground 8, the Tribunal found the Applicant had been given repeated opportunities to make representations, including at the oral hearing before the UT, and that other consequences such as possible ICAEW disciplinary proceedings were beyond the UT's jurisdiction (88-95).
The Tribunal concluded that none of the grounds raised a novel point, matter of public importance, or point of principle, and that there was no other compelling reason to grant permission (96).
Outcome
Permission to appeal to the Upper Tribunal was refused on all eight grounds, as none held a realistic prospect of success and none raised an arguable error of law in the FTT's Costs Decision (97). The FTT's costs order against Strauss Phillips & Co Ltd, in the sum of £13,068.42, therefore stands.
Major issues / areas of contention
- Whether the FTT identified an adequate evidential foundation for its findings of unreasonable and negligent conduct against the Applicant.
- Whether the FTT applied the correct legal threshold for negligence and professional incompetence under Ridehalgh v Horsefield and Distinctive Care Ltd v HMRC.
- Whether the FTT applied the correct approach to causation in linking the Applicant's conduct to specific costs incurred by HMRC.
- Whether the FTT adequately identified the recoverable loss, including the basis for excluding only £861.80 and applying an 80% summary assessment to the remaining costs.
- Whether the FTT sufficiently explained its rejection of the Applicant's explanation regarding the use of AI in producing case summaries.
- Whether the FTT properly distinguished between professional error, negligence and unreasonable conduct as separate legal categories.
- Whether specific positive findings of fact, including those concerning the letters of 2 December 2024 and 30 October 2023, were supported by identified evidence.
- Whether the Applicant had a fair opportunity to be heard, given the earlier refusals of permission on the papers and potential wider consequences such as ICAEW disciplinary proceedings.
- A procedural dispute at the oral hearing over the identity of the Applicant's representative, Mr Josh Marsh, which the Tribunal declined to investigate further.