Judgment summary
This decision concerns an application by John Douglas Wardle, acting in person, for a protective costs order (PCO) in relation to an appeal brought by HMRC. HMRC have permission to appeal a First-tier Tribunal decision released on 19 June 2024, which allowed Mr Wardle's appeal against a closure notice denying his claim to entrepreneurs' relief on disposal of his interest in Biomass UK No 1 LLP ("the LLP") (paras 1-2).
The application was dealt with on paper, following written submissions from both parties dated 7 July 2026, 22 July 2026 and 31 July 2026 (para 1). Judge Jonathan Cannan applied the principles set out in Drummond v HM Revenue & Customs [2016] UKUT 221 (TCC) and refused the application (paras 8, 29, 32).
Background
The FTT allowed Mr Wardle's appeal, finding that the LLP had commenced its trade of selling electricity generated from wood waste and/or selling renewable obligation certificates by the relevant date, applying the three 'steps' identified in Mansell v HM Revenue & Customs [2006] STC (SCD) 605 at [93] (paras 2, 4).
HMRC's appeal to the Upper Tribunal was stayed pending the decision in Putney Power Ltd v HM Revenue and Customs [2026] UKUT 105 (TCC), released on 5 March 2026, in which the Upper Tribunal held that the correct approach to determining when a trade commences is a multi-factorial evaluation of the facts, rather than the Mansell test alone (para 3).
Following Putney Power, HMRC served an amended sole ground of appeal, contending that the FTT wrongly applied the Mansell test rather than undertaking a multi-factorial evaluation, and that on the correct approach the FTT would have been bound to find the LLP had not commenced trade by the relevant date, since the power plant was incomplete and incapable of generating income from the trade (paras 3-4).
Mr Wardle initially applied for a PCO shortly after HMRC's appeal was lodged, and renewed that application by an updated application dated 7 July 2026 (para 5).
Core dispute
The issue before the Upper Tribunal was whether to grant Mr Wardle a protective costs order, or some analogous form of costs protection such as an appeal costs order (ACO), in respect of HMRC's appeal (paras 5, 13).
The Tribunal considered the Corner House criteria as applied in Drummond: whether the issues raised are of general public importance; whether the public interest requires those issues to be resolved; whether Mr Wardle has a private interest in the outcome; the financial resources of the parties; and whether, absent a PCO, Mr Wardle would probably and reasonably discontinue the proceedings (paras 14, 27-29). The Tribunal also considered whether an ACO under the principles analogous to CPR 52.19 was appropriate (paras 8-12, 30-31).
Court findings
On general public importance, the Tribunal proceeded on the basis of HMRC's concession that the multi-factorial approach to determining when a trade commences is a matter of general public importance, while expressing reservations (paras 15-16).
On public interest, the Tribunal found that authoritative guidance on the correct legal approach had already been given in Putney Power, and there was no real public interest in the Upper Tribunal determining when the trade commenced on the particular facts of this case (paras 17, 19).
On private interest, the Tribunal found Mr Wardle had a clear private interest, with tax of some £87,000 at stake which he had paid and sought to recover, although this was not treated as a bar to a PCO (para 20).
On financial resources, HMRC estimated their costs of the appeal at some £42,000 and were represented by leading and junior counsel. Mr Wardle, acting in person, did not adduce evidence of his financial means but confirmed he had never suggested he lacked resources to satisfy an adverse costs order (paras 21-23).
On discontinuance, the Tribunal was not satisfied that Mr Wardle would probably withdraw his defence of the appeal in the absence of a PCO, notwithstanding his statement that it would not be prudent to continue without one (paras 24-26).
Weighing these factors, the Tribunal placed most weight on the absence of any real public interest in determining the trade-commencement question on these facts, and on Mr Wardle's apparent ability to meet an adverse costs liability (para 29). The Tribunal also declined to make an appeal costs order, having received no submissions specifically directed to that jurisdiction and no evidence of Mr Wardle's means, and was not satisfied an ACO was necessary to facilitate access to justice (paras 30-31).
Outcome
The Upper Tribunal refused Mr Wardle's application for a protective costs order (para 32).
The Tribunal also declined to make any form of appeal costs order (para 31).
Mr Wardle was directed to confirm to the Upper Tribunal and HMRC, within 28 days of the decision, whether he intends to pursue his defence of the appeal or to withdraw his case (para 33).
Major issues / areas of contention
- Whether the Upper Tribunal has jurisdiction to make a protective costs order (PCO) in a tax appeal, applying the principles in Drummond v HM Revenue & Customs [2016] UKUT 221 (TCC)
- Whether the underlying appeal, concerning when the LLP commenced its trade for entrepreneurs' relief purposes, raised an issue of general public importance
- Whether the public interest required the Upper Tribunal to resolve the trade-commencement question on the facts, given the authoritative guidance already given in Putney Power Ltd v HM Revenue and Customs [2026] UKUT 105 (TCC)
- The relevance of Mr Wardle's private interest, given tax of some £87,000 at stake, to the exercise of discretion
- The relative financial resources of the parties, HMRC being well-resourced with estimated costs of £42,000, against Mr Wardle acting in person without evidence of his means
- Whether Mr Wardle would probably and reasonably discontinue the appeal in the absence of a PCO
- Whether an appeal costs order (ACO), analogous to CPR 52.19, should be made to cap recoverable costs