P9: Costs in complex cases
“(1) The Tribunal may only make an order in respect of costs (or, in Scotland, expenses)--
(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;” (FTT Rules, r.10(1)(c)).
“(8) In this rule "taxpayer" means a party who is liable to pay, or has paid, the tax, duty, levy or penalty to which the proceedings relate or part of such tax, duty, levy or penalty, or whose liability to do so is in issue in the proceedings;” (FTT Rules, r.10(8)).
Costs orders against LLPs
Transparency and taxpayers: uncertain scope and effect
“We doubt that, the Tribunal Rules should be construed by reference to concepts of fiscal transparency in the way that Ms Murray suggests not least since those concepts may apply differently to different taxes that are within the Tribunal’s jurisdiction. For example, a limited liability partnership (“LLP”) such as Aquarius may be appealing against a determination that it is not trading for income tax purposes and a determination of its VAT liabilities. The LLP may well be “transparent” for income tax purposes but would not be for VAT purposes. We doubt that the Tribunal rules would be intended to treat the LLP as a “taxpayer” for VAT purposes, but not for the purposes of the income tax appeal…However, there is a more fundamental reason why Ms Murray’s argument does not assist Aquarius. Nothing in Rule 10 states that an order for costs can be made only against a “taxpayer”. Rule 10 provides only that a failure by a “taxpayer” to submit an election that the proceedings be excluded from the costs-shifting regime is a necessary precondition to an award of costs being made in a complex case. Moreover, even if Aquarius is not a “taxpayer”, and the “taxpayers” are the members of Aquarius, in order for Ms Murray’s argument to avail, she would need to demonstrate that every member of Aquarius had, within the appropriate time limit, made an election to opt out of the costs regime. There was no evidence that any member of Aquarius, still less all of them, had submitted any election to opt out.” (The Aquaries Film Company LLP v. HMRC  UKFTT 702 (TC), §§32…33).
Opt out within 28 days of receiving notice of complex categorisation
“The right to opt out under Rule 10 has to be exercised, as I have mentioned, within 28 days of the allocation of the case as a Complex case. There are, I think, two related reasons for that requirement. The first is to achieve certainty for both parties so that they know, at an early stage, which costs regime is to apply and can run their cases accordingly. The second is to prevent the taxpayer from waiting to see how his case progresses. To take the extreme case, if the taxpayer were entitled to wait until a decision had been given, he would obviously elect for a costs shifting regime if he had won and for a no costs shifting regime if he had lost. This would be effectively a one-way costs shifting which it was never the policy of the Tribunal Procedure Committee to produce. In a less extreme case, say half way through an appeal, the same consideration applies although it has less force; but the policy is that the taxpayer should not be able to wait and see how the wind blows but must make his election early on. The need to make an election within 28 days is well-known and causes no difficulties in practice.” (HMRC v. Atlantic Electronics Ltd  UKUT 45 (TCC), §7).
Burden on taxpayer as to date of receiving notice and sending opt out
“The burden of proof, it seems to me, is on the appellant, as it is the appellant that claims it opted out in time.” (Rapid Brickworks Ltd v. HMRC  UKFTT 194 (TC), §20, Judge Mosedale).
28 days runs to the date notice is sent by taxpayer rather than received by Tribunal
“Rule 10 requires the opt out notice to have been sent (not received) within 28 days of receiving notice of the complex allocation.” (Rapid Brickworks Ltd v. HMRC  UKFTT 194 (TC), §25, Judge Mosedale).
Not late if notice of complex categorisation not received
“The Tribunal considers that the appellant opted out of the costs regime in time in view of the unchallenged evidence that it did not receive the original notification of category…” (Barrell Booze Ltd v. HMRC  UKFTT 0347 (TC), §23).
Method of notice of complex categorisation
No prescribed method
“Construing the Rules purposively it seems to me that knowledge derived from something other than a written direction given by the Tribunal pursuant to Rules 23(1)(b) and 6(4) can amount to notice in appropriate circumstances. Rule 10(1)(c)(ii) refers to “receiving notice” and not receiving “the” notice. Whether oral notice or what Mr Southern described as imputed notice or constructive notice is sufficient for these purposes will depend on all the circumstances of the case.” (Albion Engineering v. HMRC  UKFTT 560 (TC), §37, Judge Cannan).
HMRC’s statement of case containing request for costs not sufficient
“I am satisfied that where the categorisation letter is not received, receipt of the Statement of Case with a concluding request for the appeal to be dismissed with costs does not constitute sufficient notice for the purposes of 10(1)(c)(ii). In particular the Statement of Case did not originate from the Tribunal and it did not particularise on what basis the Respondents would be seeking their costs. Costs might have been sought on the basis that the appeal was a complex case, or on the basis that the Appellant had acted unreasonably in bringing the appeal because there was no real prospect of success.” (Albion Engineering v. HMRC  UKFTT 560 (TC), §38, Judge Cannan).
Electronic title of directions document not sufficient
“I am also satisfied that receipt of suggested draft directions from the Tribunal in electronic form in a document with a file name “Complex Directions.doc” does not constitute sufficient notice, either by itself or together with the Statement of Case.” (Albion Engineering v. HMRC  UKFTT 560 (TC), §39, Judge Cannan).
Time of notice of complex categorisation
When T knew or ought to have known of complex categorisation
“In construing the Tribunal Rules to identify what amounts to sufficient notice for the purposes of Rule 10(1)(c)(ii) it is necessary to take into account the policy behind the costs-shifting provisions as described by Warren J. Tribunal Rule 2(3)(b) also provides that in interpreting the Rules the Tribunal must seek to give effect to the overriding objective of dealing with cases fairly and justly. On that basis a taxpayer should be treated as having received notice of allocation for these purposes where it would be fair and just for him to be treated as having received such notice. Such an approach is consistent with the decision of the Upper Tribunal in Hills v Commissioners for HM Revenue & Customs  UKUT 266 (TCC). In that case the Upper Tribunal held in rather unusual circumstances that a written request to opt out of the costs-shifting regime did not take effect where the interests of justice would not be served by treating it as a written request for the purposes of Rule 10(1)(c)(ii).” (Albion Engineering v. HMRC  UKFTT 560 (TC), §35, Judge Cannan).
“So I would summarise my view by saying that, on a fair and just interpretation of the language used in rule 10(1)(c)(ii) of the Tribunal Rules, notice can be said to be received for the purposes of rule 10(1)(c)(ii) of the Tribunal Rules only if the recipient either is actually aware that it has received the notice or ought to be aware that it has received the notice given the circumstances in which the notice was received.” (Clipper Group Holdings Ltd v. HMRC  UKFTT 712 (TC), §41, Judge Beare).
Not sufficient that T should have made enquiries that would have revealed categorisation (but may be unreasonable behaviour)
“It is one thing to say that there was sufficient information in the hands of a party to know that the appeal had been categorised as complex. It is another to say that with further enquiries a party would have discovered that the appeal had been categorised as complex. In my view the failure of Mr Dauppe to make himself familiar with the Tribunal Rules or to make enquiry of the Tribunal is more appropriately a matter to be taken into account in relation to any application for costs which might be made under Rule 10(1)(b) based on unreasonable conduct. That would be a matter to be addressed at the conclusion of the appeal and I express no view as to whether Rule 10(1)(b) would be engaged.” (Albion Engineering v. HMRC  UKFTT 560 (TC), §40, Judge Cannan).
Interpretation Act deemed service does not apply to FTT rules
“HMRC point out that s 7 only applies to ‘an Act’ and not to Rule 6, which is subordinate legislation. Nevertheless, s 7 seems to reflect the balance of probabilities. It is more likely than not that the letter arrived in the ordinary course of post.” (Rapid Brickworks Ltd v. HMRC  UKFTT 194 (TC), §19, Judge Mosedale).
“In the event, the Respondent had obtained a letter from the Tribunal dated 26 May 2017 to the effect that “it may be inferred [from the file] that the letter dated 21 May 2014 was sent by post”. That would not in itself ordinarily be sufficient evidence to engage section 7 IA 1978 but in circumstances where the Appellant had indicated that the only issue was one of receipt I am prepared to accept that section 7 IA 1978 is engaged.” (Albion Engineering v. HMRC  UKFTT 560 (TC), §15, Judge Cannan).
Party claiming non-receipt should fully set out procedures for dealing with incoming communications
“[HMRC] submitted that the evidence of non-receipt was inadequate. In particular there was no evidence from Mr Dauppe that he had checked whether his firm’s system for incoming post was operating efficiently in May 2014. I accept that Mr Dauppe’s evidence as to the reliability of his firm’s systems might have been more comprehensive. However, Mr Dauppe was a credible witness and on balance I am satisfied that ABG and therefore the Appellant did not receive the Tribunal’s letter dated 21 May 2014.” (Albion Engineering v. HMRC  UKFTT 560 (TC), §30, Judge Cannan).
Who notice of complex categorisation may be validly received by
Counsel receiving notification of complex categorisation in bundle at procedural hearing
“The fact that the document was handed to Ms Sloane as part of a bundle prepared in connection with an application that was not the substantive hearing of the appeal is neither here nor there, in the same way that counsel in the Penman case received the relevant document at a time when he was dealing with the matter generally in issue but not at a time when the document was immediately relevant. I therefore conclude that Ms Sloane did have implied authority to receive the copy of the Notice Letter on behalf of the Appellant when she received the bundle containing the Notice Letter at the hearing on 26 September 2014.” (Clipper Group Holdings Ltd v. HMRC  UKFTT 712 (TC), §31, Judge Beare)
Challenge alleging opt-out late should be made early
“ What this dispute does make clear is that it is difficult for HMRC or the Tribunal to calculate whether an opt out is made in time: the date of receipt of the notice of category allocation and the date of sending of the opt out are dates known to the appellant and not necessarily apparent to the Tribunal or HMRC…In view of this uncertainty, it seems right to me that if HMRC are concerned with an opt out that they challenge it early on and a failure to challenge it early on might be a factor in the Tribunal deciding to extend time if the opt out does indeed turn out to be slightly late.” (Rapid Brickworks Ltd v. HMRC  UKFTT 194 (TC), §25, Judge Mosedale).
Late applications to opt out
“While I certainly agree that the Tribunal should be cautious about exercising its discretion given the statements as to the purpose of the 28-day deadline in Atlantic Electronics Limited, it is overstating matters to say that there is no discretion at all. Moreover, the reason why the Tribunal decided in N Brown that it had no power to permit a party to withdraw an opt-out from the costs-shifting regime was because there was no provision providing for this in the Tribunal Rules. Here, there is an express general power contained within the Tribunal Rules that permits time limits to be extended…I therefore conclude that the Tribunal does have power to extend the time limit in Rule 10(1)(c)(ii).” (The Aquaries Film Company LLP v. HMRC  UKFTT 702 (TC), §36).
- Time limit not extended: litigants in complex cases expected to inform themselves of the costs risks
“There was nothing to prevent the appellant reading the Rules of the Tribunal from which, had it done so, its right to opt out within 28 days of notification would have been apparent. The appellant's misunderstanding is not a fair reason in my view for refusing to give the normal 'costs follow the event' direction.” (British Security Industry Association Ltd v. HMRC  UKFTT 786 (TC), §17, Judge Mosedale).
“Even so, Aquarius would have known when it made the 2011 Appeals and the 2013 Appeals that it was engaging in litigation of some complexity involving a large amount of tax. Appellants who commence such litigation should expect to inform themselves of the costs risks of doing so. I do not consider it is fair in the circumstances to make a direction that would deprive HMRC of the ability to recover their costs if they were successful in the 2013 Appeals on the grounds that Aquarius failed to inform itself as to the costs risks associated with those appeals.” (The Aquaries Film Company LLP v. HMRC  UKFTT 702 (TC), §41).
- Time limit extended: 1 day late and HMRC taking a year to challenge lateness
“I consider that I would extend time because:
(a) If the opt out was made late, it was only one day late;
(b) HMRC were notified of the opt out in April 2013 and did not make any challenge to its timeliness until over a year later;
(c) It is difficult to see how HMRC would have been prejudiced by the opt out being one day late bearing in mind that they did not challenge it at the time.
(d) The appellant was potentially prejudiced by having its opt out challenged so long after it was made, because it had proceeded with the appeal on the assumption that it was not in an open costs regime.” (Rapid Brickworks Ltd v. HMRC  UKFTT 194 (TC), §28, Judge Mosedale).
- Time limit not extended: no good reason for not notifying in time
“I shall simply say that if, contrary to my findings, the Appellant did receive notice of allocation in 2014 then I would not have been minded to extend the time for opting out. I agree with Mr Southern that the applicable principles are those in Data Select Ltd v Commissioners for HM Revenue & Customs  UKUT 187 (TCC). Applying those principles, in the light of the purpose of the Rule described in Atlantic Electronics Ltd I would not have extended time. Put briefly, the purpose of the 28 day time limit is clearly to promote certainty and fairness. There would have been no good reason for the delay. The Respondents have conducted the proceedings to date on the basis that costs-shifting applied. Those factors would have outweighed the prejudice to the Appellant of an unwanted potential liability for costs.” (Albion Engineering v. HMRC  UKFTT 560 (TC), §42, Judge Cannan).
- 2 months late as a result of oversight but before evidence: time limit extended
" The third stage of the Denton/Martland process requires me to consider all the circumstances of the case so as to ensure that the application is dealt with fairly and justly. I recognise, of course, that the FTT Rules and any deadlines imposed thereby must be complied with. However, on the facts of this case, I am satisfied that extending time to file the request to opt out of the costs regime is the fair and just result in circumstances where:
(1) The delay (whilst serious and significant by dint of its length and the fact that it was in breach of one of the FTT Rules) has had no material effect on the litigation timetable or otherwise on the efficient conduct of this appeal (or any other appeal).
(2) The (late) request was made at an early stage in the proceedings and before the exchange of evidence.
(3) No material prejudice has been caused to HMRC by the delay in making the application (HMRC’s inability to recover their costs is not the product of the delay but of the operation of the FTT Rules). There is no suggestion that HMRC have (or would have) conducted the litigation differently had the Appellant made the request within the 28 days provided for by the FTT Rules.
(4) The FTT Rules envisage the taxpayer being given a choice in relation to whether to be in or out of the cost regime if a case is allocated as Complex. Whilst that choice should be exercised within 28 days of the case being allocated as Complex, I do not consider it is proportionate, on the facts of this case, to remove that choice from the taxpayer for a breach that has not caused any material prejudice to HMRC or to the conduct of the litigation, and was made at an early stage in the proceedings." (Betindex Limited v. HMRC  UKFTT 372 (TC), Judge Bedenham)
- Forgetfulness of advisers not a good reason to extend for 4 months even though appeals no further along
" However, as set out by the Court of Appeal in BPP Holdings Ltd and others the wider system also needs to be considered. The starting principle is that time limits should be respected unless there is a good reason for failure to comply with a time limit. In this case, there has been a delay of at least two months and almost four months from the time limit for opting out. I do not consider that forgetfulness on the part of the adviser provides a good reason for that failure; nor do I consider that the fact that there would be no significant impact on the proceedings constitutes a good reason for accepting the failure." (Opus Labour Services (in liquidation) v. HMRC  UKFTT 470 (TC), Judge Fairpo)
- No late application to opt out after withdrawal
“Nor do I consider its avowed intent to make a late opt out application relevant. The application had not been made at the time it decided to withdraw. As the purpose of the time limit on the opt out is to prevent an appellant applying a 'wait and see' approach to the costs regime, it is extremely unlikely any application for an extension of time for opt out would be allowed where the appellant had already withdrawn the appeal.” (British Security Industry Association Ltd v. HMRC  UKFTT 786 (TC), §18, Judge Mosedale).
No possibility of withdrawing costs opt out
“In my view, rule 5(3)(c) does not give the Tribunal the power to permit the Appellants to withdraw a written request to opt out of the costs shifting regime. First, I am far from certain that “document” in rule 5(3)(c) includes such written requests. It seems to me that, in the context of the other sub paragraphs in rule 5(3)(c) and especially rule 5(3)(d), “document” means a document which is used in the proceedings such as a pleading, application or submission. Even if the written requests are documents for the purposes of rule 5(3)(c), I agree with Ms McCarthy that the Appellants are not asking to amend the requests to opt out of the costs shifting regime but to revoke them entirely. It seems to me that goes beyond what is envisaged by the word “amend” in rule 5(3)(c). Further, the fact that rule 17 of the FtT Rules specifically provides that a party who has given written notice of withdrawal of their case may apply to the Tribunal for the case to be reinstated, ie to revoke the notice, strongly suggests that the absence of such a provision in rule 10 was a deliberate choice. Ms Sloane did not seek to rely on any other provision of the FtT Rules and I cannot find one that would allow the Tribunal to permit the Appellants to withdraw their requests to opt out of the costs shifting regime. Accordingly, I have concluded that the Tribunal does not have power under the FtT Rules to permit the Appellants to withdraw their written requests that these proceedings be excluded from potential liability for costs under rule 10(1)(c) and the application must be refused.” (N Brown Group plc v. HMRC  UKFTT 445 (TC), §21 – the FTT would have refused even if it did have power due to delay).
Rectify failure to opt out by consolidating with earlier appeal
“Without deciding the point, I can see the force in the appellant’s view that if this appeal had been consolidated with an earlier opted-out appeal, then as from the date of consolidation it would (as a single appeal) be entirely opted out.” (Rapid Brickworks Ltd v. HMRC  UKFTT 194 (TC), §4, Judge Mosedale).
No valid opt out if unjust
“I do not consider that Rule 10 can be construed in a way that would give rise to an injustice. Although in normal circumstances justice is served by the making of a timely opt-out request, as that reflects the purpose of providing the taxpayer with the choice of costs regime in the FTT, that consideration may be overridden by the circumstances. The reference to a request in Rule 10(1)(c)(ii) must be construed so as to apply only to such requests that serve the interests of justice.” (Hills v. HMRC  UKUT 266 (TCC), §40, Judge Berner).
Unjust where late application to recategorise as complex made based on representation of no opt out
“In my view this case is an example of those circumstances. The application was made for re-categorisation was made by Mr and Mrs Hills. It was made at a very late stage in the proceedings, and at a time when immediate expense was to be incurred. It was accompanied by a statement of intent which was clearly, in my judgment, intended to support the case for re-categorisation. That statement of intent was relied upon by the FTT in making its direction. It cannot be within the purpose of Rule 10 to enable a request to be made that fundamentally undermines the basis on which the application is made and the re-categorisation is directed. Such a request is not within the meaning of Rule 10(1)(c)(ii), as it does not serve the interests of justice.” (Hills v. HMRC  UKUT 266 (TCC), §41, Judge Berner).
Substitution of a party into a complex case
Substituted party liable for costs prior to substitution
“Where a person is substituted as a party, subject to any consequential directions made at the time that person should inherit the position of the previous party, including the position as to costs. Adopting any other approach would be unfair to the Respondents.” (Warren v. HMRC  UKFTT 521 (TC), §38, Judge Cannan).
Party substituted should apply for consequential direction on costs
“It seems to me that the answer to the Appellant’s objection in this regard lies in the fact that when the Tribunal gives a direction substituting a party, it may give such consequential directions as it considers appropriate. No consequential directions were sought or given in respect of costs. The appeal therefore remained a complex case in which the Appellant had not opted out of liability for costs. The Appellant had the opportunity at any time from 31 July 2013 onwards to apply for a consequential direction in relation to costs and/or to extend the time within which to opt out of liability for costs.” (Warren v. HMRC  UKFTT 521 (TC), §27, Judge Cannan – substituted party was or ought to have been aware that it was a complex case at the time of substitution).
Refusal of opt out if party delays applying
“It is clearly desirable that there should be certainty in relation to costs at an early stage in the proceedings. It is undesirable that an appellant should be able to opt out of costs at a late stage. In the light of all the circumstances of the present appeal I am satisfied that the costs shifting regime applied to the appeal and the Appellant had an opportunity to opt out. He did not opt out and it is not appropriate to extend his time for doing so.” (Warren v. HMRC  UKFTT 521 (TC), §28, Judge Cannan)
Starting point in complex cases: costs follow the issue
" Thus, in Administrative Court cases, just as in other civil litigation, particularly where a claim has been settled, there is, in my view, a sharp difference between (i) a case where a claimant has been wholly successful whether following a contested hearing or pursuant to a settlement, and (ii) a case where he has only succeeded in part following a contested hearing, or pursuant to a settlement, and (iii) a case where there has been some compromise which does not actually reflect the claimant's claims. While in every case, the allocation of costs will depend on the specific facts, there are some points which can be made about these different types of case.
 In case (i), it is hard to see why the claimant should not recover all his costs, unless there is some good reason to the contrary. Whether pursuant to judgment following a contested hearing, or by virtue of a settlement, the claimant can, at least absent special circumstances, say that he has been vindicated, and, as the successful party, that he should recover his costs. In the latter case, the defendants can no doubt say that they were realistic in settling, and should not be penalised in costs, but the answer to that point is that the defendants should, on that basis, have settled before the proceedings were issued: that is one of the main points of the pre-action protocols. Ultimately, it seems to me that Bahta was decided on this basis." (M v Croydon London Borough Council  EWCA Civ 595)
“But although there is no express provision to this effect, it does not seem surprising that if the FTT is to have a discretion over costs, the starting point will usually be that if any order for costs is made at all, it will be that costs should follow the event, that is that the loser will pay the winner. This is what fairness and justice would seem normally to require.” (Bastionspark LLP v. HMRC  UKUT 425 (TC), §16, Nugee J).
“I think that where there is an open costs regime, the normal order that costs follow the event should apply, as that is in line with the reasonable expectations the parties should have, unless there are exceptional reasons to order otherwise.” (British Security Industry Association Ltd v. HMRC  UKFTT 786 (TC), §22, Judge Mosedale).
“It seems to me (and no party has suggested to the contrary) that there is no reason to depart from the general rule that the unsuccessful party should pay the costs of the successful party in this case” (Biffa (Jersey) Ltd v. HMRC  UKFTT 0010 (TC), §14).
But take account of lack of general statement in FTT rules
“Such an order does, we appreciate, normally follow in proceedings in court. But that is because the Civil Procedure Rules (reflecting the practice before their adoption) provides expressly at Part 44.3(2) that, where the court decides to make an order about costs, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party. There is, however, no similar rule in the Tax Chamber Rules. And it can be seen from other jurisdictions that a general costs-shifting power does not always result in the winner obtaining costs. To take an example, the Competition Appeals Tribunal has a developing jurisprudence in this area where, in certain types of case, a successful party does not obtain an order for costs.” (Capital Air Services Ltd v. HMRC  UKUT 373, §15).
Unreasonable behaviour is exceptional reason
“Unreasonable behaviour by the party seeking costs would certainly be an exceptional reason justifying a departure from the normal 'costs follow event' rule. I accept that a failure to raise a timely defence might well be unreasonable behaviour and grounds for deviation from the normal order, but it will depend on circumstances and contributory behaviour by the other party.” (British Security Industry Association Ltd v. HMRC  UKFTT 786 (TC), §23, Judge Mosedale).
Both parties to blame for a failure to realise HMRC had a potential defence that they raised late
"My view is that both parties were equally to blame in not realising the potential applicability of the defence earlier. While the appellant might say it is for HMRC to raise defences, the appellant had chosen to take a point on it right from the outset so it was clearly aware of the defence as a potential issue in its appeal…To the extent that it was unreasonable for HMRC to first raise the defence after, rather than before, 31 March 2016, I consider that the appellant was no less unreasonable in overlooking it at the same time. For this reason, I do not consider that HMRC's behaviour justifies a departure from the normal rule that costs should follow the event.” (British Security Industry Association Ltd v. HMRC  UKFTT 786 (TC), §§32…33, Judge Mosedale).
Different approach if party deliberately delays raising defence
“I also make the point that if there was any suggestion that HMRC had deliberately delayed raising a defence then my decision would have been very different.” (British Security Industry Association Ltd v. HMRC  UKFTT 786 (TC), §35, Judge Mosedale).
Includes costs prior complex allocation
" The Upper Tribunal considered the discretion of this Tribunal to award costs prior to the allocation of an appeal to the complex track in its decision in Capital Air Services v HMRC  STC 617 (also not cited to me). The panel, comprising the then chamber presidents of both the Upper Tribunal and the First-tier Tribunal held (at ) that:
[…] the time for determining whether a costs order can be made is the time when the order is in fact made. If the case has be then been allocated as a Complex case, an order can be made. Similarly, if a case has been allocated as a Complex case and is re- allocated as a Standard case before any costs order has been made, the First-tier Tribunal no longer has any power to make an order. In contrast, if an order is made while the case is allocated as a Complex case, is subsequent re-allocation would not deprive the receiving party of the benefit of the order. We conclude that once a case has been allocated as a Complex case and for so long is remains so allocated, the First-tier Tribunal has power to make an order for costs in the case proceeding before it whenever those costs were incurred.
 The Upper Tribunal noted at  with regard to the Tribunal's power to make an order for costs for periods prior to the allocation to the complex track that:
No doubt when it comes to exercising its discretion, the First-Tier Tribunal will take account of the retrospective effect of a costs order in deciding whether it is just and fair to make such an order.
 As the appeal had been allocated to the complex track at the time the application for costs was made, I find that I have discretion to make an award of costs which includes costs incurred prior to the allocation of the appeal to the complex track.
 I find that it is fair and just for any order for costs to relate to all reasonable costs incurred in and incidental to this appeal without limitation as to time." (Patel v. HMRC  UKFTT 128 (TC), Judge Aleksander)
Applies to interlocutory costs
Hotly contested application hearing
" In my view, in relation to the application, with a clear winner and a clear loser, the "general rule" should apply. It is appropriate to make an inter partes costs order in favour of HMRC, on the footing that this appeal was allocated to the complex track, 15 that neither party sought to opt-out of that costs regime, and that costs were consequently (albeit subject to my discretion) at large. In short, it is appropriate to make an order under Rule 10(1)(c). This was not a run-of-the-mill case management hearing. It was a "heavy", and hotly controverted, application, potentially dispositive of the substantive appeal, and causing the respective parties to incur significant sums 20 by way of legal costs which would not have been incurred had the application not been made and pursued." (Ulster Metal Refiners Ltd v. HMRC  UKFTT 125 (TC), Judge McNall)
Follow the issue rather than the event
"...there is a general "salutary" rule that costs follow the issue rather than the "event". This is because an overly robust application of a principle that costs should follow the final event discourages litigants from being selective as to the points they take in litigation and encourages an approach whereby no stone or pebble, howsoever insignificant or unmeritorious, remains unturned: Phonographic (ibid page [1523A]); Mean Fiddler Holdings Limited (ibid paragraph ); and Merck KGaA v Merck Sharp & Dohme Corp & Ors  EWHC 3920 (Ch) ("Merck") where Nugee J (as he then was) stated at paragraph ) that it was "… in general a salutary principle that those who lose discrete aspects of complex litigation should pay for the discrete applications or hearings which they lose, and should do so when they lose them rather than leaving the costs to be swept up at trial". In the present the merits were overwhelmingly in favour of the respondent and the Judge recorded his displeasure at the taking of unmeritorious points by the appellant." (McKeown v. Langer  EWCA Civ 1792, Green LJ)
Good reason to depart
Failure to utilise step to try and resolve dispute without litigation
" It can be seen, therefore, that the main factors which, taken together, persuaded the Master to depart from the general rule and make no order as to Mrs Archer's costs were:
(a) the commencement of judicial review proceedings was premature, given her failure to take the "clear alternative step" of making representations under section 222;
(b) there was objectively "a very significant potential" for the dispute to be resolved without resort to litigation;
(c) the fact that the parties had been involved in negotiations for many years, which were "clearly ongoing and at an advanced stage"; and
(d) the guidance given by this court (Lord Woolf CJ, sitting with Mummery and Buxton LJJ) in the Cowl case.
 Furthermore, it is a striking feature of the detailed statement of grounds that Mrs Archer had independent grounds of challenge to her APN, which fell clearly within the areas of challenge permitted by section 222, and had nothing to do with Mr Archer's grounds of challenge, apart from their common origin in the same tax avoidance scheme. Against that background, it seems to me that the alleged joint nature of the Archers' judicial review proceedings is largely spurious, and in any event insufficient to justify the refusal in Mrs Archer's case to make representations under section 222 before embarking upon judicial review. Whatever the position may have been in relation to Mr Archer, Mrs Archer should have engaged with the section 222 procedure as a first resort, and her failure to do so clearly entitled the Master to exercise his discretion in relation to her costs as he did.
 In view of the conclusion I have reached, it is not strictly necessary to consider whether the Master's order should also be upheld on the alternative ground that it was justified by Mrs Archer's conduct of the litigation. It is not entirely clear how far the Master treated this as a separate ground for his decision, or whether it did no more that reflect his judgment that section 222 provided an alternative remedy of which Mrs Archer should have taken advantage. Nevertheless, to the extent that the Master took an adverse view of Mrs Archer's litigation conduct, he was in my view fully entitled to do so. The fact of the matter is that no serious attempt was made by KPMG to comply with the pre-action protocol for judicial review, and far from being given a reasonable time within which to respond, HMRC were in substance presented with the commencement of judicial review proceedings as a fait accompli on 28 November 2014. As I have already pointed out, this was the first response from KPMG to the APNs served on the Archers, and the proceedings were in fact issued on the same day, although they were not served until 2 December. Far from judicial review being a last resort, here it was being employed as the first line of attack, and the very substantial costs of preparing the proceedings had already been incurred." (R (oao Archer) v. HMRC  EWCA Civ 1021 - T commenced judicial review proceedings of an APN before making s.222 representations, HMRC subsequently withdrew the APN but T was denied costs)
" In my view, it is not going too far, and it is fair and just, to deprive UM (despite its success in relation to a large proportion of the deals in issue) of the ability to recover any of its costs from HMRC:
(1) Although UM succeeded in a substantial part of its appeal (the Irwin Deals) Mr Donaldson's evidence was untruthful, and was rejected in a number of important respects;
(2) Even in relation to the Irwin Deals, the Tribunal "had no doubt at all that Mr Donaldson and UM not only should have known better that Irwin was connected to fraud, but did know better": see Paragraph 99 of the Decision;
(3) In relation to two of the three sets of deals, UM, through Mr Donaldson, was a knowing participant in fraud. It does not matter that those deals, empirically, amounted to just a small proportion of the overall deals in dispute.
 Those are all factors, whether taken individually or collectively, which attract censure, and which must sound in an adverse costs order, namely depriving UM of any ability to recover any part of its costs of the substantive appeal from HMRC." (Ulster Metal Refiners Ltd v. HMRC  UKFTT 125 (TC), Judge McNall)
Pursuing other arguments that should not have been pursued
" HMRC cross-apply for an order that UM pay 10% of its costs of the substantive appeal - ie a proportion of its costs said to be reflective of the degree of its overall success...
 Some of the criticisms made of HMRC by UM are not without force: for instance, (i) HMRC's pursuit, until the hearing itself, of certain deals and (ii) HMRC's pursuit of the Irwin Deals on the basis which had already been considered, and rejected, by the FtT in 2015. In my view, those points - which were (as UM identify) the subject to critical comment by the FtT - tend against the making of an order in HMRC's favour (and cannot, given the criticism of the integrity of Mr Donaldson's evidence, carry the matter so far as to justify the making of an order in UM's favour)." (Ulster Metal Refiners Ltd v. HMRC  UKFTT 125 (TC), Judge McNall)
Determining who was successful/to what extent
Question of law, but not hard-edged
“[HMRC] indeed accepted in terms that the identification of the successful party is an issue of principle and if the lower court or tribunal gets it wrong, this is an error of law. I will therefore proceed on this basis, although again sound a note of caution: I agree that if the FTT identifies a party as successful when they are not (or fails to identify them as successful when they are), this is an error of principle which undermines their decision. But it does not necessarily follow that the question of whether a party is successful is always a yes/no, or hard-edged, question to which there is only one right answer. In some cases it may be that the question is rather whether the decision of the FTT is one that was open to it on the facts.” (Bastionspark LLP v. HMRC  UKUT 425 (TC), §21, Nugee J).
Identifying overall winner is for trial judge
" Finally, there is the fact that Mr Flood was only partially successful. There are, of course, cases where a claimant (or indeed a defendant) is successful, but the success is partial or limited to an extent which would make it unreasonable to award him all his costs. In the instant case, there is an initial attraction in the notion that the fact that Mr Flood succeeded on the material posted on TNL’s website after 5 September 2007 but failed on the hard copy and website material published before that date, means that there should be some amendment in TNL’s favour to the costs order made by Nicola Davies J. However, as Sharp LJ said in the Court of Appeal (para 41), the fact that TNL had “won on a significant part of the case, comprising numerically the greater proportion of the publications” was a factor to be taken into account when deciding what costs order to make, but the effect of that factor on the eventual decision was a matter for the first instance judge. As she also said, on the facts of this case, the first instance judge was entitled to resolve to award costs on the basis that Mr Flood was the overall winner rather than making an issues-based order." (Times Newspaper Limited v. Flood  UKSC 33)
Not necessary to find a single winner
“It by no means follows that in a case where both sides have had some measure of success the FTT has to, or ought to, approach the question of what is fair and just by seeking to identify one or other party as the successful party. I would have thought that what the FTT should be doing is seeking to identify a fair and just outcome, and that that is likely to be one that reflects, by one means or another, the fact that the parties have each been successful in part.” (Bastionspark LLP v. HMRC  UKUT 425 (TC), §19, Nugee J).
Need to consider the real nature of each party’s case
“…it seems to me that this is a case where the Court does need to consider, in determining the extent to which a successful party should recover its costs, the real nature of the successful party’s case. TNT Post’s case was fundamentally misconceived…TNT Post simply failed in the real objective which had inspired its claims against the UK, namely, to put itself in the same VAT position as that enjoyed by [Royal Mail Group], whether that be a shared position in supplying VAT-exempt or standard rated services.” (R (oao Whistl UK Ltd (formerly TNT Post UK Ltd)) v. HMRC  EWHC 4118 (Admin), §16)
Need to consider the importance of each issue realistically
“In practice that meant that the LLPs had to win on the 80 in order for the scheme to produce a net benefit to the members at all…In that sense too, the deductibility of the 80 can I think fairly be regarded as the key issue, because on that issue turned the question whether the venture was a financial success or a financial failure for its members. In circumstances where the LLPs lost on that issue, it certainly does not look as if they have been the successful parties overall. It looks more like a case where the LLPs have failed in their main objective, even though they have had some success on other issues.” (Bastionspark LLP v. HMRC  UKUT 425 (TC), §§34…35, Nugee J).
Disallowance of deduction of single payment, but different arguments relating to different parts of the payment
“But although it is true that the payment to Shamrock by each LLP was a single payment, and the appeal by each LLP against the disallowance of it was a single appeal, it is quite apparent from the way in which the FTT’s Substantive Decision is structured that the arguments in relation to the part of that single payment equal to the Final Minimum Sum (the 80) were very different from those in relation to the balance (the 15), and the two parts of the payment were treated quite separately…in litigation of any complexity, the factors which go into an assessment of which party is the overall winner are multifarious, and on the facts of this case, I do not see how it can be said to be erroneous in principle for Judge Bishopp to have concluded that HMRC were in substance the successful party. No doubt, as Day v Day illustrates, if other things are equal, the fact that the claimant has had to take proceedings to recover anything from a defendant is a good reason for regarding the claimant as the winner; but it would to my mind seriously distort the principles by treating this as a rule only to be departed from in certain specified circumstances. The true principle as I understand it from the authorities I have referred to is that the question who is the successful party is to be answered by asking who as a matter of substance and reality has won, and that the factors that can be taken into account in answering that question are not confined to any particular checklist.” (Bastionspark LLP v. HMRC  UKUT 425 (TC), §§28…60, Nugee J).
Where the opponent runs alternative arguments, winning in respect of only one is not normally a success
“The two arguments were explicitly stated to be in the alternative and it was always the case that if HMRC succeeded on the section 730A ICTA 1988 argument then the other argument fell away. In the circumstances, I do not consider that BJL can be regarded as the successful party. For that reason, my view is that it would not be appropriate to award BJL its costs.” (Biffa (Jersey) Ltd v. HMRC  UKFTT 0010 (TC), §16).
Arguments against two different taxpayers run in the alternative means success in one equals success in both
“[Versteegh Ltd v. HMRC  UKFTT 397 (TC)] was a case of three taxpayers, each with different issues and different arguments, one of which (the borrower) succeeded and was entitled to its costs, whereas the other two (the lender and share-recipient) did not succeed (at least if looked at together rather than separately) and had to pay HMRC’s costs…The second point of interest [in Versteegh] is the way in which Judge Berner dealt with the costs of the lender’s appeal. Viewed in isolation, the lender had won its appeal; but HMRC had always made it clear that the claims against the lender and the share recipient were alternative claims and would not have pursued the lender if it had been accepted that the share recipient was taxable. In those circumstances, Judge Berner regarded the appeals of the lender and share recipient as a single appeal on which HMRC were successful. That is illustrative of the proposition that decisions on costs are always fact-sensitive and cannot be reduced to a mechanistic exercise.” (Bastionspark LLP v. HMRC  UKUT 425 (TC), §§42…44, Nugee J).
“In Versteegh, HMRC’s case was that one of the Lender or the Share Recipient was liable to tax. The arguments in relation to each were strictly in the alternative: as Judge berner pointed out at , HMRC did not seek to tax both the Lender and the Share Recipient but only one or the other. The position of the Borrower was different: it was, as Judge Berner said at , a discrete issue, in that it related to deduction not income, and it was pursued irrespective of the outcome of the cases against the Lender and the Share Recipient. That seems to me to be the situation in relation to BHL…HMRC should pay BHL’s costs of its appeal on a standard basis.” (Biffa (Jersey) Ltd v. HMRC  UKFTT 10 (TC), §19).
“Fortuitous” partial victories
“I am disinclined to seek to quantify the precise extent, in terms of volume or revenue, to which TNT Post, although wholly misconceived in its legal arguments and failing in its real objective, somewhat fortuitously scored a victory of sorts in the ECJ. Looking at the question in a broad and proportionate manner, I conclude that TNT Post should have 30 per cent of its costs of claim.” (R (oao Whistl UK Ltd (formerly TNT Post UK Ltd)) v. HMRC  EWHC 4118 (Admin), §17).
Major reduction in liability due to time limits not success
“I do not consider that the fact that HMRC accepted that, if the appeal was dismissed, they could only hold BJL liable for some £500,000 should lead to any reduction in the costs awarded. The fact that the amount at stake for BJL reduced substantially did not affect the issues in the appeal, which were purely points of law, the way that BJL conducted its case or the length of the hearing as there was no dispute about the facts.” (Biffa (Jersey) Ltd v. HMRC  UKFTT 0010 (TC), §15).
Interim relief obtained by consent: taxpayer receives costs
" Accordingly, while, on a narrow view of the cases, I see some force in [HMRC's] criticism of the judges in the present cases for treating the claimants as fully successful on the basis that they obtained in the end under the consent orders the whole of the relief that they had sought by the judicial review proceedings, nevertheless I would accept that, in these rather unusual circumstances, the cases should be regarded as falling within the first category in M v Croydon. I say so because the claimants had to start the judicial review proceedings in order to have any chance of obtaining interim protection, and they did secure that protection, by virtue of having brought the claims, for as long as they needed it, namely until the problem that had led to approval being refused had been resolved. In many other cases it might not be sufficient to show that interim protection had been obtained by bringing proceedings which are later compromised, in order to bring the case within the first category in M v Croydon, but in these cases it seems to me that it is appropriate to consider the interim orders obtained, rather than the eventual consent order, in assessing whether the claimants are to be regarded as the successful party and therefore, under the general rule, entitled to their costs. To have obtained that interim protection was the crucial factor for the claimants, and the costs incurred at that initial stage are presumably the majority of the sums at issue on the question of the proper order for costs. The need for a causal link is satisfied because it was, and could only have been, by bringing the judicial review proceedings that the claimant could and did secure interim protection." (R (oao Medway Soft Drinks Ltd) v. HMRC  EWCA Civ 1041)
Adjustment for overall justice of the case
“I now consider whether I should make a different order in order to reflect the overall justice of the case…BHL incurred expense in relation to an appeal based on a case that HMRC conceded just a few months before the hearing. HMRC’s concern that the costs incurred by BHL in relation to its appeal are greater than HMRC’s costs in relation to BJL’s appeal may be justified. However, I do not consider that is an argument that is an argument for not awarding BHL its costs. The fact that those costs may exceed HMRC’s costs is simply an aspect of litigation risk.” (Biffa (Jersey) Ltd v. HMRC  UKFTT 0010 (TC), §20).
Multiple winners: different options
" In case (ii) [a case where he has only succeeded in part following a contested hearing, or pursuant to a settlement], when deciding how to allocate liability for costs after a trial, the court will normally determine questions such as how reasonable the claimant was in pursuing the unsuccessful claim, how important it was compared with the successful claim, and how much the costs were increased as a result of the claimant pursuing the unsuccessful claim. Given that there will have been a hearing, the court will be in a reasonably good position to make findings on such questions. However, where there has been a settlement, the court will, at least normally, be in a significantly worse position to make findings on such issues than where the case has been fought out. In many such cases, the court will be able to form a view as to the appropriate costs order based on such issues; in other cases, it will be much more difficult. I would accept the argument that, where the parties have settled the claimant's substantive claims on the basis that he succeeds in part, but only in part, there is often much to be said for concluding that there is no order for costs. That I think was the approach adopted in Scott. However, where there is not a clear winner, so much would depend on the particular facts. In some such cases, it may help to consider who would have won if the matter had proceeded to trial, as, if it is tolerably clear, it may, for instance support or undermine the contention that one of the two claims was stronger than the other. Boxall appears to have been such case.
 In case (iii) [a case where there has been some compromise which does not actually reflect the claimant's claims], the court is often unable to gauge whether there is a successful party in any respect, and, if so, who it is. In such cases, therefore, there is an even more powerful argument that the default position should be no order for costs. However, in some such cases, it may well be sensible to look at the underlying claims and inquire whether it was tolerably clear who would have won if the matter had not settled. If it is, then that may well strongly support the contention that the party who would have won did better out of the settlement, and therefore did win." (M v Croydon London Borough Council  EWCA Civ 595, Neuberger LJ)
“I have already said that where both parties were in part successful and in part unsuccessful, one would expect the FTT to fashion a costs order that reflected the fact that each side won in some respects but lost in others. There are in principle various ways in which this could be done.
[1 - Issues based] If A and B have both had some success but overall B is the more successful party, one way would be to require A to pay B the costs of the issues on which B won and B to pay A the costs of the issues on which A won. That might sound attractive in theory, but has the drawback that it requires apportionment of costs between different issues, which has practical difficulties. That is no doubt why CPR 44.2(7) provides that before making an order relating to a distinct part of the proceedings (which would I think include an order for the costs of a particular issue), the court will consider whether it is practicable to make an order under CPR 44.2(6)(a) or (c) instead, (a) being an order that a party pay a proportion of another party’s costs.
[2 - Overall figure] A second method would indeed be to require A to pay B a proportion of B’s costs to reflect the fact that B has overall been the more successful party but has not been wholly successful.
[3 - Composite order] A third method would be to require A to pay B a percentage of B’s costs, but require B to pay A a percentage of A’s costs…
There is nothing prescribed in the FTT Rules which requires the FTT to adopt one method rather than another, which means that the choice between them (assuming that the FTT thinks it an appropriate case to make an order of this type at all) is a matter for the discretion of the FTT.” (Bastionspark LLP v. HMRC  UKUT 425 (TC), §§63…64, Nugee J).
Losing party won an earlier application
“I understand that pursuant to the Civil Procedure Rules, a court would normally make an order for the costs of such an application against the party seeking to be substituted. In the present case however the application was strenuously resisted, whether it related to the application to continue the proceedings in the name of the LLP, in Mr Warren’s name or for his substitution as an Appellant. In those circumstances I consider that there should be no order as to the costs of that application. In other words, both parties should bear their own costs of the application, including the hearing on 31 July 2013.” (Warren v. HMRC  UKFTT 521 (TC), §40, Judge Cannan).
Issue by issue costs orders
“the judge may make different orders for costs in relation to discrete issues – and, in particular, should consider doing so where a party has been successful on one issue but unsuccessful on another issue and, in that event, may make an order for costs against the party who has been generally successful in the litigation.” (Johnsey Estates (1990) Ltd v. Secretary of State for the Environment  EWCA Civ 535, §21)
Likely to be a crude way of measuring success
“I therefore do not accept that there was anything wrong in the FTT saying that HMRC had succeeded on more issues than the LLPs. What however this really shows is that counting up the number of issues is likely in many cases (including this one) to be a rather crude way of measuring relative success. Some issues take up a good deal more time, and cost, than others.” (Bastionspark LLP v. HMRC  UKUT 425 (TC), §29, Nugee J).
Both parties making irrelevant arguments
“I do not accept that this is a case where it would be appropriate to make an issues-based order for costs…HMRC did not lose on any discrete issue: it simply advanced an argument that I did not find convincing. However, the argument was a central one and, TNT Post clearly had to deal with that argument. On the other hand HMRC had to deal with very substantial arguments regarding fiscal neutrality and competition which, in my view, were largely irrelevant. Taking account of that countervailing factor I do not believe that it would be right to disallow any part of HMRC’s costs.” (R (oao Whistl UK Ltd (formerly TNT Post UK Ltd)) v. HMRC  EWHC 4118 (Admin), §5)
Case too complex for issue based order
“Both sides are agreed that, in a case as complex as this, the appropriate basis for the costs orders is a percentage rather than an issue-based approach. Such an approach accords with the guidance in CPR 44.2(7), which says that before the court considers making an (issue-based) order under paragraph (6)(f), it will consider whether it is practicable to make an order under paragraph (6)(a) or (c) (i.e. an order that a party must pay a proportion of another party's costs, or costs from or until a certain date only) instead. Furthermore, I seriously doubt whether, in a case with so many and frequently interlocking issues, it would even be possible to adopt an issue-based approach, at any rate without making a large number of arbitrary assumptions about the allocation of costs to particular issues. What is needed, therefore, is an appropriate methodology to classify and assess the relative importance of the issues, so as to provide a proper foundation for a percentage-based order.” (The Test Claimants in the FII Group Litigation v. HMRC  EWHC 2883 (Ch), §28).
Percentage based deduction reflecting mixed success
Treat both parties costs as equal and double the deduction
" If there is justification for ordering the otherwise successful party to pay the costs of a particular issue to the other, it is often convenient to treat both parties' costs of an issue as being equal and to double the deduction. So, if a party fails to recover costs of an issue amounting to 15% of his total costs, he will be deducted 30% of his costs if the court concludes that he should also pay the costs of that issue to the other. This is a rule of thumb, but is convenient when one comes to working out the resulting order." (Monsanto Technology LLC v. Cargill International SA  EWHC 3113 (Pat))
Weighted topic based costs order
“Using this methodology, the claimants prepared a table grouping the issues under 17 topics, showing:
(a) the court, or courts, in which the topic was at issue;
(b) the importance of the topic; and
(c) the outcome, with a few explanatory notes…HMRC accept that the exercise conducted by the claimants of grouping the issues, and according them varying degrees of importance, is a useful starting point…I agree with HMRC that the assessment of the importance of each topic needs to be more broadly based than the predominantly financial approach advocated by the claimants, both as a matter of general principle and because the reliance which can be placed on the outcome of the quantification trial is, for the reasons which I have already given, in my opinion very limited. What I propose to do, therefore, is to examine the 17 topics in turn, recording any points of disagreement between the parties and doing my best to assess their general significance in the context of the group litigation as a whole.” (The Test Claimants in the FII Group Litigation v. HMRC  EWHC 2883 (Ch), §§32…33…34).
Costs orders departing from following the issue
Successful party unreasonable behaviour may lead to adverse costs order
“the judge may deprive a party of costs on an issue on which he has been successful if satisfied that the party has acted unreasonably in relation to that issue;” (Johnsey Estates (1990) Ltd v. Secretary of State for the Environment  EWCA Civ 535, §21)
Proceedings rendered unnecessary by HMRC concession
“we have concluded that the just order is that the Applicant should have the costs of this hearing which has become unnecessary because of the concession made by the Respondent” (Bennett v. CCE  EWCA Civ 1727, Lord Phillips MR);
Late recategorisation of cases as complex: costs order to reflect lateness
“I take the view, however, that in the circumstances of a re-categorisation of a case to Complex at an advanced stage of the proceedings, consideration should be given to the making of a costs order that reflects the time spent by the parties in the expectation that the regime of a Standard case (limited costs shifting) would apply. That would in my view be a proper consideration whether costs were to be awarded in favour of the party making the application to re-categorise, or the other party…Absent special factors pointing in another direction, I consider the proper course to be for costs to be awarded to the successful party in such a case from the time when the appeal was re-categorised, and for there to be no costs for the earlier period.” (Hills v. HMRC  UKUT 266 (TCC), §§47…49, Judge Berner).
Withdrawing due to follower notice does not affect costs position
“I do not consider that the introduction of the 2014 legislation is a significant factor in the discretion as to costs, if it is relevant at all. The merits of the appeal were not affected by the 2014 legislation. Losing the appeal may have affected the Appellant’s liability to penalties under section 208 Finance Act 2014. However the Appellant would have been able to appeal any penalty pursuant to section 214. One ground of appeal in section 214(3)(d) is that it was reasonable in all the circumstances for the Appellant not to take the corrective action. Hence, whilst the Appellant was exposed to a risk of penalties, if he acted reasonably he could justify not taking the corrective action and thus avoid the penalties. On that basis the risk to the Appellant in pursuing the appeal was the possibility of penalties if he was later found to have been unreasonable in pursuing the appeal.” (Warren v. HMRC  UKFTT 521 (TC), §34, Judge Cannan).
Interested party costs
“[an interested party] will not normally be entitled to his costs unless he can show that there was likely to be a separate issue on which he was entitled to be heard, that is to say an issue not covered by counsel for the [Defendant], or unless he has an interest which requires separate representation” (Bolton Metropolitan DC v. Secretary of State for the Environment  1 WLR 1176, 1178, Lord Lloyd)
Not usually necessary to support HMRC
“It should not ordinarily be contemplated that individual actual or potential taxpayers, even those as large and potentially affected as [Royal Mail Group], are required to support HMRC in its defence. The prospect of such intervention, and the consequential risk of having to bear what may well be the heavy costs of such intervention, could act as a real deterrent to challenges of this nature, and could thus inhibit an important instrument for promoting the lawful implementation and application of EU law. I say ‘ordinarily’ advisedly, because there could well be fiscal or similar cases where the facts in favour of an aware of costs to an intervening party may nonetheless be sufficiently power to justify that result.” (R (oao Whistl UK Ltd (formerly TNT Post UK Ltd)) v. HMRC  EWHC 4118 (Admin))