Executive Car Rentals v Revenue & Customs (PROCEDURE : Other) [2015] UKFTT 473 (TC)

FTT-Tax
Executive Car Rentals v Revenue & Customs (PROCEDURE : Other)
[2015] UKFTT 473 (TC) · 2015-09-15
[11]The ability of the Tribunal to make an order in respect of costs is derived from s 29 of the Tribunals Courts and Enforcement Act 2007 (“TCEA”) which provides:(1) The costs of and incidental to— (a) all proceedings in the First-tier Tribunal, and (b) all proceedings in the Upper Tribunal, shall be in the discretion of the Tribunal in which the proceedings take place.(2) The relevant Tribunal shall have full power to determine by whom and to what extent the costs are to be paid.(3) Subsections (1) and (2) have effect subject to Tribunal Procedure Rules. As is clear from s 29(3) TCEA, the power of the Tribunal to award costs is also subject to Tribunal Procedure Rules.[12]Insofar as it applies to basic category cases, such as the present, rule 10 of the Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009 (the “Tribunal Procedure Rules”) provides:(1) The Tribunal may only make an order in respect of costs (or, in Scotland, expenses) – (a) … (b) if the Tribunal considers that a party or their representative has acted unreasonably in bringing, defending or conducting the proceedings;… (c) …(2) The Tribunal may make an order under paragraph (1) on an application or of its own initiative. 13.

(b) of the Tribunal Procedure Rules stating, at [34]:

“In our view, a Tribunal, faced with an application for costs on the basis of unreasonable conduct where a party has withdrawn from an appeal should pose itself the following questions: - (1) What was the reason for the withdrawal of that party from the appeal? (2) Having regard to that reason, could that party have withdrawn at an earlier stage in the proceedings? (3) Was it unreasonable for that party not to have withdrawn at an earlier stage?”
Discussion and conclusion 14. Adopting the approach of the Upper Tribunal in Tarafder it is clear that HMRC withdrew the Notice of Penalty assessment as a result of receipt of the schedule from CTM indicating that there was no potential lost revenue. 15. Could HMRC withdrawn the penalty sooner? 16. CTM contend that information to have enabled HMRC to withdraw the penalty sooner was in its possession before the provision of the schedule, as the output tax for the supply to Everycar had been included in ECR’s 02/14 VAT return in error (rather than correctly in its 11/13 return). However, Officer Patel explained that she was not, and could not, have been aware of the error in ECR’s VAT 11/13 VAT return, which had not been explained either by or on behalf of ECR, until receiving the schedule the day before the hearing. 17. If I were to accept that, as CTM contend, the information contained in the schedule was available to HMRC, albeit in a different form, it is necessary to consider the third question in Tarafder , whether it was unreasonable for HMRC not to have withdrawn the penalty at an earlier stage in the proceedings? 18. It is clear that when the assessment – as opposed to the penalty assessment – was issued ECR was aware, as a result of the letter from HMRC of 29 January 2014, that a decision had been made to issue a penalty in respect of the undisputed error in the 11/13 VAT return. Also, as the penalty was issued on 8 May 2014 it would have been possible for ECR, or CTM on its behalf, to have identified and alerted HMRC to the correct position with regard to the 11/13 and 02/14 VAT returns at a much earlier stage in the proceedings than the afternoon before the hearing was due to take place. 19. In my judgment it is not sufficient in a claim for costs under rule 10(1)(b) of the Tribunal Procedure Rules for the grounds of appeal in an appellant’s Notice of Appeal to refer to the errors in the VAT returns being “genuine mistakes and no tax advantage” being gained as a result relying on HMRC to ascertain from information that may be in its possession as to why this might be the case without providing any further explanation until the day before the hearing. 20. Therefore, having regard to all the circumstances of the case, I do not consider that ECR has established that HMRC, by withdrawing the penalty assessment the day before the hearing rather than at an earlier stage in the proceedings, has acted unreasonably and dismiss its application for costs. Right to Apply for Permission to Appeal 21. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. JOHN BROOKS TRIBUNAL JUDGE RELEASE DATE: 12 SEPTEMBER 2015