Sovereign Corporate Limited v The Commissioners for HMRC (Costs) [2026] UKFTT 1004 (TC)

[2026] UKFTT 01004 (TC)

Case No TC 09945

PROCEDURE - COSTS - Rule 10(1)(b) - Whether the Appellant's conduct in failing to attend a final hearing and in other regards was unreasonable? - Yes - Application against the Appellant granted

PROCEDURE - WASTED COSTS - Rule 10(1)(a) - Was the Appellant represented by F4Tax Ltd? - Yes - Whether an order of wasted costs should be made against F4Tax Ltd? - In principle, yes: F4Tax Ltd's conduct was negligent. But, in the circumstances, no order for wasted costs can be made because of lack of demonstrated causative link between F4Tax Ltd's negligent conduct and any element of HMRC's incurred costs - Application against F4Tax Ltd dismissed

FIRST-TIER TRIBUNAL

TAX CHAMBER

Hearing Heard on: 17 June 2026

Date Judgment date: 02 July 2026

Appeal reference: TC/2022/02200

Before

TRIBUNAL JUDGE CHRISTOPHER MCNALL

Between

SOVEREIGN CORPORATE LIMITEDAppellant

(as the nominated partner of CORONATION FILM PARTNERS LLP)Appellant

Appellant / Respondent to application for costsAppellant

THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondent

Respondents / Applicants for costsRespondent

F4TAX LTDRespondent

Third Party / Respondent to application for costsRespondent

Decided on the papers, without a hearing.Respondent

SOVEREIGN CORPORATE LIMITED

(as the nominated partner of CORONATION FILM PARTNERS LLP)

Appellant / Respondent to application for costs

THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS

Respondents / Applicants for costs

F4TAX LTD

Third Party / Respondent to application for costs

Decided on the papers, without a hearing.

DECISION ON COSTS

[1]This is my decision on costs.

[2]On 8 July 2025, this appeal (having originally been notified to the Tribunal in March 2022) came on for a hearing before me and Mr Bell at Taylor House in London. In the circumstances more fully set out in our full substantive decision (

[2025] UKFTT 902 (TC)

) no-one attended on behalf of the Appellant (the nominated partner of an LLP). We decided to proceed in the Appellant's absence, and, for the reasons set out in our published decision, we dismissed its appeal. There has been no application for permission to appeal nor any application to set aside the Decision.

[3]The sole and narrow ground of appeal was that no notice of enquiry had ever been issued to the nominated partner - ie, to Sovereign Corporate Limited - in accordance with TMA 1970 section 12AC(1)(a). If that was right, then no valid inquiry had ever been opened: see Paragraph [32] of the Decision. It was potentially a knock-out argument.

[4]However, and as was evident from the papers, HMRC had sent two letters. One was to the wrong entity (which we described as 'the Defective Letter'). Had that been the only letter, the appeal would have succeeded. The Appellant focussed exclusively on this. But the other letter was to the nominated partner (which we described as 'the Company Secretary Letter'). The Appellant ignored that.

[5]We said (at Para [36]) "in our view, the Appellant's exclusive focus on the Defective Letter is (and always was) fundamentally misconceived because the Company Secretary Letter:(1) Is addressed to an officer of the company;

(2) Is addressed to the right person, namely SCL (which had filed and signed the partnership's tax return);

(3) Was sent to the correct address."

[6]Thus, the appeal was always bound to fail.

[7]In the Decision, we remarked as follows:

"Costs The Appellant seized upon a poor point; pursued it for several years; and then failed - on the face of it, without any good reason - to appear or be represented at the final hearing of its appeal. Rule 10(1) makes provision for orders for costs. Relevantly, the Tribunal may only make an order in respect of costs (a) under section 29(4) of the 2007 Act (wasted costs) or (b) if the Tribunal considers that a party or their representative has acted unreasonably in bringing, defending or conducting the proceedings. The Tribunal may make an order on an application or of its own initiative. Section 29(4) of the Tribunals Courts and Enforcement Act 2007 describes “wasted costs” as any costs incurred by a party "(a) as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such a representative, or (b) which, in the light of any such act or omission occurring after they were incurred, the relevant Tribunal considers it is unreasonable to expect that party to pay."

At the hearing, HMRC invited us to make an order for costs. We are minded to make such an order. In accordance with Rule 10(5) we give the Appellant - Sovereign Corporate Limited, as the nominated partner of Coronation Film Partners LLP - the opportunity to make representations as to whether a costs order should be made against it, including anything it wishes to say as to its financial means. Any such representations should be received within 42 days of the date of release of this decision. F4TAX Ltd is directed to bring this decision to the attention of SCL, and to inform the Tribunal that it has done so."

[8]HMRC now applies for a costs order, pursuant to Rule 10: (1) Rule 10(1)(b); unreasonable conduct:

"that the Appellant and/or their representative F4Tax Ltd ('F4Tax') acted unreasonably in conducing these proceedings, causing the Respondents to incur costs"; (2) Rule 10(1)(a) - wasted costs: "the Appellant's representative, acted improperly, unreasonably and/or negligently in the Ridehalgh sense, and should meet the costs"

[9]The application was made timeously, in September 2025, but an administrative error led to some delay.

[10]On 30 April 2026, I wrote to the parties:(1) Requiring proper particularisation of the application, including requiring HMRC to specify "the identity of the persons (natural and legal)" against whom they were seeking costs;

(2) Giving directions for service;

(3) Directing that "Any person against whom costs are sought shall, if opposing an order for costs, notify the Tribunal and HMRC that it does oppose an order, and shall set out the reasons for it."; and

(4) Directing that "Any individual natural person party so served shall file with the Tribunal and serve on HMRC a statement, together with any evidence in support, setting out anything about their financial means which they wish the Tribunal to consider".

[11]Subsequently, HMRC wrote to the Tribunal:(1) Confirming that they seek a costs order against the Appellant until Rule 10(1)(b);

(2) Confirming that they seek a wasted costs order against F4Tax under Rule 10(1)(a);

(3) Confirming that the application for costs had been served on the Appellant, SCL, by post;

(4) Confirming that the application had been served on F4Tax by email;

(5) Confirming that a Dr Khurana (one of the natural person participants in the LLP) had been served with the application by email.

[12]The only response received has been from Mr Kevin Farley at F4Tax, dated 18 May 2026. I shall return to that response below.

[13]Nothing at all has been heard from the Appellant or Dr Khurana. F4Tax was expressly directed to bring this decision to the attention of SCL, and to inform the Tribunal that it had done so. Although not encapsulated in a formal order, that was a direction by the Tribunal which has not been appealed; and which F4Tax has not applied to vary or set aside.

The Rule 10(1)(b) Application against the appellant

(b) Application against the appellant

[14]This appeal was allocated to the standard category. Therefore, costs do not ordinarily follow the event. But a costs order may be made "if the Tribunal consider that a party or their representative has acted unreasonably in bringing, defending or conducting the proceedings": Rule 10(1)(b).

[15]The law as to the circumstances in which this rule is engaged is well-established.

[16]In Distinctive Care v HMRC

[2019] EWCA Civ 1010

, the Court of Appeal (Rose LJ, as she then was, with whom Lewison and Floyd LJJ agreed) approved (at Para 25) the following comments of Judge Bishopp in Catana v HMRC

[2012] UKUT 172 (TC)

that "bringing, defending or conducting the proceedings" is "an inclusive phrase designed to capture cases in which an appellant has unreasonably brought an appeal which he should know could not succeed, a respondent has unreasonably resisted an obviously meritorious appeal, or either party has acted unreasonably in the course of the proceedings, for example by persistently failing to comply with the rules or directions to the prejudice of the other side."

[17]In Market & Opinion Research International Limited v HMRC

[2015] UKUT 0012 (TCC)

at Paras [22] and [23], the Upper Tribunal endorsed the approach set out by the FtT in that case as to whether a party had acted unreasonably. That approach can be summarised as follows:

"(1) the threshold implied by the words “acted unreasonably” is lower than the threshold of acting “wholly unreasonably” which had previously applied in relation to proceedings before the Special Commissioners; (2) it is possible for a single piece of conduct to amount to acting unreasonably; (3) actions include omissions; (4) a failure to undertake a rigorous review of the subject matter of the appeal when proceedings are commenced can amount to unreasonable conduct; (5) there is no single way of acting reasonably, there may well be a range of reasonable conduct; (6) the focus should be on the standard of handling the case (which we understand to refer to the proceedings before the FTT rather than to the wider dispute between the parties) rather than the quality of the original decision; (7) the fact that an argument fails before the FTT does not necessarily mean that the party running that argument was acting unreasonably in doing so; to reach that threshold, the party must generally persist in an argument in the face of an unbeatable argument to the contrary; and (8) the power to award costs under Rule 10 should not become a “backdoor method of costs shifting”."

[18]In assessing whether a party has acted unreasonably, the Upper Tribunal in that case went on to say this (at Para [49]):

“It would not, we think, be helpful for us to attempt to provide a compendious test of reasonableness for this purpose. The application of an objective test of that nature is familiar to tribunals, particularly in the Tax Chamber. It involves a value judgment which will depend upon the particular facts and circumstances of each case. It requires the tribunal to consider what a reasonable person in the position of the party concerned would reasonably have done, or not done. That is an imprecise standard, but it is the standard set by the statutory framework under which the tribunal operates. It would not be right for this Tribunal to seek to apply any more precise test or to attempt to provide a judicial gloss on the plain words of the FTT rules.”

[19]I am bound by, and apply, the above guidance.

Discussion

[20]In my view, the Appellant's conduct, including that of its representative, has been unreasonable so that an order for costs against the Appellant should be made.

[21]It failed to attend the hearing on 8 and 9 July.

[22]Not every failure to attend a hearing would necessarily attract a costs order. However, in this case, it does:(1) At the very outset of this appeal, in 2022, on the Notice of Appeal, a Mr Gary Clarkson ('Mr Clarkson') was named as the Appellant's representative;

(2) Mr Clarkson latterly corresponded with HMRC and the Tribunal on the headed notepaper of a firm known as F4TAX Ltd ('F4Tax');

(3) Mr Clarkson described himself as a consultant with F4Tax;

(4) Neither Mr Clarkson nor anyone else from F4Tax appeared at the hearing on 8 July;

(5) A phone message was passed to Mr Clarkson on the day of the hearing that the Tribunal wanted to know where he was, and why he was not at Taylor House;

(6) HMRC (and, through them, the Tribunal) were told by someone at F4Tax that Mr Clarkson was 'in a meeting';

(7) As far as HMRC and/or the Tribunal could tell, at the hearing on 8 July 2025, F4Tax Ltd, whether that be in the person of Mr Clarkson, or someone else at the firm, were duly instructed by this Appellant as its representative. Neither Mr Clarkson nor F4Tax contacted HMRC or the Tribunal to say that they or he were not instructed. The person at F4Tax who answered the phone did not say that they or he were not instructed;

(8) Mr Farley's email later that day contained several representations which could only have been made by a person who not only knew about the appeal, but was instructed by the Appellant, namely: (a) "At present the appellant has not secured a replacement for their previous agent (Gary Clarkson) who withdrew from representation under ongoing health reasons"; and (b) "Both the appellant and I have seen no formal notification of the rescheduled dates until this afternoon, which was sent just an hour ago by email."

[23]The latter - on the face of it - can only have been said by Mr Farley if he had been told or otherwise informed, by the Appellant, on 8 July, that it had not seen any "formal notification of the rescheduled dates until [the afternoon of 8 July]'.

[24]Nothing has been heard directly from Mr Clarkson, then or since. If Mr Clarkson had indeed withdrawn from the case, he did not tell either HMRC or the Tribunal. It does not matter whether or not he told his principals at F4Tax. That is a matter of internal governance entirely between Mr Clarkson and F4Tax. Nor did he (or they) apparently make any alternative arrangements. Nor did the Appellant contact the Tribunal or HMRC to say that its representative was no longer acting for it, as it could have done.

[25]It is not for HMRC or the Tribunal to act as a detective to try and work out who is representing an Appellant or to chivvy them into action or attendance on the day of the hearing.

[26]If an appellant instructs a person to represent it, then the Tribunal is entitled to consider that person to be instructed and continuing to act, unless and until it is told something different.

[27]If a person writes to the Tribunal on a firm's headed notepaper, then the Tribunal is entitled to assume that the firm is acting and is continuing to act, unless and until it is told something different . That person is acting with (at least) ostensible authority on behalf of the firm.

[28]Here, in the circumstances the Tribunal and HMRC were entitled to assume that F4Tax were acting; and that someone - whether Mr Clarkson, or someone else from F4Tax - would appear at the hearing. The fact that Mr Clarkson is a consultant is immaterial. The precise content of the contractual relationship between him and F4Tax is immaterial. He wrote in terms which held F4Tax out as acting.

[29]It was unreasonable for this Appellant to set this appeal in motion, and then - at the very last moment - to disengage with its own appeal. That disengagement took the form of the non-appearance of anyone to represent it. A breakdown in communications (for example, between Mr Clarkson and his principals at F4Tax) would be a matter for the Appellant and its representative and/or for Mr Clarkson and F4Tax. But it is not a matter for the Tribunal or HMRC.

[30]Appellants - whether represented or not - are the persons responsible for making appeals and for pursuing them. Leaving aside any issue of what the representative should have done, this was, ultimately, the Appellant's appeal and not the representatives' appeal. If the Appellant had parted company with its representative, then it was the Appellant's responsibility and task to inform the Tribunal and HMRC of that fact, and to appear or be represented at the hearing and/or to make any such application as appeared appropriate. The Appellant - unreasonably - did not do any of those things, with the unfortunate effect that HMRC and the Tribunal were left in the dark on the day of the hearing, having to try and work out, on the hoof, what the Appellant's intentions were.

[31]The representations made during the calls on 8 July were also a species of unreasonable conduct. A hearing had been listed and was in session. Two calls were made to find out what was happening. What was said to HMRC (and, through it, the Tribunal) in those calls appears (at the very least) to have been inaccurate. The Tribunal expects (and is entitled to expect) to be given accurate information by persons who deal with it, whether represented or unrepresented. Neither the Tribunal nor HMRC were told, until after the hearing, "Mr Clarkson is no longer acting in this appeal".

[32]It was also unreasonable for this Appellant to set this appeal in motion, and then to pursue it for several years when the point being taken was always, as a matter of fact, transparently wrong. The Appellant can never have conducted a proper review of its own correspondence. Had it done so, it would have focussed on the Company Secretary Letter and realised that its appeal (against a notice of enquiry for over £1m) was hopeless.

[33]For present purposes, I do not treat anything to do with the adjourned hearing in February 2025 (adjourned because of what the Tribunal was told was Mr Clarkson's ill health) as unreasonable. I cannot make any findings about that, because no evidence was placed before the Tribunal, or required to be placed before the Tribunal, as to whether what it was being told about Mr Clarkson's ill-health was accurate or not. Nor do I consider any failures to comply with the Tribunal's earlier case-management directions to be material to this analysis.

[34]Therefore, HMRC's costs, under Rule 10(1)(b), shall be payable by the Appellant, Sovereign Corporate Ltd.

[35]HMRC have made no representations as to whether, if a costs order is made against a nominated partner of an LLP incorporated under the Limited Liability Partnerships Act 2000, that order can be regarded or can be treated, whether expressly or by implication, as a costs order either(i) against the LLP and/or

(ii) against the other partners (5 natural persons).

[36]Therefore, Sovereign Corporate Ltd is the paying party.

Rule 10(1)(a) - Wasted costs

(a) - Wasted costs

[37]This is the second limb of the application. An application can be made, in tandem, both for costs against an appellant and wasted costs against an appellant's representative, although - as set out below - the application for wasted costs would have to identify which particular costs were wasted.

[38]F4Tax has been given the opportunity to make representations, and has done so through Mr Farley.

[39]Mr Farley vehemently denies that F4Tax has ever had any involvement in these proceedings:

"in 1. Any representative capacity, or 2. In respect of conduct of Tribunal procedure", although he accepts that "

F4Tax Ltd, on behalf of the representative agent, submitted various documentation to the Tribunal (at the request of the representative agent)".

[40]I do not know what the expression 'representative agent' is supposed to convey. I presume that it is supposed to mean Mr Clarkson. Mr Clarkson told HMRC that he was 'a consultant' for F4Tax, and wrote on its headed notepaper. His precise employment status and/or ability to bind F4Tax was not something into which HMRC or the Tribunal needed to look further.

Discussion

[41]Normally, there is no doubt as to who the party's representative was. Cases where a wasted costs order is sought against someone who subsequently denies having been a party's representative are extremely unusual. But here, it is said by Mr Farley that Mr Clarkson, and not F4Tax, was the representative. But no costs order has been sought against Mr Clarkson personally. As far as I am aware, he has not been served with the application, and he has not responded to it.

[42]Given that no costs order is sought against Mr Clarkson, but only against F4Tax, then(i) there has to be evidence that F4Tax was acting (so as to make it liable on its own account); and/or

(ii) there has to be some link or nexus between Mr Clarkson and F4Tax so as (in effect) to make it vicariously liable for his acts and/or omissions.

[43]The requisite evidence and link here is that Mr Clarkson told HMRC that he was acting as a consultant for F4Tax. That was credible on the face of it because Mr Clarkson was writing on F4Tax's notepaper.

[44]Absent clear explanation from Mr Clarkson, before the hearing, that - despite appearances - he was not acting on behalf of or under the auspices of F4Tax, the reasonable objective observer would have believed that F4Tax were instructed by the Appellant and were acting.

[45]Moreover, when F4Tax was phoned (twice) on 8 July, no-one at F4Tax said that F4Tax had never been involved in the proceedings, as Mr Farley now seeks to argue. Instead of saying 'We have no idea what you are talking about', or words to that effect, someone at F4Tax instead represented that they knew who Mr Clarkson was; they knew where he was; they knew what he was doing; and were in a position to speak to him to pass on a message. And indeed, by the end of that day, something had been passed on to Mr Farley because Mr Farley was in a position to write to the Tribunal setting out his understanding of Mr Clarkson's position and that of the Appellant.

[46]I find that F4Tax was the Appellant's representative. And, having made that finding, it is also appropriate to join F4Tax formally as a party to this application.

[47]I also find that F4Tax's conduct was "unreasonable" in the accepted sense. I have already made my findings about that above.

[48]Alternatively, its conduct - especially in the run-up to the hearing on 8 July, and on 8 July - was negligent in sense of falling below the standard of competence reasonably to be expected of a professional representative responsible for the conduct of proceedings before the Tribunal: see Ridehalgh v Horsfield

[1994] Ch 205

[49]I agree with HMRC that a competent representative would have ensured continuity of representation or would have communicated promptly and candidly if any issues were encountered. No competent representative would have failed to turn up to the hearing and to say nothing about it. No competent representative would have waited until after the hearing had taken place before saying something. Hence, an order for wasted costs is, in principle, appropriate.

[50]However, the difficulty which HMRC encounter here is that it is difficult to see what costs were incurred by HMRC as a result of F4Tax's acts or omissions, whether in its own right or vicariously.

[51]The conduct, if to result in a wasted costs order, must actually lead to identifiable wasted costs.

[52]HMRC bears the burden of identifying the specific loss caused. In my view, it has failed to discharge that burden.

[53]HMRC submit that they "incurred costs in preparing for and attending a two day hearing. Those costs would not have been incurred had F4Tax communicated promptly about representation issues, and taken prompt steps to request a postponement of the relisted hearing."

[54]But that submission, with respect, does not hold good because, despite the Appellant's failure to be represented at the final hearing on 8 July 2025, that hearing in fact went ahead. The fact that it took only 1 day and not two is immaterial. It might have only taken a day if the Appellant had been represented. The situation in terms of wasted costs might have been different had the hearing been adjourned, but it was not. No postponement was requested, by anyone, so submissions based on an application to postpone which was not in fact made do not go beyond hypothetical.

[55]Otherwise, it seems to me that failures to do things like give contact details are not sufficient to give rise to a wasted costs order in this instance; and it is not said that those led to anything other than inconsequential and unidentified additional costs, even at the time, let alone in the long run.

[56]Nothing, here and now, can realistically be said about whether the costs of and incidental to the February 2025 hearing were wasted. That hearing was adjourned due to what was said to have been Mr Clarkson's ill-health, where the Tribunal, having adjourned, ultimately indicated that it did not require any medical evidence to substantiate F4Tax's position, and HMRC did not press the point with the Tribunal. Nor, as far as I am aware, did HMRC take the point then that, even if Mr Clarkson was ill, someone else from F4Tax should deal with the hearing.

Assessment of the costs

[57]I am going to summarily assess the costs. It is disproportionate and unnecessary to send them to a detailed assessment. I have a Schedule in sufficient detail to allow me to summarily assess.

[58]The costs amount to £12,997.80 base profit costs, and £1,519.23 disbursements, coming to £14,517.03 overall. There is no VAT.

[59]All the work being done was at hourly rates of between £129 and £143; which is lower than the relevant Guideline Rates for solicitors in ordinary civil work. There are disbursements relating to travel to the hearing and accommodation.

[60]There is some overlap between costs incurred in advance of the February 2025 hearing, and those incurred in advance of the July 2025 hearing; but it seems to me that there was sufficient time between those hearings to justify some degree of re-preparation in July.

[61]I make a modest adjustment to take account of the fact that the adjournment of the February 2025 hearing was not anyone's fault.

[62]I also make a modest adjustment to reflect the fact that some of HMRC's costs must have been time spent in developing and pursuing arguments which did not engage with the obvious point in this appeal, being that a compliant notice of enquiry had been given to the appropriate person, at the right address.

[63]With those features in mind, I therefore summarily assess the costs at £13,000.

[64]The costs shall be paid within 28 days of the date of service of this decision by HMRC on Sovereign Corporate Ltd.

[65]I can only observe that this might end up a Pyrrhic victory for HMRC given that SCL is a Jersey registered company which, according to Jersey Companies House online records, has recently ceased to exist. I am not told anything as to whether this LLP has another nominated partner.

Right to apply for permission to appeal

[66]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. Release date: 02 July 2026