iHeat.me Ltd v The Commissioners for HMRC [2026] UKFTT 1089 (TC)

[2026] UKFTT 01089 (TC)Case No TC 09963
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 21 July 2026Date Judgment date: 23 July 2026
[By remote video/telephone hearing]
Appeal reference: TC/2025/01791
PROCEDURE: various applications by Appellant including for costs, barring of HMRC and summary judgment due to alleged procedural unfairness by HMRC – applications refused.
Before
TRIBUNAL JUDGE AMANDA BROWN KC
Between
iHEAT.ME LTDAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentMs Bowen, daughter of the director of the Appellant for AppellantMx Lunt, litigator of HM Revenue and Customs’ Solicitor’s Office for RespondentsDECISION

Introduction

[1]With the consent of the parties, the form of the hearing was by way of video.[2]Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.[3]The hearing was listed to hear the following applications (Applications) made by the Appellant in a document “Appellant’s Statement of Case” (ASOC)served on 27 October 2025:(1) For an award of costs under rule 10(1)(b) Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (FTTTC Rules) on the basis of HMRC’s unreasonable conduct in the appeal (Costs Application).(2) That HMRC’s case be struck out on the basis of no reasonable prospects of success pursuant to rule 8(3)(c) FTTTC Rules (Rule 8(3)(c) Application).(3) For directions excluding or limiting HMRC’s continued participation in the proceedings (Barring Application).(4) An application for summary determination of its appeal pursuant to rule 8(7) FTTTC Rules repaying the full amount of R&D tax credits claimed together with statutory interest (Summary Determination Application).[4]The Applications are substantively made on the same grounds of alleged procedural unfairness as set out in the Appellant’s submissions below.[5]In addition to the Applications, and prior to 27 October 2025, the Appellant has also applied that HMRC’s case be struck out pursuant to rule 8(1) FTTTC Rules because HMRC had failed to serve their statement of case in accordance with the Tribunal’s directions of 16 September 2025 (Rule 8(1) Strike Out Application).[6]Over the period 26 – 28 November 2025 the Appellant has objected to service of HMRC’s list of documents claiming that service of their list of documents is impermissible because the list should have been served with their statement of case. The Appellant contends that service of the list of documents represents an attempt by HMRC to vary or substantiate their case contrary to the FTTTC Rules and directions of the Tribunal (LOD Application).[7]By HMRC’s response to the Applications they also make applications which it was also relevant to determine at the hearing:(1) An application for disclosure of a CCTV recording taken by the Appellant of a meeting on 12 September 2025. The Appellant claims that the recording demonstrates that HMRC’s note of the meeting is not wholly accurate and founds a claim that HMRC’s conduct at that meeting gives rise to a legitimate expectation that the R&D tax credits would be paid.(2) Disclosure of documents concerning the receipt of grant funding as referred to in the Appellant’s grounds of appeal but not included or referenced in the ASOC which is said to contain reference to all documents on which the Appellant intends to rely in these proceedings and which therefore stands as its list of documents. (together Disclosure Applications).[8]After presentation of the Disclosure Applications the Appellant confirmed that it was willing to disclose the documents and information sought by HMRC if the Applications were determined in such a way that HMRC were not excluded from these proceedings and/or that the appeal was not summarily determined. That agreement having been reached I do not set out the arguments or analysis regarding the Disclosure Applications. However, I do briefly deal with the Appellant’s contention that the meeting gave rise to a legitimate expectation that the claim would be paid.[9]For the reasons set out below I have refused all the Appellant’s applications.

Relevant FTTTC Rules

[10]The relevant FTTTC rules to be applied in this appeal are:
“Rule 2 (1) The overriding objective of these Rules is to enable the Tribunal to deal with cases fairly and justly. (2) Dealing with a case fairly and justly includes— (a) dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties; (b) avoiding unnecessary formality and seeking flexibility in the proceedings; (c) ensuring, so far as practicable, that the parties are able to participate fully in the proceedings; (d) using any special expertise of the Tribunal effectively; and (e) avoiding delay, so far as compatible with proper consideration 5 of the issues. (3) The Tribunal must seek to give effect to the overriding objective when it - (a) exercises any power under these Rules; or (b) interprets any rule or practice direction. … Rule 8 (1) The proceedings, or the appropriate part of them, will automatically be struck out if the appellant has failed to comply with a direction that stated that failure by a party to comply with the direction would lead to the striking out of the proceedings or that part of them. … (3) The Tribunal may strike out the whole or a part of the proceedings if - (a) he appellant has failed to comply with a direction which stated that failure by the appellant to comply with the direction could lead to the striking out of the proceedings or part of them; (b) the appellant has failed to co-operate with the Tribunal to such an extent that the Tribunal cannot deal with the proceedings fairly and justly; or (c) the Tribunal considers there is no reasonable prospect of the appellant’s case, or part of it, succeeding. … (7) This rule applies to a respondent as it applies to an appellant except that: (a) a reference to the striking out of the proceedings must be read as a reference to the barring of the respondent from taking further part in the proceedings; and (b) a reference to an application for the reinstatement of proceedings which have been struck out must be read as a reference to an application for the lifting of the bar on the respondent taking further part in the proceedings. (8) If a respondent has been barred from taking further part in proceedings under this rule and that bar has not been lifted, the Tribunal need not consider any response or other submissions made by that respondent and may summarily determine any or all issues against that respondent. Rule 10(1): The Tribunal may only make an order in respect of costs (or, in Scotland, expenses): … (b) if the Tribunal considers that a party or their representative has acted unreasonably in bringing, defending or conducting the proceedings;” (a) dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties; (b) avoiding unnecessary formality and seeking flexibility in the proceedings; (c) ensuring, so far as practicable, that the parties are able to participate fully in the proceedings; (d) using any special expertise of the Tribunal effectively; and (e) avoiding delay, so far as compatible with proper consideration 5 of the issues. (a) exercises any power under these Rules; or (b) interprets any rule or practice direction. Rule 8 (a) he appellant has failed to comply with a direction which stated that failure by the appellant to comply with the direction could lead to the striking out of the proceedings or part of them; (b) the appellant has failed to co-operate with the Tribunal to such an extent that the Tribunal cannot deal with the proceedings fairly and justly; or (c) the Tribunal considers there is no reasonable prospect of the appellant’s case, or part of it, succeeding. (a) a reference to the striking out of the proceedings must be read as a reference to the barring of the respondent from taking further part in the proceedings; and (b) a reference to an application for the reinstatement of proceedings which have been struck out must be read as a reference to an application for the lifting of the bar on the respondent taking further part in the proceedings. Rule 10(1): … (b) if the Tribunal considers that a party or their representative has acted unreasonably in bringing, defending or conducting the proceedings;”

Rule 10(1):

[11]In addition to those rules also relevant are rules 5(3), 7, 12, 20, 25 and 27.(1) Rule 5(3) grants the Tribunal wide case management powers including at 5(3)(d) the power to direct the provision of documents and information.(2) Rule 7 confirms that a failure to comply with a requirement under the rules or a direction does not render the proceedings void and provides the Tribunal with wide discretion to take such action as it considers just in respect of any such failure.(3) Rule 12 is the rule which governs the calculation of time and provides that if the time specified in a direction ends on a day other than a working day the requirements of the direction will be in time if done no later than the next working day. It also provides that the time for compliance on the due date for compliance is no later than 17:00 unless otherwise directed.(4) Rule 20 provides for the commencement of appeals by way of notice of appeal and the requirement to provide grounds of appeal.(5) Rule 25 prescribes the requirements for HMRC’s statement of case in particular that it should set out HMRC’s position in relation to the case.(6) Rule 27 requires that, subject to any contrary direction of the Tribunal, each party must send or deliver to the Tribunal a list of documents in their possession and on which they intend to rely or produce in the proceedings, within 42 days of service of HMRC’s statement of case. Tribunal’s approach Unreasonable costs

Tribunal’s approach

[12]The Tribunal's jurisdiction to award costs in a standard category appeal derives from section 29 Tribunals, Courts and Enforcement Act 2007 and rule 10(1)(b) of the FTTTC Rules. The starting point is that costs do not follow the event. As noted in MG v Cambridgeshire County Council [2017] UKUT 172 (AAC) (MG), the general rule is that in the Tribunal there generally should be no order for costs. A costs order under rule 10(1)(b) is therefore exceptional and should be made only in the clearest of cases and where there is good reason to depart from the ordinary position.[13]The leading authority is Distinctive Care Ltd v HMRC [2019] EWCA Civ 1010 (Distinctive Care CA), which endorses the approach adopted in Market & Opinion Research International Ltd v HMRC [2015] UKUT 12 (TCC) (MORI). Those authorities establish that the Tribunal is concerned with the conduct of the litigation rather than the substantive merits of the underlying dispute. Save where bad faith is involved, pre-commencement conduct is generally irrelevant. The Tribunal must identify the proceedings to which the costs application relates and consider whether the conduct complained of occurred in those proceedings.[14]The test for unreasonableness is derived from Ridehalgh v Horsefield [1994] Ch 205 and was adopted for tribunal proceedings in Cancino v Secretary of State for the Home Department [2015] UKFTT 59 (IAC), an approach subsequently approved in Distinctive Care CA. The "acid test" is whether the conduct complained of permits a reasonable explanation. Conduct is not unreasonable merely because it proves unsuccessful, because another course might have been wiser, or because a party ultimately loses. Equally, unreasonable conduct may consist of a single act or omission.[15]Where unreasonable conduct is alleged, the Tribunal should adopt a structured approach.(1) First, determine whether the party acted unreasonably in bringing, defending or conducting the proceedings.(2) Secondly, determine whether that conduct caused the opposing party to incur unnecessary costs.(3) Thirdly, determine whether, in all the circumstances, it is just to make an award of costs and, if so, in what amount.[16]Even where unreasonable conduct and causation are established, there is a discretion rather than an obligation to award costs: Tarafdar v HMRC[2014] UKUT 362 (TCC) (Tarafdar). The Tribunal must therefore stand back and consider whether a costs order is just and proportionate having regard to the overriding objective and the fact that cost-shifting is not the norm in standard category appeals. Relevant considerations may include the seriousness of the conduct, the extent to which it generated unnecessary expense, the conduct of both parties, and whether a substantive costs award would be fair in the particular circumstances of the case.[17]In summary, the question is whether a party’s conduct in the proceedings fell outside the range of conduct reasonably to be expected such that it caused unnecessary costs and renders it just to depart from the ordinary rule that each side bears its own costs.

Strike out/Barring

[18]The Tribunal’s powers to strike out an appeal or bar HMRC from further participation are contained in rule 8 of the FTTTC Rules. Those powers are draconian because they may prevent a party from obtaining a determination of the substantive issues on their merits and must therefore be exercised with considerable caution.[19]By virtue of rule 8(1) FTTTC, an appeal will be struck out automatically where a party is in breach of a direction which provides that non-compliance will carry that result. As confirmed in the matter of Elite Management Consultancy Limited (in administration) v HMRC [2024] UKFTT 567 (TC) there is no discretion on the Tribunal where there has been a breach of such an unless order. There is a discretion under rule 8(3)(a) where the Tribunal has made an unless order which provides that non-compliance may result in the appeal being struck out.[20]Where an application is made under rule 8(3)(c) FTTTC on the basis that a case has no reasonable prospect of success, the applicable test is whether the case has a realistic, as opposed to a fanciful, prospect of succeeding, if not the appeal may be struck out. The Tribunal must avoid conducting a mini trial at an interlocutory stage in determining whether there is a realistic prospect of success. It is not required to accept unsupported assertions at face value and may critically analyse the available material. The Tribunal should also consider not only the evidence presently before it but the evidence that may reasonably be available at the substantive hearing. A strike out application should not succeed where there are reasonable grounds for believing that a fuller investigation of the facts may add to or alter the evidential picture. First de Sales Ltd Partnership v HMRC [2018] UKUT 396 (TCC) (First de Sales)provides the relevant guidance.[21]Where the application is based upon procedural default (including under rule 8(3)(b)), the Tribunal must conduct a broader evaluative assessment. The authorities, including HMRC v BPP Holdings Ltd [2014] UKUT 496 (TCC) (BPP), Nutro UK Ltd v HMRC [2014] UKFTT 971 (TC), XG Concept Ltd v HMRC [2017] UKFTT 92 (TC) and my own decision in Carbon Six Engineering Ltd v HMRC [2026] UKFTT 177 (TC) (Carbon Six), demonstrate that exclusion from proceedings is ordinarily a remedy of last resort. The Tribunal must consider the nature and seriousness of the default, whether it was isolated or persistent, the adequacy of any explanation, any prejudice caused, the impact on the efficient administration of justice, the importance of compliance with directions and, ultimately, whether a fair hearing remains achievable.[22]In the case of a proposed barring order against HMRC under rule 8(7), the same principles apply. Barring is not a punitive sanction. Its purpose is to protect the integrity of the proceedings and secure procedural justice. There is no presumption that HMRC should be barred merely because a direction has been breached (save where the breach is of an unless order). The Tribunal must determine, through the lens of the overriding objective, whether the conduct in question has reached the point at which the proceedings can no longer be dealt with fairly and justly without exclusion. If a fair determination remains possible by the use of lesser case-management measures, barring will ordinarily be inappropriate. Conversely, persistent or serious non-compliance, particularly following an unless order, may justify barring where lesser measures have proved inadequate.

Relief from sanctions

[23]The approach to relief from sanctions is that articulated by the Upper Tribunal in Martland v HMRC [2018] UKUT 178 (TCC) (Martland)and derived from the three-stage framework established by the Court of Appeal in Denton v TH White Ltd [2014] EWCA Civ 906 (Denton).[24]First, the Tribunal must assess the seriousness and significance of the breach. A failure to comply with an unless order will generally be regarded as serious, but the Tribunal should also consider the practical consequences of the default, including its impact on the efficient conduct of the proceedings, compliance with directions, hearing dates and prejudice to the other party.[25]Secondly, the Tribunal must consider why the default occurred. The question is whether there is a satisfactory explanation for the breach. Deliberate or persistent non-compliance will weigh heavily against relief, whilst administrative error, although not necessarily amounting to a good reason, requires careful evaluation in its factual context.[26]Thirdly, the Tribunal must consider all the circumstances of the case. Particular weight must be given to the need for litigation to be conducted efficiently and at proportionate cost and to the importance of compliance with rules, directions and statutory time limits. The exercise is ultimately evaluative, not mechanistic, and the question is whether granting or refusing relief accords with the overriding objective and represents the just and proportionate outcome.

Findings of fact

[27]The parties each provided me with a lengthy recitation of the course of the litigation as they perceived it and I was provided with all the relevant correspondence passing between them which I have reviewed. I did not receive any witness statements or sworn testimony on behalf of the Appellant though I did ask questions of both Ms and Mr Bowen regarding certain aspects of the factual chronology. I consider that both of them had the genuine intention of seeking to help me in determining the Applications, but I find that their recollection of events to have been, in part, coloured by their frustration at what they both consider to have been unreasonable conduct by HMRC.[28]As required when applying the relevant statutory tests under rules 8 and 10 FTTTC Rules I make the following findings of fact as to the conduct of the parties in these proceedings:(1) Proceedings in this appeal commenced when the Appellant submitted its notice of appeal on 22 April 2025 setting out its grounds of appeal.(2) The Appellant is unrepresented in these proceedings; however, the Appellant had appointed an authorised representative in connection with the R&D tax claim and enquiry with HMRC.(3) HMRC’s involvement in the proceedings commenced on 1 July 2025 when the Tribunal notified the appeal to them. This is the earliest point of reference when considering HMRC’s conduct in the proceedings.(4) That notification required that HMRC serve their statement of case within 60 days of the date of that letter.(5) The letters acknowledging receipt and serving the appeal both required that the parties communicate by email and that all correspondence to the Tribunal be copied to the other party.(6) 60 days from 1 July 2025 was Saturday 30 August 2025. The first working day after 30 August 2025 was 1 September 2025. The due date and time for service of HMRC’s statement of case was 17:00 on 1 September 2025. Settlement meeting(7) On 2 July 2025 HMRC wrote to the Appellant and invited it to a without prejudice teleconference to discuss the claim with a view to settlement without recourse to the Tribunal. HMRC’s litigator introduced herself by email on 7 July 2025 and reiterated the invitation to the proposed teleconference. The Appellant accepted, at least in principle, the offer of a meeting on 7 July 2025.(8) On 19 August 2025 the officer responsible for issuing the closure notice rejecting the claim informed the Appellant that the teleconference which had been offered to the Appellant had been offered in error but that she was nevertheless willing to meet to discuss the claim. A meeting after 14:00 on 10 September 2025 was offered. That email was sent to the Appellant, and the representative.(9) The Appellant’s response to the invitation to meet was sent at 22:37 on 19 August 2025 confirming willingness to engage in settlement discussions but expressing concern at delays and miscommunication from HMRC and seeking confirmation that any meeting would include all relevant individuals from HMRC and that those individuals be independent of the original decision.(10) On 22 August 2025 HMRC confirmed that they would ensure that the relevant individuals were at the meeting and stated “I will book the meeting for 10 September 2025 …” In response the Appellant acknowledged the timing of the proposed meeting whilst expressing certain concerns as to the chronology of the offer of the meeting. The Appellant indicated that it reserved the right to record and transcribe the meeting.(11) By email on 26 August 2025 HMRC confirmed that the proposed meeting would remain in their calendar.(12) An email dated 9 September 2025 indicates that the meeting invitation referred to in subparagraphs (9) and (11) above was sent but had not been accepted by the Appellant. The email offered a revised meeting time of 10:00 on 10 September or after 10:00 on 12 September 2025. The Appellant’s response was that it remained open to a meeting provided that the meeting was:
“convened with the genuine purpose of exploring meaningful financial settlement, not to reduce or segment the issues in [the appeal]. All grounds of appeal remain live, and I will not agree to [the case] being reframed outside the Tribunal process.” (13) HMRC confirmed that the meeting would be a genuine exercise in exploring the merits of the claim and that the officer attending would be approaching it with an open mind with consideration given to the facts and arguments already presented and any further information or arguments presented at the meeting. The officer confirmed that he was authorised to agree any potential settlement and that the meeting was not intended to delay the proceedings though the extension of time application was referenced. The Appellant agreed to attend the meeting reiterating that all grounds of appeal were to remain live and that the meeting was not to “narrow or segment issues in the appeal”
. The Appellant explicitly confirmed that its attendance was to explore resolution without the need for the Tribunal. (14) The meeting took place on 12 September 2025. At the Appellant’s invitation the agenda for the meeting was prepared by HMRC. It was a meeting diarised for 2 hours but lasted an hour. There were two note takers at the meeting one from each party. The meeting was recorded on the Appellant’s permanent CCTV system, without HMRC’s consent to such recording. At the meeting 3 of the 4 agenda items were resolved. Further information was requested regarding the final agenda item. Information was provided on 15 September 2025. (15) HMRC reviewed the information provided and, on 19 September 2025, responded confirming that HMRC remained unable to accept the claim. The Appellant did not treat that response as the final word and on 22 September 2025 provided a further submission. In that submission the Appellant made the following points: (a) The agreed basis of the meeting was to resolve the final outstanding point not to open new ones. (b) There were no ongoing discussions and a decision needed to follow. (c) The Appellant’s intention to make the Applications was anticipated. (d) Allegations of misleading the Tribunal in connection with the applications for extension of time were made. (e) The Appellant remained willing to resolve the dispute by agreement but only if HMRC engaged in a genuine way provided that settlement was offered before the Statement of Case was filed. (16) I find that the submission at (a) is not a wholly fair reflection of the correspondence I have reviewed as that correspondence confirmed all arguments in the appeal remained open and there was opportunity for new information and arguments. (17) I also find that on balance the overall message communicated was that the Appellant wanted a door to settlement to remain open/that it expected HMRC to settle on the basis of the additional information provided but no longer had faith in further meetings or discussion. I find that there was no communicated and settled intent that the matter could only be resolved by way of litigation. There was at least one further step before that stage was reached which required HMRC to consider the documentation and argument provided and confirm or amend the decision communicated on 19 September 2025. First extension of time application (18) At 17:21 on 19 August 2025 HMRC applied for an extension of time in which to submit their statement of case to 30 November 2025. The application therefore fell between the correspondence exchanged between the parties on that date. The application incorrectly indicated that the statement of case was due by 8 September 2025. The grounds on which the application was made stated that an offer had been made for a teleconference with a view to settlement and that the meeting had been arranged for 11 September 2025. On the evidence an offer had been made for such a meeting, but it had not in fact been arranged for 11 September 2025. It had been proposed for any time after 14:00 on 10 September 2025. However, I do not find that the application was made on a basis which had the effect of misleading the Tribunal. At the point it was submitted HMRC had offered a meeting in the course of correspondence in which the Appellant had (on 2 July 2025) agreed to a meeting. (19) The application was sent to the Tribunal and was copied to the representative authorised in the enquiry but not appointed in the proceedings. Failure to copy in the Appellant was a breach of the Tribunal’s direction referenced at sub-paragraph (5) above. (20) The Appellant stated that it had not been informed by the representative of receipt of the application. It is unclear to me what the representative’s role continued to be over the period from when the appeal was notified to the Tribunal and through to September 2025. I observe that the representative was copied into correspondence between HMRC and the Appellant on 19 August 2025 (see (9) above) and subsequently, including emails initiated by the Appellant (and not therefore limited to “reply all” emails sent by the Appellant). I find it most surprising that a representative copied by the Appellant into emails regarding settlement meetings would not have made his client aware of correspondence received from HMRC about proceedings to which he had a connection but was not directly involved. Mr and Ms Bowen were, however, adamant that they had not been told about the application. On the evidence before me I am prepared to accept that the representative did not inform the Appellant. (21) Having made an in-time application for an extension of time to serve their statement of case, and pending confirmation from the Tribunal that the direction had been amended, HMRC did not serve a statement of case. Not doing so was entirely consistent with the general behaviour of FTT litigants, taxpayers and HMRC alike, (at least prior to the issue by the Tribunal of the practice statement on requesting extensions of time) that the effect of making an application was to suspend the requirement to comply pending receipt of further direction from the Tribunal. As such, the behaviour was not unreasonable. (22) On 1 September 2025 at 14:52 the Appellant applied to the Tribunal to issue an unless order to HMRC compelling service of their statement of case within 14 days and for HMRC’s case to be struck out if there was no compliance. Further directions were also requested; in particular, that “our filing deadline” be set at 14 rather than 42 days. That application reflected a misunderstanding on the part of the Appellant that it was required to serve its own statement of case within 42 days of receipt of HMRC’s statement of case. That misunderstanding was not apparent to the Tribunal at the time, or at any point prior to this hearing despite service of the ASOC on 27 October 2025. I find it was not unreasonable of HMRC not to have discerned the misunderstanding from the correspondence. (23) On 1 September 2025, by email timed at 16:06, HMRC responded to emails received from the Appellant regarding the failure to serve a statement of case by the directed date and the application to the Tribunal. That response explained that the due date for service was not 30 August 2025, as asserted by the Appellant, but close of business on 1 September 2025. The email confirmed that HMRC had not prepared the statement of case pending the meeting. No reference was made in that response to HMRC’s application for an extension of time. (24) Responsibility for conduct of the litigation within HMRC moved on 2 September 2025. The new litigator emailed the Appellant on 2 September 2025. In that email she indicated that an application for an extension of time had been served on 19 August 2025 on the basis of the proposed settlement meeting she understood had been arranged for 11 September 2025. She acknowledged the application made by the Appellant the previous day and explained the basis for the extension of time application and confirming HMRC’s intention to oppose the Appellant’s unless order application. The formal opposition was served the same day. The objection reiterated that a meeting had been arranged for 11 September 2025. (25) The Appellant responded to HMRC’s opposition on 3 September 2025. In the response it was flagged that the Appellant had not been served with the extension of time application made on 19 August 2025. Various complaints were made regarding HMRC’s delay in setting up the settlement meeting and setting out the basis on which the Appellant was prepared to attend such a meeting. The Appellant claimed that there was prejudice caused by the delays. (26) On 3 September 2025, having considered the representations received from the parties up to that date, Judge Morgan considered the extension of time application and refused HMRC’s application for an extension of time to 30 November 2025 but granted an extension to 30 September 2025. In the brief reasons given it was noted:
“HMRC wish to have a meeting with the appellant on 11 September to seek to resolve matters or narrow the issues between the parties. However, the appellant has stated it does not wish to participate. Judge Morgan considers, therefore, that matters in the tribunal should progress without undue delay. In any event the new deadline is more than two weeks after the proposed meeting. It is open to HMRC to update the tribunal if the meeting does go ahead and make any further application for any further extension of time. Any such application is likely to be refused however unless it is clear that the parties are actively engaging in discussion.” (27) HMRC sent the application for extension of time to the Appellant on 8 September 2025. No explanation was given for it not having been sent on 2 September 2025 once it was clear to HMRC that it had not been served as required by the Tribunal directions. (28) On 8 September 2025 the Appellant wrote to the Tribunal, it reiterated that the Appellant had not been served with the application at the time of service on the Tribunal, that no statement of case had been served in compliance with the original directions and that no mention had been made of the application until 2 September 2025 despite communications between the parties on 1 September 2025. The chronology regarding the arrangement of the meeting was narrated. It claimed that no meeting had “ever been agreed”
. This statement cannot be read in absolute terms. The chronology of correspondence regarding the arrangement of the meeting as set out above demonstrates that by 8 September 2025 the Appellant had been invited to a meeting (though the form of the meeting had changed) and that the Appellant had indicated a desire and willingness to engage with a view to settlement within certain specified parameters. No date for a meeting had been agreed between the parties though HMRC had sent a meeting invite for 14:00 on 10 September 2025 which had not been accepted. Full submissions were made as to the perceived unfairness in HMRC’s behaviour and prejudice caused because HMRC were professionally represented whereas the Appellant was a litigant in person. (29) Judge Morgan’s direction was issued to the parties on 16 September 2025. The correspondence between the parties dated 8 September 2025 was not before Judge Morgan when she gave the direction and was not referred to a judge before the directions were issued. Had that correspondence been so reviewed I find that Judge Morgan would have been likely to make the same order though I anticipate that the observations in her reasons may have been different. Second extension of time application (30) On receipt of Judge Morgan’s direction, HMRC wrote to the Appellant. HMRC’s legal group acknowledged the direction and that the meeting had taken place. The litigator indicated an intention to apply for a further extension of time to 14 October 2025 to allow for consideration of the material provided. The Appellant’s frustrations with the progress to date were acknowledged and the litigator explained why the extra 14 days were required. The Appellant’s consent to the application was sought. The following day, 17 September 2025, the Appellant notified that it did not consent to the application. It stated that the meeting had been held, the follow-up was complete and it was for HMRC to make a decision. It continued “There are no ongoing discussions.” (31) On 25 September 2025 HMRC sought a further extension of time again to 30 November 2025. The covering email to the application acknowledged the terms of Judge Morgan’s direction. It confirmed that a meeting had taken place on 12 September 2025 and that “correspondence continues to be exchanged between the parties” the correspondence was attached to the email. The application itself stated: (a) A meeting had been arranged for 11 September 2025. (b) The meeting took place on 12 September 2025. (c) The meeting had resolved 3 areas of dispute and that additional information had been requested. (d) The information had been provided on 15 September 2025. (e) The Appellant’s consent to an extension of time to 14 October 2025 had been sought but that the Appellant objected to the application. (f) HMRC had confirmed their position on the claim by correspondence dated 19 September 2025. (g) In response to that correspondence the Appellant had submitted further information referring to the possibility of settlement. (h) “the parties, respectfully, are actively engaging in discussion with a view to reach settlement or narrow the issues for the Tribunal to consider.” (32) By reference to the analysis of and findings in respect of the correspondence set out in sub paragraphs (14) to (16) above I do not consider any of those statements to be misleading in intent or effect particularly in the context of the covering email. As regards (h), whilst the Appellant had stated in its submission of 22 September 2025 that there were no discussions and that there would be no further meeting the fact was that following the communication of HMRC’s confirmation that the claim had been rejected after the meeting on 12 September 2025 the Appellant had prepared and submitted a further 23-page submission reiterating a willingness to settle and inviting a decision on the further submissions made. Whilst the parties were not engaged in “discussions” in the sense of verbal dialogue, correspondence continued to be exchanged and the Appellant had invited a further response from HMRC with a view to settlement of the dispute. (33) Judge Bailey reviewed the application and the Appellant’s full objection on 26 September 2025. She gave her instruction on the same day. Taking full account of the Appellant’s objection Judge Bailey directed that HMRC serve their statement of case no later than 14 October 2025. The full requested extension was refused on the basis that Judge Bailey considered that HMRC had had sufficient time to consider the documentation. HMRC were informed that should they miss the deadline for service they would need to seek relief from sanctions. (34) Due to admin processing delays the direction was not served on the parties until 14 October 2025 at 11:32. Despite this, HMRC served their statement of case on 14 October 2025. Service was at 18:57 and thereby in breach of the direction as rule 12 requires service to be by 17:00. HMRC made no application for relief from sanctions. (35) The statement of case, at paragraphs 102 – 164 it sets out HMRC’s representations as to the basis on which it contends that the Appellant has failed to demonstrate that it meets the requirements for them to accept the R&D claim. (36) HMRC served their list of documents in accordance with the requirements of rule 27 FTTTC Rules on 25 November 2025 and in advance of any direction of the Tribunal concerning service of lists of documents. (37) The Appellant served its ASOC on 27 October 2025. That document set out, at some considerable length, the Appellant’s position on the substance of the R&D claim and made the Applications. It has been accepted that this document was prepared using an AI tool and included fictitious references which were not checked. Some of these errors have been corrected, HMRC continue to question some other references. I make no finding in respect of asserted errors. (38) On 16 February 2026, HMRC were directed to provide “their representations on the [ASOC] … (and the [Applications])” and the Appellant’s email of 28 November 2025 no later than 9 March 2026. (39) HMRC provided a response on 9 March 2026, prior to the 17:00 deadline. It addressed the Applications and the Appellant’s email of 28 November 2025. It did not provide a response in respect of the substantive tax technical elements of the ASOC. Parties submissions Appellant’s submissions

Parties submissions

[29]The Appellant’s skeleton argument and oral submissions were not made by reference to the individual Applications. Rather, the submissions sought to step back and establish what is contended to be a cumulative course of procedural conduct which was unreasonable, unfair and prejudicial. The Appellant submitted that HMRC’s conduct should not be examined as a series of isolated incidents, but as a pattern which had affected its ability to understand the case it had to meet and to conduct the appeal fairly. Particular emphasis being placed on HMRC’s position as a regular and professional litigant. Reasonableness of HMRC’s Procedural Conduct[30]The Appellant submitted that HMRC’s conduct should be assessed cumulatively. It relied on the extension application made on 19 August 2025 before any meeting had been agreed, the failure to serve that application on the Appellant, HMRC’s decision not to prepare a Statement of Case by the original deadline, successive extension applications said to have relied on the same meeting process, and continued reliance on that process after the Appellant had made clear that no further delay was agreed. It submitted that those matters disclosed a sustained procedural pattern rather than isolated mistakes.[31]The Appellant contends that this conduct fell below the standard reasonably to be expected of an experienced institutional litigant. It relied on Distinctive Care for the objective character of the Rule 10 test, and on BPP for the proposition that HMRC should not receive procedural indulgence because it is a public authority. It submitted that HMRC’s legal department was familiar with Tribunal procedure, that service of applications on the other party was elementary, and that HMRC’s experience was relevant to the assessment of what was objectively reasonable. Procedural Fairness[32]It is contended that procedural fairness was undermined by HMRC’s failure to serve the first extension application on the Appellant and by what it characterised as reliance on an incorrectly stated factual position about the meeting process. The Appellant submitted that it had consistently made clear that participation in any meeting was not to delay the Tribunal timetable, and that HMRC’s applications nevertheless used the proposed or recent meeting as a basis for further time.[33]The Appellant submitted that the prejudice could not be cured merely because HMRC ultimately served its Statement of Case. It was said that the practical effect of the extensions was that HMRC obtained additional time to formulate its case, while the Appellant had to respond to procedural irregularities, correspondence and uncertainty rather than prepare the substantive appeal on an equal footing. The Appellant relied on Rule 2, Denton and Martland as requiring the Tribunal to examine the seriousness of the procedural history, the explanation for it and all the circumstances. Procedural Finality[34]HMRC’s case is said to have evolved during the enquiry and appeal process. The Appellant contended that HMRC had moved from the Closure Notice to the matters discussed before and during the September 2025 meeting, to later correspondence, the Statement of Case and subsequent representations. The Appellant submitted that, after the enquiry process, a year of appeal proceedings and multiple extensions of time, HMRC should have been able to identify a clear and settled case.[35]The Appellant relied on Rules 20, 25 and 27 and HMRC guidance ARTG8395, submitting that the function of a Statement of Case is to identify the case to be met. It submitted that HMRC’s Statement of Case did not plead a positive case with sufficient clarity and that the later List of Documents and correspondence amounted, in substance, to an attempt to expand or alter the case after the event.

Exercise of the Tribunal’s Case Management Powers

[36]The Appellant submitted that the cumulative procedural history engaged Rules 2, 5, 7, 8 and 10. It accepted that the remedies sought were significant but contended that the Tribunal was not confined to considering each procedural default separately. Its submission was that the Tribunal should ask whether, viewed as a whole, the proceedings remained fair and just, and what directions were required to restore procedural fairness.[37]The Appellant relied on MORI, BPP and Carbon Six. It submitted that debarment, strike out and restrictions on participation were not sought as punishment, but as corrective measures where the procedural balance had been lost. The Appellant did not submit that any particular sanction followed automatically. It submitted that the full range of case-management powers remained open to the Tribunal if intervention was required to give effect to the overriding objective.

Appropriate Relief

[38]On the Costs Application, the Appellant submitted that costs should be awarded under Rule 10(1)(b) because HMRC’s conduct, assessed objectively and cumulatively, was unreasonable. It relied on the failure to serve the first extension application, delay in regularising the position, extension applications said to have been made on an inaccurate basis, the late service of the Statement of Case, the failure to respond fully to the ASOC, the timing and scale of HMRC’s authorities bundle, and the costs and disruption caused by the need to deal with those matters.[39]On the Rule 8(3)(c) Application, the Appellant submitted that HMRC’s case had no reasonable prospect of success or should not be permitted to proceed in its present form, because HMRC had failed to identify a coherent and final case to be answered.[40]On the Summary Determination Application, the Appellant submitted that the appeal should be determined in its favour because the procedural history and the matters said to have been concluded at the 12 September 2025 meeting left no fair basis for HMRC to continue to resist the claim.[41]On the Barring Application, the Appellant submitted that HMRC should be excluded from further participation, or its participation should be limited, because continued expansion of HMRC’s case would perpetuate the procedural unfairness already caused. In the alternative, the Appellant sought directions restricting HMRC firstly to the limited area of dispute remaining after the meeting on 12 September 2025 The Appellant claims that following the meeting it had a legitimate expectation that there was only one issue which remained to be resolved and that HMRC’s case should be so limited. In default the Appellant contends that HMRC should be limited to arguing the issues pleaded in HMRC’s Statement of case. The Appellant contended that HMRC should be prevented from any further expansion without proper application and explanation.

HMRC’s submissions

[42]HMRC addressed the Applications rather than the general approach of the Appellant’s skeleton (the skeletons being prepared in parallel and not sequentially). For ease of reference, I summarise HMRC’s case to reflect the way in which the Appellant presented its case.

Reasonableness of HMRC’s Procedural Conduct

[43]HMRC submitted that its conduct throughout the appeal had been reasonable, proportionate and consistent with the overriding objective in Rule 2. It submitted that the Appellant’s complaints concerning the conduct of the litigation and should be separated from complaints arising during the enquiry process, which HMRC said had been addressed through the complaints process. HMRC submitted that it was appropriate to consider the conduct relied upon both individually and in the round.[44]HMRC accepted that the 19 August 2025 extension application had not been served on the Appellant but submitted that this was a genuine mistake rather than a calculated attempt to disadvantage the Appellant. HMRC said the application had been copied to the Appellant’s representative in connection with the R&D claim (but who was not appointed in connection with the appeal), who had been included in correspondence concerning the wider claim, and that HMRC believed the Appellant was aware of the application. HMRC repeated an apology previously given and submitted that once it understood the Appellant had not received the application, a copy was provided.[45]HMRC denied that it had misled the Tribunal. It submitted that references to the meeting in the extension applications were not intended to mislead and reflected HMRC’s understanding that a meeting had been discussed or planned, and that further correspondence and information following the meeting required consideration. HMRC accepted that there was a dispute about language, particularly whether “discussions” continued, but submitted that the correspondence and further information could reasonably be characterised as continuing engagement.[46]HMRC submitted that its extension applications were legitimate case-management steps. It submitted that they were made before the relevant deadlines, that extensions were granted by the Tribunal, and that HMRC had complied with all relevant deadlines save for any issue which arose from the timing of service on 14 October 2025. It submitted that it was reasonable to seek time to consider whether the meeting and subsequent information might narrow or resolve matters, rather than produce a Statement of Case which might then require amendment.

Procedural Fairness

[47]HMRC disputed that the Appellant had been denied a fair hearing. It submitted that disagreements over case management, dissatisfaction with meeting notes and objections to correspondence did not amount to procedural unfairness. HMRC submitted that there had been no unless order and no subversion of the course of justice. It argued that the substantive appeal could still proceed fairly to a full hearing.[48]HMRC submitted that fairness applies equally to both parties. Relying on Barton v Wright Hassall LLP [2018] UKSC 12, Reynard v Fox [2018] EWHC 443 (Ch) and EDF Energy Customers Ltd v Re-Energized Ltd [2018] EWHC 652 (Ch), it submitted that litigants in person may receive procedural assistance but are not exempt from procedural obligations and are not entitled to a different threshold when seeking exceptional remedies.

Procedural Finality

[49]HMRC submitted that its Statement of Case complied with Rule 25. It submitted that the Statement of Case identified the decision under appeal, the procedural background, the issues in dispute, the burden and standard of proof, the statutory framework, and HMRC’s position by reference to the facts. They contended that, because the appeal concerned a claim to relief, it was for the Appellant to demonstrate eligibility, and HMRC was entitled to plead its case by explaining why, on the material available, that burden was not discharged.[50]HMRC rejected the suggestion that it had expanded its case improperly. It submitted that the List of Documents was served in accordance with Rule 27 and that correspondence after 15 October 2025, including requests for the meeting recording, clarification of authorities and correspondence about the hearing bundle, was reasonable and necessary. It submitted that the Statement of Case remained the pleading and that any skeleton argument would develop that pleaded case but would not introduce new points without a formal application.[51]HMRC also submits that the Appellant’s reliance on alleged legitimate expectations arising from the meeting of 12 September 2025 is misplaced. It argues, relying on Aspin v Estill [1987] STC 723, Trustees of the BT Pension Scheme v HMRC [2015] EWCA Civ 713 and Lobler v HMRC [2015] UKUT 152 (TCC), that public-law concepts such as legitimate expectation cannot ordinarily defeat an otherwise lawful tax assessment. Applying R v IRC ex p MFK Underwriting Agents Ltd [1990] 1 WLR 1545, HMRC submits that no clear, unambiguous and unqualified representation was made.

Exercise of the Tribunal’s Case-Management Powers

[52]HMRC submits that debarment, strike out and restrictions on participation are exceptional remedies which are not justified here. It argues that it has continued to engage actively with the proceedings and that the Tribunal should determine the dispute by applying ordinary procedural principles rather than by imposing sanctions.

Relief sought on the Applications

[53]On the Costs Application, HMRC submitted that the Appellant had not established unreasonable conduct within Rule 10(1)(b). Relying on MG, Tarafdar, MORI and Distinctive Care, HMRC contended that costs orders are exceptional, that the focus is on conduct in the proceedings. Their case is that procedural disagreement, unsuccessful applications or correspondence do not amount to unreasonable conduct. If, contrary to its primary position, any conduct was found as unreasonable, HMRC submitted that any costs should be limited to costs caused by that conduct and should not extend more widely.[54]On the Rule 8(3)(c) Application, HMRC submitted that there was no basis for striking out its case. The substantive appeal raises disputed issues of fact and expert judgment, including whether qualifying R&D took place, whether technological uncertainties existed, the timing of any advance, field-testing issues and qualifying expenditure. HMRC submitted that those issues require determination at a substantive hearing.[55]On the Summary Determination Application, HMRC submitted that summary determination was inappropriate for the same reasons as the Rule 8(3) Application and that the appeal should proceed to a full hearing at which witness evidence and the relevant technical evidence could be considered.[56]On the Barring Application, HMRC submitted that barring or restricting its participation would be disproportionate and unsupported by the procedural history. It submitted that it had continued to engage actively with the proceedings and that the Appellant’s application to limit the appeal to matters discussed at the 12 September 2025 meeting was misconceived. HMRC submitted that the meeting was intended to explore possible settlement or narrowing of matters, but the correspondence did not amount to an agreement that the issues in the Tribunal appeal were confined to the meeting agenda or to any single matter remaining after that meeting. HMRC therefore invited the Tribunal to dismiss all of the Appellant’s Applications and to give ordinary case-management directions for the substantive appeal to proceed. Discussion Costs Application

Discussion

[57]I have set out in paragraphs 12 - 17 above the test to be applied in determining whether to exercise my discretion to make an unreasonable costs award. In short, I must look at HMRC’s conduct in the proceedings and not more widely and I must determine whether the conduct alleged to have been unreasonable permits a reasonable explanation.[58]The Appellant effectively invites me to apply a slightly different test. The Appellant appeared to accept that considered individually the objectionable conduct complained of may be capable of reasonable explanation but contended that, taken together, the individual acts were collectively unreasonable and thereby justified a costs award against HMRC.[59]Limiting my analysis to conduct within the proceedings the conduct complained of is:(1) HMRC’s failure to serve the 19 August 2025 extension of time application on the Appellant in breach of the Tribunal’s direction as set out in the letter of service of the appeal on 1 July 2025;(2) The asserted incorrect statement in the application that a meeting had been arranged with a view to settlement;(3) What is said to be a disingenuous failure to reference the extension of time application when the Appellant first challenged HMRC’s apparent non-compliance with the requirement to serve a statement of case within 60 days of 1 July 2025;(4) The continuing delay in serving that application on the Appellant until 8 September 2025 when HMRC had become aware that it had not been served as early as 1 September 2025.(5) The submission of a further application for extension of time when Judge Morgan had indicated that an extension would only be granted if there were active discussions between the parties regarding settlement;(6) What was said to be a misleading statement that discussions were ongoing when the second extension of time application was claimed to have been designed to align the application to the limited circumstances in which Judge Morgan had indicated any further application would need to have any prospects of succeeding.(7) A failure to fully comply with the Tribunal’s direction of 16 February 2026 because HMRC’s response addressed only the Applications and not the Appellant’s substantive case as set out in the ASOC.[60]Conduct to which I was not specifically referred by the Appellant but which I note is HMRC’s service of their statement of case approximately 2 hours after the deadline expired.[61]I consider that each allegation of unreasonable conduct individually is capable of reasonable explanation and I consider viewed as a whole HMRC’s conduct in these proceedings was not unreasonable.[62]I have found that on 19 August 2025 HMRC had written to the Appellant and had offered a meeting, a meeting invitation appears to have been sent at that time for 14:00 on 10 (rather than 11) September. It had not been accepted by the time the application was made but the Appellant had previously confirmed willingness to meet with HMRC. I consider it reasonable that HMRC considered that a settlement meeting was likely and an application to extend time would be consistent with the overriding objective. I do not consider the error as to the due date for service of the statement of case or the actual date of the meeting to be material. When considering an application for an extension of time the Tribunal is and should be concerned that there is a reasonable prospect of settlement discussions.[63]The Tribunal’s practice statement on extensions was issued in November 2025 because it had become the systematic pattern of behaviour of all litigants (taxpayers and HMRC alike) to make applications without reference to the other party and at the very last minute. Procedural delays at the Tribunal often meant that the extension of time was effectively obtained before the other party had an opportunity to comment. Despite this application being made before the practice statement was issued it was made proactively and well before the deadline for the statement of case (albeit without having obtained the views of the Appellant in advance).[64]The failure to serve the application was unfortunate but the application was served on the representative with whom HMRC had otherwise been engaging. The incorrect service of the application was unquestionably an administrative error, but isolated administrative errors are not unreasonable. Persistent ones may be. The failure to serve the application was not entirely isolated because the position was not remediated as soon as it was obvious that the Appellant was unaware of the application, it took an extra 6 days. In addition, HMRC did not refer to the existence of the application when corresponding with the Appellant when the unless order application was served on 1 September 2025. I have carefully considered whether taken together the failure to serve and the chronology which led to a period of 17 days to remediate it represents unreasonable conduct. On balance I have decided it does not. Had the Appellant been served with the notice I consider it most likely that it would have objected to the application; however, the service of the Appellant’s unless order application had the same effect. The Appellant was not therefore materially prejudiced by the failure to serve as Judge Morgan knew that the Appellant did not want time to be extended for service of the statement of case and that was given due consideration when Judge Morgan made her direction. The Appellant’s concern was respected and addressed. In essence the Appellant prepared and served the unless order rather than an objection to the application but was not put to significant further work.[65]I have set out my findings on to the chronology of correspondence during the period immediately following the meeting on 12 September 2025. On the one hand the Appellant stated that discussions were over and that it would attend no further meetings. On the other it chose to provide a substantial further response and information to HMRC following the correspondence on 19 September 2025 and said that it was open to settle the appeal. I consider that HMRC reasonably considered that the possibility of settlement remained realistic but that they needed to review the additional material provided on 22 September 2025. Consent was sought for a short extension, and the Appellant’s objection was communicated by HMRC to the Tribunal. As with the first extension request Judge Bailey was fully aware of the parties’ respective positions on the deadline for service of the statement of case when she made her direction taking account of those respective positions.[66]Whilst HMRC missed the deadline for service by 2 hours that can be fully explained by the fact that Tribunal administrative delay meant that they were notified of the direction only 5.5 hours before it expired. As it is explicable, the delay was extremely short and there was no unless order. Applying the three-stage test in Martland I consider the delay is not significant and is explained such that in all the circumstances it is reasonable that I exercise my discretion under rule 7 to waive the failure.[67]As to the contention that HMRC failed to comply with the direction of 16 February 2026, as I explained in the hearing, that asserted non-compliance represents a double-edged sword for the Appellant. By the ASOC, the Appellant provided a substantial and expanded recitation of its position on the substantive issues in the appeal and made the Applications. Strictly, and to the extent that the position adopted in the ASOC represents an extension of the Appellant’s grounds of appeal such extension would have required the Tribunal’s consent as it would represent an amendment to the grounds of appeal.[68]Without giving evidence Mx Lunt posited that HMRC had not interpreted the 16 February 2026 direction as requiring a response on the substantive tax issues as any response would provide them with an opportunity to develop their case beyond that stated in their own Statement of Case and/or would represent a requirement to serve a skeleton argument before the exchange of evidence. In support of this Mx Lunt referred to paragraphs 33 and 34 of the Response served on 9 March 2026 which states:
“33. [the substantive tax matters] are not addressed in this response, as they are more appropriately dealt with in the parties’ skeleton arguments and at the substantive hearing, once the Tribunal has had the opportunity to hear and consider all evidence. 34. Accordingly, this response is confined to issues of procedure and jurisdiction …”
[69]I was not the judge making the direction of 16 February 2026. I take the view that HMRC’s interpretation of it was not an unreasonable one i.e. that the direction required them to address the Applications rather than the substantive issues. Such an interpretation is more consistent with the practice that each party gets one opportunity to plead their case, the Appellant in the grounds of appeal and HMRC in the statement of case with any iteration of those cases then requiring the permission of the Tribunal. This would not have been obvious to the Appellant, but my focus is on the conduct of HMRC and whether any perceived failure was capable of reasonable explanation. I consider there was a reasonable explanation for the approach adopted by HMRC in their 9 March 2026 response.[70]Whether I take the individual incidents individually or collectively I do not consider they demonstrate a disregard for Tribunal Procedure. To the contrary, the applications were made in time and before deadlines expired. I do not consider HMRC sought to obtain an unfair procedural advantage. There was reason to believe that settlement might be possible throughout the period from July to 14 October 2025 and it is therefore reasonable to defer the procedural requirement of preparing a statement of case until it is clear that the matter will require litigating. The applications were made and granted only after the Tribunal had considered the Appellant’s objections which had been clearly put and HMRC were not granted either application in full as a result of the position represented by the Appellant. I am confident that the Appellant was not prejudiced and was properly heard by the Tribunal in connection with both extensions of time.[71]The bar set in Distinctive Care CA for an unreasonable costs order is not met and for these reasons I refuse the Costs Application.

Rule 8(3) Application

[72]The test to be applied in determining an application under rule 8(3) is that set out in First de Sales as summarised in paragraph 19 above. The Appellant’s claim is for R&D tax credit. The Appellant bears the burden of proving entitlement to make the claim by reference to a complex factual matrix of evidence sufficient to establish on the balance of probabilities that the eligibility criteria are met. In order to conclude that HMRC bore no prospects of defending the appeal the Appellant would need to show a case so compelling as to eligibility that it was unnecessary for there to be a hearing of the evidence not yet presented. In assessing the evidence at the stage of a rule 8(3) strike out application I am not required to undertake a mini trial and once it is established that fuller consideration of the evidence which will only be available at the substantive hearing of the appeal is required I am duty bound to refuse the strike out application.[73]The nature of the appeal and where the burden of proof lies almost inevitably means that the Rule 8(3) Application cannot even get off the ground. HMRC have pleaded their case as set out in their statement of case and both parties case must now be tested through hearing of the evidence. For that reason, I refuse it.

Barring application/Rule 8(1) Application

[74]The case law establishes that strike out (for an appellant) and barring for HMRC (as a consequence of rule 8(7)) is a draconian step. The provisions of rule 8 provide for strike out/barring where: the Tribunal has no jurisdiction (rule 8(2)); there has been breach of an unless order that provides expressly for that outcome either on a may or will basis (rules 8(1) and (3)(a)), where a party’s case has no reasonable prospects of success (rule 8(3)(c)) and where the party’s conduct is such that it has failed to co-operate with the Tribunal to such an extent that the Tribunal cannot deal with the proceedings fairly and justly.[75]I explored with the Appellant whether it maintained its Rule 8(1) Application given that it had accepted that there was no unless order issued by the Tribunal in which HMRC could have been in breach. The Appellant indicated that it nevertheless maintained the application.[76]I can deal with the Rule 8(1) Application and any contention that I have a power under 8(3)(a) to bar HMRC very shortly. Rule 8(1) and (3)(a) apply only where there has been a breach of an unless order. The Appellant applied for an unless order to be issued but the Tribunal never issued such an order. As such there was no breach of an unless order and there is no requirement or discretion to bar HMRC under those provisions.[77]I have dealt with the Rule 8(3) Application and there is no question as to jurisdiction as the appeal is against a closure notice permitting a barring under rule 8(2).[78]That leaves Rule 8(3)(b). The Appellant’s case, as outlined above, focused on HMRC’s conduct and a contention that justice could not be achieved in these proceedings because of the delays caused and errors made by HMRC. I have already determined that I do not consider that HMRC’s conduct has been unreasonable in the sense required to make a costs order. Costs is the first remedy where one party’s conduct has been unreasonable. Conduct to justify striking out/barring the party requires not only that the conduct be unreasonable but also that it be such that the Tribunal cannot deal with matters fairly through other case management or by way of a costs order. It is therefore unreasonable conduct of a different magnitude.[79]The Appellant drew a parallel to the circumstances in this case and those in of Carbon Six. In Carbon Six HMRC were barred under rule 8(1) having failed to comply with an unless order which stated that they would be struck out if they failed to comply. HMRC then sought to apply for reinstatement but did so outside the time limit for such an application. Their grounds for reinstatement were poor. They relied on case law that had been superseded and blamed procedures expressly agreed between the Tribunal and HMRC for efficient conduct of appeals generally. The decision issued refused to reinstate them and my refusal to provide relief from sanction. With respect to the Appellant there is no sensible comparison between the two cases and no issue of relief from sanction applies because HMRC have not been in breach of a direction directly imposing a sanction and/or would not meet the Martland test (see paragraph 66 above.[80]Essentially for the reasons stated in dismissing the Costs Application I refuse to bar HMRC from the proceedings.[81]I acknowledge that the extensions of time caused a period of delay of 42 days in the proceedings. Although the Appellant undoubtedly expended time and effort responding to HMRC's procedural defaults, I am not satisfied that those matters impaired its ability to present its case, deprived it of any procedural opportunity available to HMRC, or rendered a fair hearing of the substantive appeal impossible.[82]As part of the Barring Application but by reference to rule 5 the Appellant also invites me to limit HMRC’s case to the one outstanding issue between the parties at the end of the meeting on 12 September 2025.[83]The correspondence I have reviewed is, in my view, clear that the meeting on 12 September 2025 was a without prejudice meeting held with a view to settlement. In that meeting HMRC accepted that three issues on the agenda were resolved and the position they reached in that regard is reflected in their Statement of Case. Otherwise, both parties preserved their ability to litigate the dispute in the present proceedings for the Appellant by reference to its grounds of appeal and for HMRC as constrained by the terms of their closure notice and arguments as ultimately set out in the statement of case.[84]In the context of an appeal against a closure notice the Tribunal’s jurisdiction is limited by section 50 Taxes Management Act 1970 to determine whether the conclusion reached in the closure notice is correct in law and whether the Appellant has been over or under assessed by the amendment made in the closure notice. In determining an appeal against a closure notice, the Tribunal’s jurisdiction is not to adjudicate on the fairness of HMRC's conduct as a free-standing public law complaint. As such, the Tribunal has no power to assess and determine whether HMRC led the Appellant to believe there was only a single issue remaining in dispute at the meeting on 12 September 2025. As a consequence it would be inappropriate to limit HMRC’s arguments to the outstanding agenda item.[85]In any event, as determined by the Court of Appeal in Fidex Ltd v HMRC [2016] EWCA Civ 385 HMRC are entitled to plead their case by reference to any argument justifying the conclusion in the closure notice. HMRC’s statement of case has been prepared setting out HMRC’s contentions justifying the conclusion to refuse the R&D tax credit claim. Those contentions represent the basis on which HMRC may defend the appeal. I therefore reject the Appellant’s submission that HMRC have failed to articulate a coherent or final case. Without an application to amend, in respect of which the Appellant would be entitled to make submissions, those contentions limit the scope of HMRC’s arguments. HMRC’s skeleton will provide further detail of the arguments by reference to the evidence to be heard by the Tribunal, but no new arguments will be entertained.[86]The Appellant should therefore take some assurance that the case it is required to meet is as set out in HMRC’s Statement of Case by reference to the documents in the list of documents. The Appellant should bear in mind that HMRC are not required to advance a positive case. It is for the Appellant to establish that the relevant criteria for entitlement to R&D credit are met. The Tribunal hearing the appeal will assess the evidence and each party’s submission on the requirements of the legal test for entitlement and determine whether it is satisfied on the balance of probabilities as to entitlement.

Summary Determination Application

[87]A summary determination of the appeal is provided for where the Tribunal has struck out or barred one of the parties. As I have not barred HMRC there is no question of making a summary determination of the appeal.

LOD Application

[88]By this application the Appellant sought to contend that HMRC were impermissibly extending the scope of the appeal by serving a list of documents after service of the statement of case.[89]The LOD Application is predicated on a misunderstanding of rule 27 FTTTC. Rule 27 provides for the disclosure by both parties of the documents on which they intend to rely at the hearing of the appeal. The rule provides for the lists of documents to be served within 42 days of the date of service of HMRC’s statement of case. This is what they did[90]As indicated above in connection with the Barring Application, HMRC’s statement of case sets out HMRC’s pleaded case in this appeal. Unless they were to make a formal application to amend the statement of case it represents the full scope of the arguments they are entitled to run in the hearing. The service of documents on which they rely does not and cannot change the scope of the appeal.

Determination

[91]For the reasons given the Applications, together with the LOD and Rule 8(1) Strike Out Application are refused.[92]The Appellant conceded the Disclosure Application.[93]This appeal should now progress swiftly towards a hearing. To that end I have made directions in the appeal.

Right to apply for permission to appeal

[94]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: 23 July 2026