Athena Luxe Limited v The Commissioners for HMRC [2026] UKFTT 775 (TC)

[2026] UKFTT 00775 (TC)Case No TC 09894
FIRST-TIER TRIBUNAL
TAX CHAMBER
Date Judgment date: 22 May 2026
Decided on the papers
Appeal reference: TC/2024/03537
PROCEDURE – Application for costs by Appellant – Summary assessment – Whether on standard or indemnity basis – Quantum of costs – Application allowed in part
Before
TRIBUNAL JUDGE BROOKS
Between
aTHENA LUXE LIMITEDAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentDECISION

Introduction

[1]On 25 February 2026, following its successful appeal (see Athena Luxe Ltd v HMRC [2025] UKFTT 1507 (TC)) the Appellant, Athena Luxe Limited (“Athena”), made an application, pursuant to rule 10 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the “FTT Rules”) for its costs of and incidental to those proceedings, in the sum of £11,500 (the “Application”). It is accepted that the Application, which was made more than 28 days after the release of the decision, was late (see rule 10(4) FTT Rules).[2]The Respondents (“HMRC”), in their 27 March 2026 response to the Application, stress that the sum in dispute was £15,138.67 and submit that the costs claimed are disproportionate. However, they accept liability for Athena’s “reasonable and proportionate costs in this matter” and submit that those costs should be summarily assessed on the standard basis in the sum of £6,000.[3]In its reply of 22 April 2026, Athena primarily contends that the costs should be summarily assessed in the amount sought on the indemnity basis. However, even if the standard basis applies, it contends that the costs claimed are proportionate, and that the proportionality of costs should not be assessed solely by reference to the quantum of VAT in dispute (see Hare Wines Ltd v HMRC [2023] UKFTT 536 (TC) at [27] and [29]).[4]The following issues arise:(1) Whether the Application should be admitted out of time;(2) Whether an order should be made for HMRC to pay the Athena’s costs of and incidental to the appeal;(3) Whether such an order should be made on the standard or indemnity basis; and(4) Whether the order be subject to a summary assessment and if so, in what amount.[5]For the reasons below, I direct that HMRC should pay Athena’s costs of and incidental to the appeal, on the standard basis, in the sum of £9,500 within 28 days.

Background

[6]Athena appealed against a decision of HMRC to reduce its input tax claim on the grounds that Athena did not hold valid VAT invoices, as required by Regulation 14 of the VAT Regulations 1995 (“VATR”), and that it was reasonable in the circumstances for HMRC to refuse to exercise their discretion, under Regulation 29 VATR, in relation to the alternative evidence supplied. The alternative evidence supplied by Athena comprised Harrods invoices and till receipts and invoices issued by Louis Viutton UK Limited[7]The Tribunal allowed the appeal applying the decision in Fount Construction Ltd v HMRC [2024] UKFTT 340 (TC). In respect of the Harrods invoices/till receipts the Tribunal noted, at [28], that HMRC’s representative:
“… relied on the same argument that the Tribunal rejected at [14] in Fount Construction, ie that the information on [an] invoice alone should be sufficient for HMRC to draw a definitive view. However, she was unable to advance any argument, let alone a convincing one, that the Tribunal in Fount Construction was wrong.”
[8]The Tribunal also concluded that it had been unreasonable of HMRC not to exercise their discretion in relation to the Louis Viutton UK Limited invoices.

Law

[9]The ability of the Tribunal to make an order for costs is derived from s 29 of the Tribunals Courts and Enforcement Act 2007 (“TCEA”) which provides:(1) The costs of and incidental to— (a) all proceedings in the First-tier Tribunal, and (b) all proceedings in the Upper Tribunal, shall be in the discretion of the Tribunal in which the proceedings take place.(2) The relevant Tribunal shall have full power to determine by whom and to what extent the costs are to be paid.(3) Subsections (1) and (2) have effect subject to Tribunal Procedure Rules.[10]As is clear from s 29(3) TCEA, the power of the Tribunal to award costs is subject to the FTT Rules. Provision for costs is contained in rule 10 FTT Rules, the material parts of which provide: Order for costs(1) The Tribunal may only make an order in respect of costs (or, in Scotland, expenses)— (a) … (b) if the Tribunal considers that a party or their representative has acted unreasonably in bringing, defending or conducting the proceedings; … (c) …(2) The Tribunal may make an order under paragraph (1) on an application or of its own initiative.(3) A person making an application for an order under paragraph (1) must— (a) send or deliver a written application to the Tribunal and to the person against whom it is proposed the order be made and; (b) send or deliver with the application a schedule of the costs or expenses claimed in sufficient detail to allow the Tribunal to undertake a summary assessment of such costs or expenses if it decides to do so.(4) An application for an order under paragraph (1) may be made at any time during the proceedings but may not be made later than 28 days after the date on which the Tribunal sends— (a) a decision notice recording the decision which finally disposes of all issues in the proceedings or …[11]The Upper Tribunal in Market & Opinion Research International Ltd v HMRC [2015] UKUT 12 (TCC) observed at [15] that:
“The condition in rule 10(1)(b) is a threshold condition. It is only if the tribunal considers that a party has acted unreasonably in a relevant respect that the question of the exercise of a discretion can arise.”
[12]In the absence of specific provision/guidance within the FTT Rules it is necessary to turn to the principles applicable under the Civil Procedure Rules (“CPR”) (see Judge Berner in Versteegh Limited and others v HMRC [2014] UKFTT 397 (TC) at [10] and Judge Sinfield in Drummond v HMRC [2016] UKUT 221 (TCC) at [24]).[13]Part 44.5 CPR provides:(1) Where the court is to assess the amount of costs (whether by summary or detailed assessment) it will assess those costs— (a) on the standard basis; or (b) on the indemnity basis, but the court will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount. (Rule 44.5 sets out how the court decides the amount of costs payable under a contract.)(2) Where the amount of costs is to be assessed on the standard basis, the court will— (a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred; and (b) resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party. (Factors which the court may take into account are set out in rule 44.4.)(3) Where the amount of costs is to be assessed on the indemnity basis, the court will resolve any doubt which it may have as to whether costs were reasonably incurred or were reasonable in amount in favour of the receiving party.[14]As Judge Donmall recently observed in Kwok v HMRC [2026] UKFTT 624 (TC) at [13] – [16]: “13. In essence under the standard basis the court will disallow costs which are unreasonably or disproportionately incurred and unreasonable or disproportionate in amount. Any doubt under the standard basis is resolved in favour of the paying party. By contrast costs awarded on an indemnity basis will exclude only costs unreasonably incurred or unreasonable in amount and the benefit of the doubt is in favour of the receiving party. 14. The test for whether indemnity costs are payable requires that the conduct of the litigation must be unreasonable to a high degree and “out of the norm”, see Excelsior Commercial & Industrial Holdings Ltd v Sailsbury Hammer Aspden & Johnson [2002] EWCA 879 as applied in a Tribunal context in Ad Hoc Property Management Ltd v HMRC [2019] UKFTT 315. In Ad Hoc Property Management, Judge Canaan noted that in considering whether there has been unreasonable conduct to a high degree, he should be wary of placing too much weight on the fact that the respondents effectively capitulated. He cited Arcadia Group Brands Ltd v Visa Inc [2015 EWCA Civ 883: ‘83. The Judge had a wide discretion as to costs but I consider that, in awarding costs on the indemnity basis rather than the standard basis, the Judge made an error in principle. The weakness of a legal argument is not, without more, justification for an indemnity basis of costs, which is in its nature penal. The position might be different if proceedings or steps taken within them are not only based on a plainly hopeless case but are motivated by some ulterior commercial or personal purpose or otherwise for purely tactical reasons unconnected with any real belief in their merit.’15. In Cheshire Centre for Independent Living v HMRC [2020] UKUT 275 (TCC), the Upper Tribunal made clear that the threshold for an order for costs under rule 10(1)(b), and that for indemnity costs, is not the same: for indemnity costs, the conduct must be unreasonable to a high degree. It does not follow that if costs are awarded under rule 10(1)(b), it must be on the indemnity basis.16. In Harris [v HMRC [2022] UKFTT447 (TC)], the Tribunal observed, by extension of the Court of Appeal’s reasoning in Distinctive Care, that when considering whether indemnity costs should be awarded the Tribunal does not consider the length of the enquiry to be a relevant factor, as the focus of the Tribunal was to be on the handling of the litigation and not as to the quality of the original decision, and the earliest conduct that was relevant in the context of whether a party had behaved unreasonably was the point at which the proceedings commenced [100-101].” ‘83. The Judge had a wide discretion as to costs but I consider that, in awarding costs on the indemnity basis rather than the standard basis, the Judge made an error in principle. The weakness of a legal argument is not, without more, justification for an indemnity basis of costs, which is in its nature penal. The position might be different if proceedings or steps taken within them are not only based on a plainly hopeless case but are motivated by some ulterior commercial or personal purpose or otherwise for purely tactical reasons unconnected with any real belief in their merit.’

Discussion and Conclusion

[15]Turning to the issues, it is first necessary to consider whether the Application, given it is out of time, should be admitted under the Tribunal’s case management powers to extend the time to comply with any rule (see rule 5(3)(a) FTT Rules).[16]This has not been addressed by HMRC which, as they accept that an order for costs should be made against them, do not appear to oppose the admission of the Application.[17]However, it is nevertheless necessary, given the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected (see HMRC v Medpro Healthcare Ltd [2026] EWCA Civ 14), to consider whether to extend the time and admit the Application. In doing so, I have applied the following three stage approach in Denton v TH White Ltd [2014] EWCA Civ 906 at [24]:
“The first stage is to identify and assess the seriousness and significance of the “failure to comply with any rule, practice direction or court order” … If the breach is neither serious nor significant, the court is unlikely to need to spend much time on the second and third stages. The second stage is to consider why the default occurred. The third stage is to evaluate “all the circumstances of the case, so as to enable [the court] to deal justly with the application …”
[18]In the present case the decision of the Tribunal in Athena Luxe Ltd v HMRC was released on 4 December 2025. Therefore, the Application should have been made within 28 days, ie by 2 January 2026. However, it was made on 25 February 2026, which I calculate to be 53 days late although the Application refers to the delay being 46 days.[19]The reason for the delay is that the Appellant, a litigant in person, did not appreciate that there was a time limit for the Application and, having paid for representation at the hearing, had extremely limited funds and could not afford legal advice until after the expiry of the time limit. However, on receiving advice the Application was made without delay.[20]Having regard to all the circumstance, the delay, whether 53 or 46 days, almost double the time permitted under the FTT Rules, must be regarded as both serious and significant.[21]It is clear from the decision of the Court of Appeal in BPP Holdings v HMRC [2016] EWCA Civ 121 at [39], that a litigant in person is expected to comply with the FTT Rules. However, given the financial constraints described in the Application and that HMRC do not appear to object to the Application being admitted out of time, I have, in the circumstances somewhat reluctantly, concluded that the Application should be admitted despite its lateness.[22]Given HMRC accept that they should pay Athena’s costs of and incidental to the appeal, and thereby implicitly accepting that the threshold condition has been met, the issue arises as to whether the costs should be assessed on the standard or indemnity basis.[23]As in Kwok, the issue of indemnity costs was not raised in the Application but in reply to HMRC’s response to the Application and, like Judge Donmall in that case, I consider that there would be potential procedural unfairness were I to make a finding on indemnity costs in Athena’s favour as HMRC, despite referring to standard costs in their response, could not have known that this was a point that they might need to respond to.[24]In addition, I am not satisfied that the conduct of the litigation by HMRC was, despite the reliance on the argument in Fount Construction, unreasonable to such a high degree and/or “out of the norm” for the indemnity basis to apply.[25]Given the sums involved, I consider it appropriate to make a summary assessment which, as

Judge Brown KC described in Harris v HMRC [2022] UKFTT 447 (TC) at [36]:

“…is not intended to involve a lengthy consideration of each item of costs claimed but, rather, represents a proportionate means of justly, fairly and swiftly resolving the question of costs without the need for further costly proceedings regarding the costs themselves. In colloquial terms it is a somewhat rough and ready means of dealing with costs; its roughness is justified on the grounds of proportionality.”
[26]A breakdown of the £11,500 costs sought by Athena (as set out in the Application) and the amounts and basis of HMRC’s £6,000 offer are set out in the Appendix. Somewhat disappointingly, despite the offer by HMRC, the parties were unable to resolve the costs issue between them. However, it was agreed that the matter be determined on the papers without a further hearing.[27]Having carefully considered the materials before me, and not taking the amount of VAT at stake into account, I have summarily assessed Athena’s costs on the standard basis, at £9,500 as follows (applying the rate for counsel, instructed by direct access (which was not disputed), at £250 per hour):(1) Drafting Grounds of Appeal: £1,500. As the length of the document does not necessarily reflect the time spent on it I accept Athena’s claim (6 hours at £250 an hour).(2) Drafting and reviewing List of Documents: £1,500. HMRC’s submissions appear to reflect consideration of the list of documents itself, as opposed to consideration of the actual documents in that list which I accept took time to consider and have accepted Athena’s claim (6 hours at £250 per hour).(3) Reviewing Witness Evidence: £2,500. I agree with HMRC that the costs claimed are disproportionate but consider that the reduction sought by HMRC is excessive, given that it is necessary to review exhibits and engage with a client, a lengthy iterative process, and have therefore reduced the sum claimed but allowed £2,500 (being 10 hours at £250 per hour)(4) Hearing fee: £3,000. This item is not disputed(5) Drafting Costs application: £1,000. Although a fairly short document, I consider it reasonable to have spent 4 hours (at £250 per hour) on this.

Right to apply for permission to appeal

[28]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: 22 May 2026