The Association of Corporate Counsel report the outcome of Nicholas Deluca v HMRC (TC01422), a First-tier Tribunal (Sir Stephen Oliver QC) which criticised HMRC’s conduct and directed that they make a contribution of half the costs incurred by Mr Deluca in connection with an HMRC enquiry into his tax return and his subsequent appeal to the Tribunal.
Mr Deluca’s appeal to the Tribunal was successful and he applied for a contribution by HMRC to the costs.
The Judge concluded that HMRC had, throughout, pursued the wrong person for the tax.
Quote:
"I am satisfied that HMRC had no justification for pursuing Mr Deluca for the tax and consequently putting him in a position of having to appeal …
HMRC should have recognised at an early stage in the enquiry on whom (if they were correct) the tax liability would properly fall. Their action in pursuing him in effect driving him to incur the costs was unreasonable in the extreme."
What is particularly interesting about the the outcome of this case, and worth bookmarking, is the fact that the judgement can be used by taxpayers as a basis for making a claim to recover costs incurred in connection with an HMRC enquiry which normally precedes an appeal itself.
As said, this judgement is worth bookmarking!
Tax does have to be taxing.
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Why not 100% of costs? Why should the taxpayer have to foot a single penny piece where HMRC are shown to have farked up?
ReplyDeleteI can't understand why HMRC would have pursued the taxpayer. It sounds like the company made these loan waivers out of a gesture of goodwill.
ReplyDeleteIt wasn't a deliberate ploy by the taxpayer to suddenly fall ill and not be able to meet the payments on time. It which point does it become a taxable benefit to the taxpayer? It's at times like this I wish I was an inspector not a lackey.
@11 January 2012 13:17
You'll have to ask the tribunal judge that.
Anne,
ReplyDeleteAn intriguing question and one for which it's very hard to tell the answer. The judgment (which is dated 1 September 2011) only covers the award of costs. It refers back to the original judgment which dealt with the actual tax liability point, and which is said to have been dated 6 January 2011. Unfortunately, I haven't been able to find this first judgment, which may shed light on the question, anywhere online (has anyone had more success?).
The careful wording of the first sentence of paragraph 4 of the September judgment leads me to wonder whether there was another point at issue in the original hearing which was either won by HMRC or on which it was at least considered that HMRC's challenge was sufficiently reasonable to preclude the award of costs. This is little more than a guess, though.
20:45,
Again, without seeing he original judgment it's very hard to even speculate. Paragraph 5 does rather make it sound like a c*ck up, but the fact that HMRC seems to have contested the claim for costs (and remember that 16 grand isn't even pocket change in the context of HMRC's budget so they could easily have chosen to take the hit and swept it under the carpet) suggests that there was more to it than meets the eye.
As for the excited claims of Ken and a few other commentators who seem to have jumped on this bandwagon today, if I were them I would tone the enthusiams down just a little in case people get overly-optimistic about the chances of claiming costs in their cases by saying something like:
“the judgement can be used by taxpayers as a basis for making a claim to recover costs incurred in connection with an HMRC enquiry” where it can be clearly demonstrated that HMRC continued to pursue a line of enquiry when they were in possession of information which clearly demonstrated that there were no reasonable grounds for doing so.
Stew G