The policy of the Inland Revenue and HM Customs and Excise on coming to arrangements about costs (in the context of High Court cases) was set out on 12 March 1980 by Mr Peter Rees, then Minister of State at the Treasury.
This statement updates that policy in relation to cases which will be considered in the Tax Chamber of the First-tier Tribunal, or the Finance and Tax Chamber of the Upper Tribunal, after 1 April 2009 following the changes made under the Tribunals, Courts and Enforcement Act 2007.
The general rule in the appeal courts is that the losing party risks having to pay the other side’s costs, and I do not think it would be right to treat tax cases differently as a matter of course.
However, HM Revenue and Customs (HMRC) exercise their discretion and are willing in appropriate circumstances, and in particular where it is they who are appealing against an adverse decision, to consider waiving any claim to costs in cases before the Upper Tribunal or the appeal courts, or to consider making other arrangements—this may also extend to cases before the First-tier Tribunal.
In the minority of cases categorised as complex, where costs can be awarded in the Tax Chamber of the First-tier Tribunal other than for unreasonable behaviour, the appellant can ensure that there is no risk of them bearing HMRC’s costs by opting for the costs rules not to apply.
In considering the exercise of HMRC’s discretion, influential factors include the risk of financial hardship to the other party, the involvement of a point of law the clarification of which would be of significant benefit to taxpayers as a whole and the efficient collection and management of revenue for which HMRC have responsibility.
If HMRC are to come to an arrangement of this nature, they would expect to do so in advance of the hearing and following an approach by the taxpayer involved.