Automated Summary
Key Facts
The Upper Tribunal granted HMRC's costs application and directed Sukhdev Mattu to pay £5,000 towards their costs of a successful penalty application (total costs incurred by HMRC: £50,114.50). The Respondent's cross application for costs (£3,858) was dismissed. The decision was based on findings that the Respondent acted unreasonably in multiple procedural aspects of the proceedings.
Tax Type
Tax type not explicitly specified in the document
Issues
- The Respondent conducted extensive correspondence with the Tribunal between February and May 2021 but did not make a formal application for reinstatement, despite guidance from Judge Herrington.
- The Respondent and/or his representatives withdrew from the proceedings without taking reasonable steps to understand the legal position or seeking advice, even after correspondence from HMRC and the Tribunal clarifying the proceedings.
- After reinstatement was granted, the Respondent and his representatives failed to adhere to the conditions outlined by Judge Herrington in his case management decisions.
- The Respondent delayed addressing his appeal against the Paragraph 39 Penalty and failed to seek permission to have it heard out of time, despite being notified of its late submission in June 2020.
- The Respondent raised most arguments in a skeleton argument submitted 7 days before the hearing, rather than earlier, even though HMRC consented due to procedural constraints.
- The Respondent introduced new evidence only 7 days before the hearing without prior communication or application, which Judge Herrington described as discourteous.
Holdings
- The Tribunal rejected the Respondent's argument that the costs regime is purely compensatory and requires a direct causal link between conduct and costs. It affirmed that the costs jurisdiction under Rule 10(3)(d) allows for a discretionary assessment based on the nature and severity of the conduct, consistent with the overriding objective of fairness.
- The Tribunal is satisfied that the Respondent and his representatives acted unreasonably in six ways during the penalty proceedings, including withdrawing without seeking legal advice, late submissions of arguments and evidence, and failing to comply with procedural conditions. This unreasonable conduct satisfies the jurisdictional requirement under Rule 10(3)(d) of the UT Rules to make a costs order against the Respondent.
- The Tribunal determined that HMRC's costs application was justified as the Respondent's conduct increased the time and cost of the proceedings. A £5,000 award was deemed fair and just, representing slightly less than 10% of HMRC's total costs (£50,114.50), to reflect the additional costs incurred due to the Respondent's unreasonable behavior.
- The Respondent's cross-application for costs was dismissed, as HMRC's application had a clear foundation based on the Tribunal's findings of unreasonable conduct and the documented increase in costs from the Respondent's procedural failures.
Remedies
- The Respondent's cross application seeking costs for defending HMRC's costs application was dismissed. The Tribunal rejected the argument that HMRC's costs application was punitive or lacked a causal link to the Respondent's conduct, emphasizing the compensatory nature of the costs regime and the Respondent's failure to prove HMRC's application was unreasonable.
- The Upper Tribunal granted HMRC's costs application under Rule 10(3)(d) of the UT Rules, directing the Respondent to pay £5,000 (10% of HMRC's total costs of £50,114.50) as a proportionate sanction for the Respondent's unreasonable conduct during proceedings. The Tribunal found the Respondent's actions, including late submissions, failure to comply with reinstatement conditions, and introducing new evidence without prior notice, had increased HMRC's costs.
Tax Issue Category
Other
Legal Principles
The Tribunal applied Rule 10(3)(d) of the Tribunal Procedure (Upper Tribunal) Rules 2008, which allows costs orders when a party has acted unreasonably in proceedings. The decision emphasized the overriding objective (Rule 2) to deal with costs fairly and justly. The Tribunal clarified that the costs regime is compensatory rather than punitive and exercised discretion to award costs based on the severity of the Respondent's unreasonable conduct.
Disputed Tax Amount
1917578.00
Precedent Name
Revenue and Customs v Sukhdev Mattu
Cited Statute
- Tribunal Procedure (Upper Tribunal) Rules 2008
- Finance Act 2008
Penalty Amount
350000.00
Judge Name
- Judge Rupert Jones
- Judge Timothy Herrington
Passage Text
- 28. Taking all of the relevant circumstances into account, in particular the Respondent's unreasonable conduct and non-compliance throughout the proceedings, HMRC submit that a fair outcome would be for the Tribunal to award HMRC £5,000, being slightly less than 10% of their total costs incurred in the proceedings (which are £50,114.50). The Tribunal considers this to be fair and just in the circumstances.
- 17. We are satisfied that the Respondent and his representatives have acted unreasonably in conducting the penalty proceedings in the six ways that HMRC have alleged.
- 30. HMRC's costs application is granted and the Respondent is directed to pay £5,000 towards their costs. The Respondent's cross application for costs is dismissed.