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You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> Blindspot Global Ltd v Revenue And Customs (VAT - Appellant providing fresh information to HMRC at same time as filing appeal to Tribunal) [2025] UKFTT 568 (TC) (09 May 2025)
URL: http://www.bailii.org/uk/cases/UKFTT/TC/2025/TC09532.html
Cite as: [2025] UKFTT 568 (TC)

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Neutral Citation: [2025] UKFTT 568 (TC)

Case Number: TC09532

FIRST-TIER TRIBUNAL

TAX CHAMBER

Location: Decided on the papers

 

Appeal reference: TC/2022/13037

 

VALUE ADDED TAX - Appellant providing fresh information to HMRC at same time as filing appeal to Tribunal - HMRC changing position in light of that fresh information, and parties settling dispute - Appellant withdrawing Tribunal appeal - Appellant making application to Tribunal for costs 18 months after withdrawal - whether the Appellant should be granted an extension of time to make costs application - no

 

 

Judgment date: 9 May 2025

 

 

Decided by:

 

TRIBUNAL JUDGE BAILEY

 

 

Between

 

BLINDSPOT GLOBAL LIMITED

Appellant

and

 

THE COMMISSIONERS FOR HIS MAJESTY'S REVENUE AND CUSTOMS

Respondents

 

 

 

The Tribunal determined the application for costs without a hearing having first read the Appellant's application for costs, consisting of a series of emails from 9 October 2024 onwards, the Respondents' opposition to that application, and the parties' correspondence (with enclosures) with the Tribunal from 21 August 2024 onwards. 


DECISION

Introduction

1.             This decision notice is in respect of two applications made by the Appellant.  The Appellant made an application for costs in a series of emails from 9 October 2024 onwards (set out in detail in the background facts).  That application for costs was made out of time, and so the Appellant was required also to make an application for permission to make the costs application.  Both of the Appellant's applications are opposed by the Respondents (HMRC). 

Outcome

2.             Given the length of this decision, it is appropriate to state the outcome at the outset. 

3.             For the reasons given below, the Appellant is REFUSED permission to make a late costs application to the Tribunal.  As the Appellant's costs application has not been admitted out of time, that costs application is also unsuccessful.

Background facts

4.             The original Tribunal file for this appeal was destroyed prior to August 2024, in accordance with the Tribunal's data retention policies.  I am grateful to both parties for their provision of documents and information about matters prior to August 2024 which has enabled me to find the facts set out below.  On the basis of the documents before me, I find as follows:

The Appellant's dispute with HMRC

5.             The Appellant was incorporated on 20 July 2020, and voluntarily registered for VAT form 15 August 2020.  Part of the Appellant's business was the supply of Covid-19 test kits.  The Appellant treated this supply as an exempt supply.    

6.             On 21 January 2022, HMRC notified the Appellant of its decision that the Appellant's supply of Covid-19 test kits for the VAT period 06/21 should be standard rated rather than exempt from VAT.  The Appellant sought a review from HMRC. 

7.             On 13 May 2022, HMRC issued its review decision to the Appellant.  That review decision varied the original decision, by reducing the amount of VAT due from the Appellant for the period 06/21, but upheld the decision that the Appellant's supply of Covid-19 test kits was a standard rated supply.    

8.             Following receipt of HMRC's review decision, the Appellant sought advice from its legal advisor.  On 19 July 2022, that legal advisor advised the Appellant that, on the basis of the facts supplied by the Appellant, the Appellant would be unlikely to succeed in an appeal to the Tribunal.  The Appellant then sought further information from its own supplier.  This additional information was emailed to Mr Moran on 13 September 2022. 

9.             By this time the Appellant was suffering financial difficulties in paying tax to HMRC.  Mr Moran's MP wrote to HMRC to seek help with these issues.  Once the Appellant had received further information from its supplier, Mr Moran instructed a new agent to assist in discussions with HMRC. 

10.         On 20 September 2022, the new agent contacted HMRC to provide what was described as fresh information.  On 27 September 2022, HMRC informed the agent that, as there had already been a review, the Appellant's options were ADR or an appeal to the Tribunal.

The Appellant's appeal to the Tribunal

11.         On 13 October 2022, the Appellant's new agent filed an appeal with the Tribunal on behalf of the Appellant.  This appeal was a late appeal against the Respondents' review decision of 13 May 2022.  In the correspondence included with the appeal documents, the Appellant's agent informed HMRC that the Appellant would not be submitting further VAT returns for any periods after 06/21 until the dispute had been resolved.

12.         The Appellant's appeal to the Tribunal was filed just over four months late, and was also subject to the requirement that the Appellant demonstrate hardship in order to proceed without payment of the tax in dispute.  The Tribunal stayed proceedings in order for the issue of hardship to be resolved.  On an unknown date the Appellant apparently applied to HMRC's ADR scheme.  

13.         On 6 January 2023, HMRC informed the Appellant that they had accepted that the Appellant would suffer hardship if it was required to pay the tax in dispute for the appeal to continue.  On 16 January 2023, the Appellant's agent emailed the Tribunal:

I am now able to confirm that:

1.  HMRC have confirmed to the Appellant that they are satisfied that the requirement to pay or deposit the amount of tax and dispute would cause the Appellant to suffer hardship (and thus they are happy for the appeal to proceed without payment of the tax allegedly due); and

2.  HMRC had confirmed that to the Appellant that they will not oppose the application made by the Appellant for the appeal to be accepted out of time.

In relation to point two above, as a preliminary issue it is requested that the Tribunal considers whether it is able to accept the appeal out of time (as per item 20(4) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009).  The party's request that this issue is considered by the tribunal immediately given that the Appellant has made an application for Alternative Dispute Resolution ("ADR"), which cannot proceed until the appeal has been admitted by the Tribunal.  ADR is considered appropriate by both the Appellant and HMRC as it will enable the relevant facts to be fully explained to HMRC.  In turn, the parties are hopeful that the ADR process will avoid the need for the Tribunal to consider the substantive issue or at the very least will clarify the facts/issues that require consideration by the Tribunal.    

14.         As the issue of hardship had been resolved, the Tribunal allocated this appeal to the Standard category and, on 1 February 2023, issued Directions to enable the issue of lateness to be resolved at a Tribunal hearing.    

15.         On 28 February 2023, the Appellant's agent filed various documents in compliance with the Tribunal Directions.  These documents included a statement that fresh information had been put to HMRC in September 2022, that this information was not available to HMRC when it made its review decision in May 2022, and that HMRC would be unable to review the additional facts unless the Tribunal admitted the late appeal.  On 13 March 2023, the Tribunal notified the parties that the lateness hearing had been listed on 17 April 2023. 

16.         Despite the Appellant's agent's understanding that HMRC could not take account of fresh information until the issue of lateness had been resolved by the Tribunal, it appears there were discussions between the parties.  On 4 April 2023, the Appellant's sole director, Mr Moran, emailed the Tribunal to withdraw the Appellant's appeal.  In this email, Mr Moran wrote:

I am writing with some good news. 

[the Appellant] and HMRC are both in agreement on what is VAT exempt & standard rate. 

To that end I would like to withdraw my appeal to the Tribunal as I believe there is no need for a Tribunal moving forward. 

I have CC'd Sophie Jones from HMRC (who I may add has been outstanding whilst looking at this case closely).  If you require confirmation on this from HMRC, I am sure Sophie would be willing to acknowledge that both parties are both in agreement now. 

I would personally like to thank you all at the Tribunal, it does feel like it has been drawn out but everyone at both HMRC and the Tribunal have been great with [the Appellant] getting it to this stage/closed off today.

Please can you advise that the Tribunal is happy to close this case for [the Appellant] & HMRC as of today. 

17.         On 12 April 2023, the Tribunal acknowledged the Appellant's withdrawal and notified both parties that any further application must be made within 28 days, i.e., by 10 May 2023.    

18.         No further application was received by the Tribunal from either party.  After 10 May 2023, the Tribunal file was put away and subsequently destroyed.    

The Appellant's complaints to HMRC

19.         Between 22 April 2023 and 7 August 2024, the Appellant engaged with HMRC's complaint process. 

20.         In the Appellant's initial complaint, made to HMRC on 22 April 2023, the Appellant apparently complained about the time HMRC was taking to make repayment of the VAT reclaimed by the Appellant in its VAT returns.  In their letter of 8 June 2023, HMRC accepted that they had delayed in repaying the VAT claimed for the period 06/21.  However, HMRC asserted that the Appellant's decision not to file VAT returns for subsequent VAT periods was the cause of the delay in HMRC processing repayments for those periods.  HMRC offered £60 redress and also offered to reimburse any unnecessary fees incurred by the Appellant as a result of having to chase HMRC for repayment.  Mr Moran was invited to submit receipted invoices or records of the telephone calls he had made to HMRC.  

21.         The Appellant made a further complaint to HMRC.  By letter dated 26 October 2023, HMRC increased the redress to £250 but otherwise did not uphold the further complaint.  HMRC considered they were entitled to conduct credibility checks of the VAT returns filed by the Appellant, and so HMRC did not accept Mr Moran's complaint that HMRC's delays had caused cashflow issues for the Appellant. 

22.         The Appellant continued with its complaint to HMRC.  On 29 April 2024, the Appellant's agent made a complaint to HMRC's tier 2 complaints team, with an accompanying statement setting out that the Appellant wished to claim £3 million from HMRC as compensation for the business and personal loss that Mr Moran considered that he and the Appellant had lost.  In this statement the agent also stated that the Appellant had ceased trading in November 2022. 

23.         By letter dated 7 August 2024, HMRC refused to make additional redress and directed Mr Moran to the Adjudicator's office if the Appellant remained dissatisfied.  HMRC noted that the VAT returns for the VAT periods 09/21 - 12/22 had not been submitted until 4 May 2023, and pointed out that it was this late submission that had delayed repayment of the VAT claimed in those returns.  HMRC also noted that although the Appellant had claimed for the time of his agent in chasing repayment, the only telephone contact they had received during the relevant period had been from Mr Moran himself. 

The Appellant's costs application to the Tribunal      

24.         On 21 August 2024, Mr Moran emailed the Tribunal, as follows:

I am sorry for coming back to you guys however I feel the need to inform you before we go legal.   

25.         Mr Moran set out his understanding of the resolution reached with HMRC, and continued:

Anyway, [the Appellant] incurred a number of Legal costs and personal costs along the way, I have since tried to recover these costs through your Complaints team both tier 1 & 2 and they have refused.  I do think they HMRC complaints team have struggled to grasp the seriousness of this case and how close we was to going to a tribunal last time. 

My accountant tried to work with HMRC complaints team on the redress of these costs without going down the legal route and not only claiming the redress costs back but also claim the damage to both business and personal with my legal team.  My legal team have a file ready to take to the courts with all emails and messages during the period. 

As your complaints team do not agree with the redress I have but no choice but to take this down the legal route. 

Please can you advise an address to send the letter to for a court hearing to reclaim the redress and damage caused to [the Appellant].

26.         It is unclear whether the Tribunal sent a reply to this email. 

27.         On 9 October 2024, Mr Moran emailed the Tribunal again.  This email was headed with the Appellant's name and "Treat as Costs Application".  Mr Moran wrote:

I don't believe that HMRC have been fair throughout this process.  HMRC admitted fault on repaying a VAT repayment before we were about to proceed with a tribunal.  I accepted the repayment of the VAT.  However, there was additional legal costs involved with Legal representation, VAT experts and accountant who worked on this.  I tried to cooperate with HMRC complaints team without going back down the legal route for the redress for the costs I incurred.  There was also damage to business and personal route I can take this down with my legal team if we choose to go down this route.  I am trying to work with HMRC and asks for a redress and the damages to personal and business will be forgotten about. 

However, at this stage if the redress will not be paid then I have no choice but to take this legal again.  I am quite happy to come to the tribunal as we were prepared last time with our case. 

I look forward to hearing back from you with a the best route you want to take this?

I am happy to go through my legal counsel with a tribunal on the redress.

Or we can go down the courts route on redress & Damages to Business & Personal damages. 

28.         As HMRC were not copy recipients, the Tribunal forwarded this email to HMRC.  While it was unclear whether Mr Moran's email was intended for the Tribunal or for HMRC, given the heading of the email, the Tribunal asked HMRC to make representations on the Appellant's email.

29.         On 8 November 2024, HMRC replied to the Tribunal and to the Appellant's accountant.  In this email, HMRC noted that the application for costs was out of time.  HMRC also stated that they were unable to respond to the application on the basis that it was out of time, the Appellant had given no reasons as to why it considered HMRC had acted unreasonably in their conduct of proceedings and there was no schedule of the costs claimed.  HMRC also noted that the complaint made to HMRC related to issues concerning delay in the repayments.  HMRC provided copies of the complaint letters issued by HMRC on 8 June 2023, 26 October 2023 and 7 August 2024. 

30.         On 10 December 2024, the Tribunal issued a letter on my instructions.  In that letter, I drew the Appellant's attention to Rule 10 of the Tribunal Rules.  I explained that the Appellant must set out in writing to the Tribunal and HMRC the basis on which it considered that HMRC had behaved unreasonably in their conduct of the proceedings.  I also required the Appellant to provide a schedule setting out the costs that it said it had incurred as a result of that unreasonable behaviour, and to make an application for permission to apply for costs out of time, explaining its reasons for the delay in making the costs application.  The appellant was given 28 days to provide all of this information and material (i.e., until 7 January 2025).  I informed both parties that HMRC would have 21 days thereafter to respond.

31.         On 9 January 2025, Mr Moran asked for more time to respond on the basis that he had post-concussion syndrome, and found it hard to retain information, read emails and send emails.  Mr Moran sent another email on 14 January 2025.  The Tribunal acknowledged these emails on 17 January 2025, and reminded the Appellant that all communications sent to the Tribunal must be copied to the other party.

32.         On 27 January 2025, the Appellant emailed again asking for an update.  On 28 January 2025, the Tribunal sent a further letter on my instructions.  I explained that although Mr Moran had asked for an extension of time, he had not explained how much longer he would require to provide the information.  I explained that, to give Mr Moran more time but to also give all parties certainty, I would impose an unless order so that the application for costs would be struck out if the information was not provided by the deadline in the Unless order.  The deadline selected was 9 May 2025, which was two years after the deadline by which the Appellant's complete costs application should have been made to the Tribunal.

33.         Later on, on 28 January 2025, Mr Moran emailed the Tribunal:

First of all I thank you very much for the extension of time, I hope we can complete this swiftly as it has dragged on for a number of years now.

Please find attached a schedule of costs in a spreadsheet along with invoices and bank statements etc.

These have been to submitted to HMRC previously and I do apologise as I thought the Tribunal and HMRC worked together, hence the reason you may not of seen these costs.

34.         Mr Moran set out his understanding of the underlying dispute, and continued:

A lot of time effort and damage to [the Appellant]'s business happened in this period whilst HMRC held our business's cash flow back.  

I hope we can recover the costs and expenses incurred through the tribunal during this terrible time for our business and our family personally.  I appreciate the tribunal cannot look at Damage to Business or Personal damage however my Barrister has the files for this separately.  As mentioned previously I have post concussion syndrome so struggle to write and retain information to the standard I once did, again the doctors have put my fall down to stress due to this awful period of my life and still on going with HMRC.

Happy to work with you moving forward if you require anything else.

35.         Attached to this email was a schedule which listed invoices with dates between January 2023 and March 2024 for two firms of solicitors and three accountants.  12 such invoices were included.  Some of these invoices referred to the preparation and submission of accounts and CT returns; some invoices referred to work undertaken several months before, or several months after, the time of the Tribunal proceedings; and one invoice lacked sufficient detail for it to be possible to know what work had been undertaken or when. 

36.         The Appellant also included a list of payments described as "director loan" which appeared to show loans Mr Moran had made to the Appellant.  With this schedule were several pages of the Appellant's bank statements for the period 1 August 2022 - 31 July 2023. 

37.         The Appellant did not provide an explanation of why the Appellant's application for costs had not been made by 10 May 2023.  The Appellant also did not explain why it considered HMRC had acted unreasonably in its conduct of proceedings. 

38.         On 14 January 2025, the Tribunal wrote to the Appellant noting that there was no explanation for the delay in making the costs application, and stating that this should be provided as soon as possible.  The Appellant was also asked to state whether it wished to have its application decided on the papers or at an oral hearing.

39.         Later on, on 14 February 2025, Mr Moran emailed the Tribunal as follows:

Thank you very much for your email and sorry for any confusion on this.  Throughout this long drawn out case my legal team have always broken this into three phases.  

Phase 1 was the repayment of the VAT by HMRC which they admitted fault and repaid.

Phase 2 is the phase we are currently in, this is the reimbursement of costs that was incurred during this period of time with all expenses incurred recovered.

Phase 3 is damaged to business and personal during this time. We do have a case to take this into phase 3 with our legal counsel however I know this does not involve your good self's at this time.

So to answer your questions on the attached email.  Whilst this case has been going on since 2022 my business and health deteriorated drastically with the stress and worry.  I found myself in hospital in the January 2023 having a blood / iron transfusion which they believed to be stress related.  June 2023 I then collapsed and had a serious head injury and was diagnosed with Post Concussion Syndrome which has been the hardest 18 months of my life and only just returning to full capacity in work in 2025.

As this is personal circumstances I would prefer not to share my personal health records with HMRC.  However, if Judge Bailey requests these then I have no problem gathering this information from my Hospital and Neurologist to present to Judge Bailey.

40.         Mr Moran emailed the Tribunal on 17 February 2025, with copies of three medical letters.  Unfortunately, the image of the first letter is blurred so cannot be read properly, but none of these letters appear to refer to post-concussion syndrome.  The letters reveal that Mr Moran was admitted to hospital on 10 January 2023, and that he self-referred to hospital in June 2023.  The reason for that self-referral is not discernible but I accept it was as the result of a collapse, as Mr Moran says.  

41.         The Tribunal wrote again to Mr Moran on my instructions on 20 February 2025.  I noted the sensitivity for Mr Moran in sharing his personal information but explained that HMRC could comment only if the information provided had been shared.  I gave the Appellant a further seven days to provide an explanation for the delay that it was willing to copy to HMRC.  Upon receipt of this email, Mr Moran emailed the Tribunal to state that he had forwarded his emails to HMRC. 

42.         On 25 February 2025, Mr Moran emailed the Tribunal, with a copy of the HMRC complaints letter of 7 August 2024.  Mr Moran wrote:

The reason my accountant could not submit VAT returns during the period of dispute was because no one knew if we should be charging 20% VAT (which HMRC was incorrectly stating) or 0% which we was found to be correct.

HMRC admitted fault and offset the monies owed to myself before we was about to attend the Tribunal last time out.  A lovely lady called Sophie Jones from HMRC could see they was incorrect and authorised the money to be paid.

The work involved was not day to day costs as you can see from the spreadsheet previously attached, which included Legal, Accountants, VAT experts and Directors loans to the business.  This is not day to day costs.  All HMRC have done on each occasion has forced me down the avenue of the Tribunal wasting all parties time and money.

As stated on my previous email this is only phase 2 of recovering the costs that I personally incurred during this time.  I am happy to take this to the high court including damage to business & personal if required.

43.         On 11 March 2025, HMRC responded to the Appellant's late claim for costs.  HMRC noted that the Appellant had not fully complied with the Directions of 10 December 2024 as no explanation had been provided for why the Appellant considered HMRC to have acted unreasonably in their conduct of the Tribunal proceedings.  HMRC stated:

The Appellant has not detailed why the respondents have been unreasonable in litigation. For reference the original late appeal was received by HMRC on 29 November 2022, hardship was granted on 6 January 2023, a late appeal hearing was scheduled for 17 April 2023 however the Appellant withdrew their appeal on 4 April 2023 after resolving the matter with the Respondents.  The Respondents considered their actions in the conduct of the proceedings to be reasonable and the Appellant has confirmed this on numerous occasions including their withdraw letter dated 4 April 2023 attached.  The Appellant's view of the Respondents conduct prior to litigation is not relevant for a costs claim under Rule 10, and this has already been referred and dealt with by HMRC's complaints department.

44.         HMRC noted that the schedule of costs provided by the Appellant was not compliant with Rule 10, and that some of the costs appeared to have been claimed twice.  HMRC continued:

The schedule contains huge amounts for things that are pre litigation or are not relevant to the proceedings, e.g., over £100,000 pounds of the costs refer to Director Loan account with such items as "covid kits test invoice" and "subcontractors and employee salaries" which are not recoverable.  There is not sufficient detail in the schedule to determine what relates specifically to the appeal.  The Respondents also contend that the costs claimed are not proportionate.  The Appellant has claimed £166,771.69 for a late appeal that was settled before any preliminary matters were carried out.

45.         In respect of the Appellant's reasons for not making an application for costs by 10 May 2023, the Respondents noted:

Whilst the Respondents are sympathetic to the Appellant's position with his health issues which have been detailed in the emails dated 17 and 20 February 2025, the Appellant was engaged in correspondence with the complaints team between April and October 2023 and then again in April 2024.  The Respondents therefore contend that the Appellant has not explained the impact of his illness on his ability to make a valid costs claim to the Tribunal before 9 October 2024, and to date

46.         Later on, on 11 March 2025, Mr Moran emailed the Tribunal to make the following points:

1.  The email attached was thanking Sophie Jones for her hard work and that we had agreed the VAT was correct, let's not get confused with the redress that was owed.

...

4. I appreciate Sophie's timelines below but skirting around the main issue in which is recovering the costs for the work that was carried out by my legal representatives and monies I had to pay throughout whilst waiting for the VAT to be repaid by HMRC.

5. My Barrister has a large file with the Negligence to both Business & Personal which is phase 3 in our approach to all this.  Phase 2 at this stage is recovering the costs that I incurred at the time and the redress so can we please focus on this.

6. I have previously been days away from attending a tribunal to recover the VAT and HMRC admitted fault, so I know how they like to keep kicking the can down the road and delaying thinking it will go away. I can assure you I am not going away until Justice is provided.

7. If there is double invoices for work done, there will be a reason behind this from my accountant I am pretty sure. If it is a double invoice submitted then we will apologise and we can deduct this from the redress.

8. I really do appreciate Sophie Jones and her hard work she does for HMRC, but for someone to question my integrity of my illness, I find this absolutely disgusting. I am happy to meet Miss Jones with my Neurologist and she can go through how horrendous the last two years of my life has been with my struggles.

To finalise, you can see Sophie's email has slightly angered me this evening. I am a hard working man who has served my country and integrity is at the forefront of everything I do.  Sophie has wrote a lot on her email, but we are here to recover the costs I incurred and for justice in the redress of my hard earned money. I am trying to move on with my new business... which is already two years behind due to VAT being held back and me having to use my hard earned money to cover invoices during the period of time HMRC held VAT monies back.

Judge Bailey, I thank you and I think there is enough evidence from both parties.  Please can you make your decision.

47.         On 21 March 2025, the Tribunal issued a letter dictated by me.  This letter stated:

I appreciate that Mr Moran would like this issue resolved so that he can progress his business.  However, looking through the papers that have been submitted on behalf of the Appellant in respect of this costs application, I cannot see where the Appellant has explained how HMRC's conduct in the Tribunal proceedings is said to be unreasonable.  The email sent by Mr Moran to the Tribunal on 4 April 2023 (provided by HMRC with their email of 11 March 2025) suggests that, at that stage at least, the Appellant had no complaint at all about the way HMRC conducted itself in their conduct in the proceedings before the Tribunal.

If Mr Moran still wishes me to decide the Appellant's application now then I will do so.  However, before I do that, I want the Appellant to clearly understand that, in the absence of any explanation of why the Appellant believes that HMRC's conduct in the Tribunal proceedings was unreasonable, then the Appellant's application for costs will inevitably fail.

The appellant has a further 14 days, either to:

a) confirm that it wishes to have its application for costs decided on the papers currently available to the Tribunal, or

b) provide the Tribunal and HMRC with a written statement providing the information sought at point 1 of the Tribunal's letter of 10 December 2024, i.e. setting out the basis on which it considers that HMRC behaved unreasonably in their conduct of the proceedings, or HMRC's representatives behaved improperly or negligently in the Tribunal proceedings.

If the Appellant chooses option (b), then HMRC will have 14 days from receipt of the Appellant's explanation, to provide their response.

48.         On 28 March 2025, Mr Moran emailed the Tribunal with further documents:

§ an invoice dated 2 August 2022, from the Appellant's solicitor to Mr Moran;

§ the Tribunal Notice of hearing dated 13 March 2023, listing the lateness application;

§ the Appellant's draft accounts for the year ended 31 July 2023;

§ a complaints letter dated 29 April 2024, from one of the Appellant's agents to HMRC's complaints team with an accompanying statement that the Appellant wished to claim £3 million from HMRC as compensation for the business and personal loss;

§ an MP letter dated 13 September 2022, seeking more time for the Appellant to avoid a winding up petition;

§ an email dated 16 January 2023, from the Appellant's agent to the Tribunal;

§ an email dated 13 September 2022, from the Appellant's supplier relating to the VAT treatment of their own supplies;

§ an email dated 19 July 2022, from the Appellant's solicitor to the Appellant, advising that an appeal to the Tribunal would be late but, on the information supplied by Mr Moran, the Appellant would:

probably struggle to convince the Tribunal that you are eligible for VAT exempt status for the supply of the goods ...  I do not think that there is a good chance of you succeeding in the tax tribunal, and therefore the vat assessments and penalties are likely to stand.  It may be that an appeal to the tax tribunal on the current facts would literally just delay the inevitable;

§ a further schedule setting out director's loans; and

§ an email dated 16 October 2023 from Mr Moran to an agent, with points to add to the agent's email to the HMRC complaints team. 

49.         In his covering email of 28 March 2025, Mr Moran wrote to the Tribunal:

I have attached a number of documents and copies of emails and what happened throughout the initial process where we had a date set for the tribunal to recover the VAT. As you were aware HMRC pulled out of the previous Tribunal before the trial thanks to Sophie Jones great work and admitted HMRC was at fault.

1. My point of view.

a.  The un-care, un-cooperation, self centered nature of rare HMRC VAT officers, results in a complete meltdown of a good company's cash flow into a financial crisis.  It destroys a fine company's future and a director's hard work and loss in finance and mind.

b.  Without the special professional help like solicitors, VAT claims specialist ongoing works the £300,000 VAT repayments would have been lost forever.  [The Appellant] would have faced bankruptcy fully.

c.  For HMRC finally accepted the errors to release the £300,000 VAT repayments, we paid out more than £67,000 to solicitors and specialists and further close to 100k in directors loans, this is the reason for the claims.

Judge Bailey - this is a legal expenses claim that is rightly and correctly within my rights.  This is not compensation as HMRC suggested in their reply for their rejection.  The only expenses accepted by HMRC was a goodwill offer of £250 of telephone bills to cover the hundreds of hours phone calls.

Without paying the specialist costs of over £67,000, we would have lost the £300,000 VAT repayment.  We had the right to reclaim our legal fees as all businesses in the UK.  We claim these Correctly and rightly.  Not a compensation claim HMRC tried to make it be.

50.         On 2 April 2025, HMRC emailed the Tribunal and the Appellant to state that they did not consider it was clear whether the Appellant was choosing option a) or b) as there was still no explanation of how it was said that they had acted unreasonably in the conduct of the proceedings. 

51.         Later on, on 2 April 2025, Mr Moran emailed the Tribunal and HMRC:

As you are aware I am not a legal expert and just a businessman trying to recover my expenses and my money I feel I am owed by HMRC.

Reference to the 21st of March 2025 email, I give Judge Bailey my legal right and my full authorisation to act and to make the right decision to recover my expenses.  I hope the information submitted on the 28th of March by myself, there is enough information for you to make your final decision.

I believe the best of my knowledge I have sent enough evidence along with the valid costs and throughout this tribunal I believe that HMRC thought it was a compensation claim and not a legal Expense claim.

52.         On 10 April 2025, the parties were informed that the Appellant's application for costs would be decided on the papers, on or after 25 April 2025. 

The requirements of Tribunal Rule 10

53.         The Tribunal's power to make an award of costs is contained in Rule 10 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.  The relevant parts of Rule 10 provide as follows:

10.— Orders 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)  ... ; or

(d)  ...

(2)  ... 

(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 that 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)  ...; or

(b)   notice under rule 17(2) of its receipt of a withdrawal which ends the proceedings.

(5)  The Tribunal may not make an order under paragraph (1) against a person (the "paying person") without first—

(a)  giving that person an opportunity to make representations; and

(b)  ...

(6)  ...

(7) ...

(8)  ...

54.         As can be seen, Tribunal Rule 10(4) imposes a deadline for a party to make an application to the Tribunal for costs.  In this case, the deadline was 10 May 2023, which was 28 days from the Tribunal's notice of receipt of the Appellant's withdrawal from proceedings. 

55.         The Appellant's application for costs was received (in an incomplete form) on 9 October 2024.  As the Appellant's costs application was not received by 10 May 2023, it is necessary for me to decide whether to admit the application for consideration out of time.  It is only if the costs application is admitted out of time, that any consideration can be given to the substance of that costs application. 

The lateness of the application

56.         Rule 5(3)(a) of the Tribunal Rules gives the Tribunal the power to extend the time to make an application, but the Tribunal must decide, in each case, whether it would be appropriate to do so given the particular circumstances of that case.  When a party is late in undertaking any action, the onus of proof is upon that party to explain the reasons for their delay and to make the case for being given relief from their failure to comply with the relevant time limit. 

57.         The Upper Tribunal in Martland v HMRC [2018] UKUT 178 (TCC) set out what the First-tier Tribunal should consider when deciding whether an extension of time should be granted.  The Upper Tribunal stated:

44.  When the FTT is considering applications for permission to appeal out of time, therefore, it must be remembered that the starting point is that permission should not be granted unless the FTT is satisfied on balance that it should be.  In considering that question, we consider the FTT can usefully follow the three-stage process set out in Denton:

 

(1) Establish the length of the delay. If it was very short (which would, in the absence of unusual circumstances, equate to the breach being "neither serious nor significant"), then the FTT "is unlikely to need to spend much time on the second and third stages" - though this should not be taken to mean that applications can be granted for very short delays without even moving on to a consideration of those stages.

 

(2) The reason (or reasons) why the default occurred should be established.

 

(3) The FTT can then move onto its evaluation of "all the circumstances of the case". This will involve a balancing exercise which will essentially assess the merits of the reason(s) given for the delay and the prejudice which would be caused to both parties by granting or refusing permission.

58.         Although Martland was concerned with an application to make an appeal out of time, the same principles apply to an application to make a costs application out of time. 

59.         The first stage is to calculate the length of the delay. 

60.         The Appellant's application was received on 9 October 2024, but it was incomplete at that time.  Mr Moran supplied further information in January, February and March 2025.  Treating the Appellant's application as being received on 9 October 2024, albeit incomplete, the application was received approximately 17 months late.  That means it took the Appellant roughly 18 times as long as Parliament considered was required to make its application.  As was said by the Court of Appeal in paragraph 105 of the Secretary of State for the Home Department v SS (Congo) and others [2015] EWCA Civ 387:  

A party who delays by several weeks or months in applying to this court for permission to appeal can generally expect to have the delay treated as significant or serious.

61.         The delays commented upon in the appeals before the Court of Appeal were of 24 days and of three months.  In that context, the Appellant's delay of 17 months cannot be considered to be anything other than serious and significant.      

62.         The second stage is to establish why the delay occurred. 

63.         Mr Moran has stated that he was seriously unwell in January 2023, and then has been seriously unwell again since June 2023, only gradually recovering between June 2023 and January 2025.  In response to this point, HMRC noted that Mr Moran was sufficiently well to make complaints to HMRC during the period April 2023 to April 2024. 

64.         I agree with HMRC that Mr Moran was sufficiently well in the period April 2023 to April 2024, to give instructions to an agent to make a complaint on behalf of the Appellant.  Mr Moran has provided the Tribunal with a copy of an email he sent to an agent on 16 October 2023, with 12 bullet points which Mr Moran wished to be included in the complaint.  In that email, Mr Moran also gave instructions to that agent on the tone of the complaint to be sent, and how he should be portrayed.  It may have taken Mr Moran considerably more effort to write that email in October 2023 than it would have done to write a similar email prior to his initial ill health and his collapse in June 2023, but it is clear from that email that by October 2023 Mr Moran was capable of making decisions and of giving clear and coherent instructions.  I consider that, if Mr Moran had chosen to make a costs application to the Tribunal at the same time as, or before, the Appellant began its complaints to HMRC in April 2023, then Mr Moran would have been able, despite his ill health, to give similarly capable instructions to an agent to file an application for costs with the Tribunal.  

65.         Therefore, while I accept that Mr Moran was not in good health between January 2023 and January 2025 than he had been previously, on the evidence of the emails from Mr Moran and the steps taken by the Appellant during this period, I find Mr Moran was able to give instructions to progress the Tribunal appeal (January 2023 - April 2023) and to take an active involvement in making complaints to HMRC (April 2023 - April 2024).  On the evidence available to me, I do not accept that making a costs application to the Tribunal would have been beyond Mr Moran at this time due to his impaired health.      

66.         In addition, as Mr Moran has made clear, the Appellant had developed a plan with its legal team to deal with various aspects of its grievances with HMRC in three phases.  It is clear from Mr Moran's emails to the Tribunal that the Appellant's strategy was to recover the outstanding VAT from HMRC as phase 1, and that it was not until phase 2 that the Appellant intended to make a costs application to the Tribunal.  I understand why the Appellant would want to ensure that the VAT claimed in its VAT returns was repaid promptly, but there is no explanation of why the Appellant - which had the assistance of multiple legal and accountancy agents at this time - was not able to make a costs application to the Tribunal at the same time that it was complaining to HMRC.  Had simultaneous action been taken, the Appellant would have met the deadline in the Tribunal Rules.

67.         I do not consider that the Appellant's decision to focus on another aspect of its affairs and then see that aspect to completion before returning to the Tribunal, gives the Appellant a good reason for the delay in making its costs application.  In the circumstances I do not consider that the Appellant has provided a good reason for any part of its 17 months of delay. 

68.         The third stage is to weigh all relevant factors.  I remind myself what the Upper Tribunal said at paragraph 45 of Martland:

45. That balancing exercise should take into account the particular importance of the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected. By approaching matters in this way, it can readily be seen that, to the extent they are relevant in the circumstances of the particular case, all the factors raised in Aberdeen and Data Select will be covered, without the need to refer back explicitly to those cases and attempt to structure the FTT's deliberations artificially by reference to those factors. The FTT's role is to exercise judicial discretion taking account of all relevant factors, not to follow a checklist.

69.         In weighing the relevant factors, first I consider the prejudice that each party would suffer if I either do, or do not, grant the Appellant permission to make a late application for costs.

70.         Looking first at the Appellant, if I refuse the Appellant permission to make a costs application out of time then the Appellant will lose the opportunity to have its costs application decided by the Tribunal.  It is not appropriate for me to conduct a detailed investigation or conduct a mini-trial in considering the value of this loss.  While Mr Moran has been clear that, in his words:

Without paying the specialist costs of over £67,000, [the Appellant] would have lost the £300,000 VAT repayment,

there is no explanation from the Appellant of any way in which HMRC is said to have acted unreasonably in their conduct of the Tribunal proceedings.  As the Tribunal pointed out to the Appellant in its 10 December 2024 letter, the Appellant must demonstrate that HMRC acted unreasonably in the Tribunal proceedings in order for the Tribunal to make an order for costs.  As there is no criticism of HMRC's behaviour in the substantive Tribunal proceedings, there is no likelihood of the Appellant being successful in its application for its costs of those proceedings.  In addition, the Appellant has made clear that, as phase 3 of its strategy, it intends to bring court proceedings against HMRC.  While I do not comment on the likelihood of such court proceedings being successful, as many of the amounts sought by the Appellant in this costs application were not costs incurred in the Tribunal proceedings (and so were irrecoverable before this Tribunal in any event), the Appellant still has the opportunity to seek those costs in its court claim.  These two factors mean that there is very limited prejudice to the Appellant if it is not now given permission to make a late application for costs.     

71.         Turning now to the prejudice that would be suffered by HMRC if I give the Appellant permission to make a late application for costs, then HMRC would be required to respond in respect of Tribunal proceedings that they were entitled to consider resolved.  That would involve HMRC spending further time and resources on this matter, at the expense of other appeals.  Although the prejudice to HMRC (and other Tribunal users) is relatively limited, in this case I conclude that the prejudice to HMRC would be greater than the prejudice to the Appellant.   

72.         In weighing the factors, I am required to take into account the particular importance of statutory time limits being respected.  There is public interest in finality.  I bear in mind that the delay is well in excess of a year, that the Appellant does not have a good explanation for its delay, and that there will be very limited prejudice to the Appellant if permission is refused (both because there is no likelihood of being successful, and also because the Appellant has said it will bring court proceedings as phase 3 of its strategy). 

73.         I remind myself that the starting point is that permission should not be given, and it is for the Appellant to demonstrate that I should depart from that starting point.  I conclude that, in this case, the Appellant has failed to demonstrate that it would be appropriate for me to grant permission. 

74.         Therefore, the Appellant is refused permission to make its costs application out of time. 

75.         As permission has been refused, the costs application is not admitted.  Therefore, there are no further issues before the Tribunal.  The 4 June 2024 Practice Direction issued by the Senior President of Tribunals, requires sufficient reasons to be given by this Tribunal but warns against excessively long decisions.  Therefore, I do not set out what I would have decided if permission been granted.  Instead, I set out only brief reasons on the substance of the Appellant's application, sufficient only to better explain my assessment of the merits.   

Whether the Respondents acted unreasonably

76.         The Tribunal does not have the costs jurisdiction of the higher courts.  Other than appeals allocated to the Complex category, there is no general rule that the unsuccessful party to Tribunal proceedings will pay the costs of the successful party.  The Appellant's appeal was allocated to the Standard category where, usually, each party bears their own costs of the proceedings.  Tribunal Rule 10(1)(b) gives the Tribunal the power to make an order for costs against a party in Standard category appeals, but only if it considers that that party has acted unreasonably in bringing, defending or conducting the proceedings.   

77.         When considering whether a party has acted unreasonably, the test I should apply is what a reasonable person would reasonably have done, or not done, in the circumstances of this appeal. 

78.         I consider that HMRC did not take an unreasonable time to agree the Appellant's hardship application in this appeal.  HMRC did not act unreasonably in not objecting to the lateness of the Appellant's appeal to the Tribunal.  It was the Appellant (not HMRC) who asked the Tribunal to list a hearing to formally decide the Appellant's application to make a late appeal.  Although the Appellant asked for this hearing on the basis that no discussions could take place until the issue of lateness was resolved, HMRC did not wait for the Tribunal to decide lateness before acting upon the fresh information provided by the Appellant in its notice of appeal.  That fresh information led to the resolution of the substantive dispute, and the withdrawal of the Appellant's appeal.  In the circumstances, I do not consider that HMRC acted unreasonably in any aspect of these proceedings.  In his email of 4 April 2023, withdrawing the Appellant's appeal, Mr Moran seems to agree with this conclusion.

79.         I can see that Mr Moran considers the Appellant had to spent considerable amounts in order to secure repayment of VAT.  However, it is relevant to note that the Tribunal proceedings lasted only from 13 October 2022 to 12 April 2023.  The behaviour that the Appellant complains about is HMRC's original refusal of the claim in January 2022, and the time that HMRC took to repay the VAT claimed after the appeal was withdrawn on 4 April 2023.  Neither of these actions are part of the Tribunal proceedings.  The Appellant may consider that it had to file a Tribunal appeal in order to have a route to provide HMRC with the additional information that then resulted in HMRC's change of view, but that does not mean that the way HMRC conducted the Tribunal proceedings was unreasonable. 

80.         It is for these reasons that I concluded that the Appellant had no likelihood of demonstrating that HMRC acted unreasonably in defending or conducting the proceedings. 

Conclusion

81.         For the reasons given above, the Appellant is REFUSED permission to make a late costs application to the Tribunal.  As the Appellant's costs application has not been admitted out of time, that application is also unsuccessful.    

Right to apply for permission to appeal

82.         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: 09th MAY 2025

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