Tribunal Upholds Strict Adherence to Procedural Rules in Costs Application Appeal

Citation: [2024] UKFTT 66 (TC)
Judgment on

Introduction

The case of Vikrant Bhargava v The Commissioners for HMRC [2024] UKFTT 66 (TC) examines the application for costs made by the appellant in a tax dispute after HMRC withdrew its opposition to the appeal. The First-tier Tribunal (Tax Chamber) deliberated on various procedural rules and principles relating to costs applications. This article seeks to offer a precise analysis of the key topics and legal principles applied within this case.

Key Facts

  • HMRC closed an enquiry into Bhargava’s 2013-14 tax return and imposed an additional liability.
  • Bhargava appealed; the case was categorized as “complex,” and he did not opt out of potential liability for costs.
  • HMRC later withdrew opposition to Bhargava’s appeal, leading to its allowance.
  • Bhargava filed a late application for costs, missed the 28-day deadline set by Rule 10, and failed to include a detailed schedule.
  • The Tribunal applied the three-stage test from Martland v HMRC to assess whether to grant permission to make a late application for costs.

Rule Compliance and Time Limits

A significant aspect of the case revolves around the importance of adhering to procedural rules and time limits. The Tribunal highlights the need to respect these limits, referencing the precedent from Martland v HMRC, BPP v HMRC, and the Civil Procedure Rules (CPR):

  1. The Three-Stage Martland Approach: This approach determines the seriousness and significance of the delay, the reasons for the delay, and evaluates all circumstances of the case, including the need for litigation to be conducted efficiently and proportionate costs to be respected.

  2. Indemnity Principle: The principle asserts that costs awarded by the court must not exceed the amount the party is actually obligated to pay, highlighting the need for a certification accompanying the claimed costs.

Costs as “Of and Incidental to the Proceedings”

The case emphasizes the scope of costs that can be awarded, requiring them to be “of and incidental to” the proceedings, a principle derived from TCEA s 29.

Summary Assessment

The Tribunal stressed the need for sufficient detail in costs applications to allow a summary assessment, as settled in Distinctive Care v HMRC, which includes hourly rates, the professional status of fee earners, and specific work details.

Reliance on Practitioners

Reliance on one’s adviser was discussed, noting it as an insufficient reason for failing to comply with rules, referencing Katib v HMRC and the judgment in Hytec.

Outcomes

The Tribunal refused Bhargava permission to make a late application for costs, based on:

  • Serious and significant delay without good reason.
  • Inadequate content in the initial application.
  • The application not meeting the requirements to be “of and incidental to” the proceedings.
  • Failure to fulfill the indemnity principle, lacking proper certification and invoicing issues.

Conclusion

In conclusion, the Tribunal in Vikrant Bhargava v The Commissioners for HMRC firmly applied established principles emphasizing the importance of adhering to procedural rules and the specificity required in filing costs applications. It reiterated the significant weight given to enforcing compliance with rules and recognized that time limits play a crucial role in maintaining the efficiency and cost-effectiveness of litigation — a key takeaway for legal professionals navigating the UK tax legal system. The case serves as a reminder that both timely compliance and detailed substantiation are essential in cost recovery efforts in complex tax-related proceedings.