London Luton Hotel BPRA Property Fund LLP
| Jurisdiction | UK Non-devolved |
| Judgment Date | 12 December 2019 |
| Neutral Citation | [2019] UKFTT 746 (TC) |
| Date | 12 December 2019 |
| Court | First Tier Tribunal (Tax Chamber) |
[2019] UKFTT 746 (TC)
Judge John Brooks
Jonathan Bremner QC, instructed buy DWF Law LLP, appeared for the appellant
Jonathan Davey QC and Nicholas Macklam, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Procedure – Appellant's application for costs – Complex category appeal – Appellant opted out of cost shifting regime – Whether respondents acted unreasonably in conduct of proceedings – No – Application dismissed – Tribunals Courts and Enforcement Act 2007 (TCEA 2007), s. 29 – Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 10(1)(b).
The First-tier Tribunal (FTT) dismissed a taxpayer's application for costs, because HMRC had not acted unreasonably in conducting the proceedings.
In London Luton Hotel BPRA Property Fund LLP [2019] TC 07059, the FTT partly allowed an appeal by London Luton Hotel BPRA Property Fund LLP (the LLP) against a closure notice rejecting a claim for Business Premises Renovation Allowance.
The LLP applied to the FTT for costs of £809,098.50 from HMRC. Although the appeal had been categorised as complex the LLP had opted out of the cost shifting regime. Therefore, its application was made under SI 2009/273, r. 10(1)(b), on the basis that HMRC had acted unreasonably in conducting the proceedings. The LLP submitted that HMRC acted unreasonably by raising lots of irrelevant and unnecessary matters which resulted in the hearing taking longer than it should have.
The FTT found that HMRC had not acted unreasonably and the LLP had accordingly failed to reach the necessary threshold identified in Market & Opinion Research International Ltd v R & C Commrs [2015] BVC 504. As such the application for costs failed.
In particular the FTT found that:
- as part of the substantive proceedings the LLP could have submitted that expert evidence relied on by HMRC was irrelevant, rather than calling its own expert evidence to counter HMRC's experts and spending time cross examining HMRC's experts, and anyway the evidence was completed within the time allotted in the agreed hearing timetable;
- while the LLP submitted that time was spent in both oral evidence and submission on issues which were agreed, these issues were relevant, the LLP did not raise objections at the time of the substantive hearing and the evidence was concluded within the agreed timeframe;
- although HMRC's arguments about the relationships between the various parties to the transactions were firmly rejected by the tribunal in the substantive case, the FTT could not be satisfied that the arguments were without merit or if they were, that HMRC knew that to be the case;
- while the FTT accepted that it was probably more inconvenient for the LLP to have to consider and review third party documents disclosed nearer to the hearing than if they had been disclosed earlier, given that it would have been necessary for the LLP to have considered and reviewed this evidence whenever it had been provided the FTT considered that it was unreasonable for HMRC not to have made the applications sooner; and
- it could not find that HMRC's application to amend their statement of case four days before the hearing was without merit or if it was that HMRC knew that to be the case.
Although this costs application related to an appeal which had been categorised as complex, because the taxpayer had opted out of the cost shifting regime their only claim could be on the basis that HMRC had acted unreasonably in bringing, defending or conducting the proceedings. The FTT found this not to be the case and suggested that the taxpayer was “seeking to obtain its costs through the backdoor”, which Judge Brannan cautioned against in Eastenders Cash and Carry plc [2012] TC 01914.
In accordance with para. 37 of the decision the fourth bullet point of the case report says that the FTT considered that it was unreasonable for HMRC not to have made the applications sooner, but based on the rest of the decision it's possible that it should say that the FTT did not consider that it was unreasonable for HMRC not to have made the applications sooner.
[1] On 28 March 2019 the Tribunal issued the decision in this appeal with neutral citation [2019] TC 07059 (the “Decision”). This allowed, in part, the appeal of London Luton BPRA Property Fund LLP (the “LLP”) against a decision of HM Revenue and Customs (“HMRC”) to reduce the LLP's business premises renovation allowances (“BPRA”) claim of £12,478,210 by £5,255,761. The LLP had claimed BPRA in respect of sums paid, under the terms of a contract with a property developer, for the conversion of a flight training centre near London Luton Airport into a 124-bedroom hotel (the “Property”). As noted at [27] of the Decision, this was the first occasion on which the BPRA legislation contained in the Capital Allowances Act 2001 (as amended by the Finance Act 2005) had been considered by the Tribunal. Following its issue, both the LLP and HMRC sought and were granted permission to appeal against the Decision.
[2] By an application dated 24 April 2019, which is opposed by HMRC, the LLP seeks its additional costs in the sum of £809,098.50 incurred as a result of what it contends was HMRC's unreasonable conduct of the proceedings.
[3] Mr Jonathan Bremner QC appeared for the LLP. HMRC were represented by Mr Jonathan Davey QC and Mr Nicholas Macklam. Although carefully considered, in reaching my conclusions I have not found it necessary to refer to every argument that they advanced on behalf of the parties.
[4] The power of the Tribunal to make an order for costs is derived from s 29 of the Tribunals Courts and Enforcement Act 2007 (“TCEA”). This provides:
(1) The costs of and incidental to–
- all proceedings in the First-tier Tribunal, and
- all proceedings in the Upper Tribunal,
shall be in the discretion of the Tribunal in which the proceedings take place.
(2) The relevant Tribunal shall have full power to determine by whom and to what extent the costs are to be paid.
(3) Subsections (1) and (2) have effect subject to Tribunal Procedure Rules.
[5] As Rose, LJ (with whom Floyd and Lewison LJJ agreed) observed in Distinctive Care Ltd v R & C Commrs [2019] BTC 17 at [7]:
The broad power to award costs conferred by s 29(1) [TCEA] is therefore expressed to be subject to the FTT Rules. Those Rules, by r 10, reflect the intention that the First-tier Tribunal is designed in general to be a “no costs shifting” jurisdiction, not least because many appellants are not legally represented. Rule 10 should therefore be regarded as an exception to this general expectation that both sides will bear their own costs, whatever the result of the appeal.
[6] Insofar as it applies to the present case rule 10 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 provides:
- The Tribunal may only make an order in respect of costs (or, in Scotland, expenses)– …if the Tribunal considers that a party or their representative has acted unreasonably in bringing, defending or conducting the proceedings; …If–the...
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...and type of connection) intended by the phrase where used in the particular context (see London Luton Hotel BPRA Property Fund LLP [2020] TC 07503).On that approach, it is plain that the intended type of connection in sub-s(1)(c) is that A's employment is part of the reason for the reward, ......