No costs

A Dutch company reclaimed withholding tax in respect of royalties paid. HMRC rejected the claim so the company appealed.

At a preliminary hearing the Special Commissioner directed that the questions relating to the validity and amount of the claim should be heard as preliminary issues. The appellant's representative opposed this and withdrew the appeal.

HMRC applied for costs under the Special Commissioners (Jurisdiction and Procedure) Regulations 1994 SI 1994/1811 reg 21(1) on the basis that the representative's behaviour was wholly unreasonable because she continued to press the appeal even though it was clearly hopeless and she did not engage with the legal argument. HMRC did not however argue that there was bad faith.

The Special Commissioner found that the representative's behaviour was not sensible or in the company's best interests but was not 'wholly' unreasonable.

The company was entitled to disagree with...