Costs are payable

The taxpayer company had claimed a refund of input VAT which HMRC refused. On appeal to the VAT tribunal the company lost but its subsequent appeal was successful in the High Court and upheld by the Court of Appeal.

The company applied for indemnity costs under part 36 of the Civil Procedure Rules.

HMRC resisted the application.

The Court of Appeal ruled that the costs should be paid. There was nothing in the rules that suggested that appeals emanating from the VAT were excluded from the application of the rules. The purpose of awarding costs on an indemnity basis was to encourage parties to avoid proceedings unless it was unreasonable for them to do otherwise.

Given that HMRC had lost the case there was no reason why the vindicated business should not apply for indemnity costs; it was irrelevant that that HMRC had...