Contingency costs are lawful

Tel-Ka set up a company selling mobile phones. In 2003 HMRC refused to repay input VAT claimed by the company in light of a large scale missing trader intra-community fraud.

Tel-Ka appealed to the VAT tribunal.

The company appointed a solicitor to represent it on a contingency fee basis: it paid a fixed fee upfront with further fees to be recovered from HMRC should the appeal be successful.

Before the VAT tribunal heard the appeal the European Court of Justice gave judgment in Optigen v CRC and related appeals (C-354/03 C-355/03 and C-484/03) [2006] STC 419 which led HMRC to make the disputed repayment to Tel-Ka with reasonable costs.

HMRC claimed that the contingency fees were not enforceable in the VAT tribunal.

The Law Society intervened saying that contingency fees were lawful in relation to non-contentious issues and that a VAT tribunal...