Award of costs against a third party

GH a company controlled by Mr K was assessed to VAT of more than £20m on the basis that it was not entitled to input tax recovery because it was a buffer company in a fraudulent missing trader chain. Mr K was arrested in connection with the fraud and after changing his plea late in the proceedings was convicted of cheating the public revenue. The company did not however withdraw its appeal against the denial of input tax even though the grounds on which it had appealed could not be maintained given Mr K’s conviction.

HMRC applied to recover its costs of preparing for the litigation from Mr K personally.

Although the judge criticised some elements of HMRC’s handling of the application for costs the First-tier Tribunal decided in principle that the conditions were met. Mr K was not a party to the appeal...