HMRC’s conduct had not been unreasonable

The taxpayer had won his appeal against assessments which HMRC had raised based on observations about till readings. The taxpayer then applied to the First-tier Tribunal for costs. He said HMRC had been unreasonable in opposing the appeal because it should have known that its opposition had no reasonable prospect of success.

The tribunal said the test was not whether one party won or lost but whether their litigation conduct was unreasonable. This was not the case here. HMRC had an arguable case which they lost.

On HMRC’s point that ‘both parties fell short in relation to the proceedings’ the tribunal agreed that was the case. However it could see no reason to ‘depart from the approach in standard cases that in general there should be no award of costs’. HMRC’s approach to defending and conducting these proceedings was not unreasonable and insofar as there...