A special commissioner decided that he had no jurisdiction to award a taxpayer the costs of its successful appeal having found that the Revenue had acted wholly reasonably in connection with the hearing of the appeal.

Facts

Following the success of its appeal in relation to Enterprise Investment Scheme relief ((2007) Sp C 630), the taxpayer applied for its costs of the appeal. The commissioner found as a fact that throughout the period in which the taxpayer's appeal was before the tribunal, and at the hearing itself, the Revenue had acted in good faith, with full belief in the correctness and reasonableness of the arguments that they presented. Although the Revenue advocate had pressed his arguments vigorously and cogently, he had acted properly, reasonably and courteously throughout the hearing of the appeal. The Revenue officer dealing with the case had spoken to the advocate several times regarding the progress of the case but had had no input into his decision making.

The special commissioners were not concerned with anything other than the question whether the Revenue had acted wholly unreasonably in connection with the hearing of the appeal. How matters were dealt with otherwise than in connection with, or incidental to, the hearing of the appeal were not within their jurisdiction and so the commissioners made no findings in respect of them.

Issue

Whether the commissioner should make an order awarding the taxpayer the costs of, or incidental to, the appeal on the basis that the Revenue had acted wholly unreasonably in connection with the hearing of the appeal.

Decision

The special commissioner (Adrian Shipwright) (dismissing the application) said that reg. 21 of the Special Commissioners (Jurisdiction and Procedure) Regulations 1994 provided for a limited cost jurisdiction. Power was given to the special commissioners to make an order awarding the costs of, or incidental to, the hearing of any proceedings by the tribunal against any party to those proceedings if the tribunal was of the opinion that the party had acted wholly unreasonably in connection with the hearing in question. There was no inherent power to award costs. In essence, the taxpayer had argued that the Revenue should not have proceeded with the case as it was a ‘flagrant attempt to bully the taxpayer into submission with arguments which never had any chance of success’. It was wholly unreasonable for the Revenue to pursue a case in which the argument advanced had no statutory or case law support. The Revenue had argued that it had acted properly and in good faith. Accordingly, it had not acted wholly unreasonably in connection with the hearing of the appeal.

It was not unreasonable for the Revenue to run the arguments that they sought to run at the hearing. There was no clear authority covering the point at issue and it was possible to read the legislation in the way contended for by the Revenue and it had been decided that the more natural meaning favoured the taxpayer's contentions. There was also the question of its application in the particular circumstances which depended on findings of fact. The commissioner had found that on the particular facts the money raised by GC Trading from the issue of the shares was employed wholly by the taxpayer for a qualifying purpose within the requisite period.

The tribunal was only concerned with the question whether or not the Revenue had acted wholly unreasonably in connection with the hearing of the appeal. The commissioner had only considered that and had not considered whether the behaviour of the Revenue otherwise than in connection with or incidental to the hearing was reasonable or not. Having found that the Revenue had acted wholly reasonably in connection with the hearing of the appeal the commissioner had no jurisdiction to award costs. Accordingly, the appeal would be dismissed and there would be no order as to costs.

(2008) Sp C 686.
Decision released 14 May 2008.