Eclipse Case and Recovery of Costs at First-Tier Tax Tribunal

The Supreme Court has ruled on the limited scope of costs recovery in the First-Tier Tribunal (FTT) in the tax case of Eclipse Film Partners No.35 LLP v HMRC [2016] UKSC 24, May/16.
The FTT had ordered the sharing of the costs of preparing the bundles in this complex case. There were over 700 lever arch files, in part due to HMRC wanting in documents that were only marginal. Eclipse lost the main appeal but sought £108,395 from HMRC as its share of preparing the bundles.
The Supreme Court ruled that the ability of the FTT, all the chambers not just tax, was limited by the Tribunal Rules.
The Supreme Court rejected a contention that the FTT had a costs power under the rule 5, case management. On the specific costs rule 10 here there was no Order for wasted costs or unreasonable behaviour, so rules 10(1)(a) and (b) did not apply. That left this being a complex case, under rule 10(1)(c) which does allow costs recovery. But Eclipse had served a request under rule 10(1)(c)(ii) for the case to be excluded from costs liability under sub-rule (c). Eclipse’s appeal was dismissed.
The Court noted by way of comment, obiter dicta, that the desired result could have been achieved by the FTT ordering both parties to jointly prepare the bundles and also commented that Eclipse possibly might have a claim against HMRC in restitution.

Eamon McNicholas
Tax Barrister, Accountant

About Eamon McNicholas

Tax Barrister, Accountant
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