Recovering Legal Fees if Successful on Appeal
Recovering Legal Fees if Successful on Appeal
A common question from taxpayers who win their Tax Tribunal appeal is whether they can recover their legal costs from HMRC. The short answer is: typically, no – but there are exceptions.
The General Rule
Since 2009, the general rule has been that neither HMRC nor taxpayers can recover costs in Tax Tribunal proceedings. This policy was introduced specifically to enable taxpayers to appeal without fearing that they would be liable for HMRC’s legal costs if they lost. It is a two-way street, however, meaning successful appellants generally cannot recover their own costs either.
The Exception: Unreasonable Conduct
The exception is found in Rule 10(1)(b) – unreasonable conduct. A party may be ordered to pay the other side’s costs where they have acted unreasonably. This includes:
- Acting unreasonably in the conduct of proceedings.
- Bringing appeals without any realistic prospects of success.
- Challenging assessments without proper foundation.
What the Tribunal Considers
When assessing a costs application, the Tribunal will ask:
- What prompted HMRC to withdraw or concede the case?
- Could the withdrawal or concession have occurred earlier?
- Was HMRC’s delay in conceding unreasonable?
Partial Recovery
It is also possible to achieve partial cost recovery. This may arise where HMRC’s unreasonable conduct was limited to specific segments of the proceedings and created additional costs that would not otherwise have been incurred. In such cases, the Tribunal may award costs for that specific element rather than the full amount.
Taxpayers who believe HMRC has acted unreasonably in their case should take professional advice on whether a costs application is viable.
Frequently asked questions
Can I recover my legal costs from HMRC if I win my tax appeal?
Generally, no. Since 2009 the general rule has been that neither HMRC nor taxpayers can recover costs in Tax Tribunal proceedings. The policy lets taxpayers appeal without fearing liability for HMRC's costs if they lose, but it means successful appellants generally cannot recover their own costs either, subject to an exception for unreasonable conduct.
What is Rule 10(1)(b) in the Tax Tribunal?
Rule 10(1)(b) is the exception to the general no-costs rule. It allows a party to be ordered to pay the other side's costs where it has acted unreasonably. This includes acting unreasonably in the conduct of proceedings, bringing appeals without any realistic prospects of success, and challenging assessments without proper foundation.
What does the Tribunal consider when HMRC withdraws or concedes a case?
When assessing a costs application, the Tribunal will ask what prompted HMRC to withdraw or concede the case, whether the withdrawal or concession could have occurred earlier, and whether HMRC's delay in conceding was unreasonable. Taxpayers who believe HMRC acted unreasonably should take professional advice on whether a costs application is viable.
Is partial recovery of legal costs possible in a tax appeal?
Yes. Partial cost recovery may arise where HMRC's unreasonable conduct was limited to specific segments of the proceedings and created additional costs that would not otherwise have been incurred. In such cases the Tribunal may award costs for that specific element rather than the full amount of the taxpayer's legal costs.
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