Mark Gadsden v The Commissioners for HMRC

Facts

Mark Gadsden's appeal against HMRC's refusal to treat late-paid Class 2 National Insurance contributions as paid for contributory benefit purposes was allowed by the First-tier Tribunal (Tax Chamber) in a decision released on 14 May 2026, the Tribunal finding that his failure to pay within the statutory time limits was attributable to ignorance or error rather than any failure to exercise due care and diligence. By an application dated 11 June 2026, the Appellant sought an order that HMRC pay his costs, totalling £21,500 plus VAT. As the appeal had been allocated to the standard category, costs could be awarded only under one of the exceptions in Rule 10 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009; the Appellant relied solely on Rule 10(1)(b) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. Two grounds were advanced: that HMRC's witness evidence, from Ms Crawford, concerning historical deficiency notices was materially inaccurate and misleading, its limitations exposed only in cross-examination; and that, given the evidence available and existing authorities on reliance on professional advisers, HMRC's defence of the appeal was itself unreasonable. HMRC opposed the application, submitting that they were entitled to advance and test an arguable, fact-sensitive case and that the application improperly sought to convert litigation success into a costs award. The application was determined on the papers by Tribunal Judge Geraint Williams.

Decision

Issues

• Whether HMRC acted unreasonably in preparing and presenting the witness evidence of Ms Crawford, given the limitations exposed in cross-examination.
• Whether HMRC acted unreasonably in continuing to defend the appeal in light of the evidence available and the authorities on reliance on professional advisers.
• Whether, viewed cumulatively, HMRC's conduct crossed the threshold for a costs order under Rule 10(1)(b) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.

Reasoning

Tribunal Judge Geraint Williams began by confirming that the Rule 10(1)(b) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 enquiry is confined to conduct in bringing, defending or conducting the proceedings themselves, not the correctness of the underlying decision. Applying Distinctive Care Ltd v HMRC, in which LJ Rose held that "the focus should be on the standard of handling the case rather than the quality of the original decision", and the Upper Tribunal's observation, endorsed in that case, that "the focus of the assessment remains on these relevant actions, not on any earlier actions", the judge held that the Appellant's ultimate success and the Tribunal's rejection of parts of HMRC's evidence were not themselves determinative. As to the witness evidence, the judge accepted that Ms Crawford's evidence about historical deficiency notices was significantly weakened in cross-examination and that HMRC had offered no explanation for how the disputed assertions came to be included in her statement. However, applying Market & Opinion Research International Ltd v HMRC and Businessman v HMRC, evidential weakness or rejection did not of itself establish unreasonable conduct absent bad faith, dishonesty or deliberate misrepresentation, none of which had been found. On the second ground, the judge held that none of the First-tier Tribunal authorities relied on by the Appellant — Thomas v HMRC, Arens v HMRC, Murphy v HMRC, Chilvers v HMRC and Schonfield v HMRC — was binding, and that the due care and diligence test explained in Revenue and Customs Commissioners v Kearney required a fact-sensitive evaluative exercise, as the substantive decision itself illustrated. The appeal was not, applying language from Catanã v HMRC approved in Distinctive Care, "an obviously meritorious appeal" unreasonably resisted, nor analogous to Revenue and Customs Commissioners v Jackson Grundy Ltd, where the respondent's position had become demonstrably untenable. Mindful of the guidance in MORI, Distinctive Care and Willow Court Management Co (1985) Ltd v Alexander that Rule 10 is an exception to the general no-costs rule and must not become a general costs-shifting jurisdiction, the judge concluded that HMRC's case, although unsuccessful, had been capable of proper argument throughout, and refused the application.

Case history