Colin Sagar v The Commissioners for HMRC

Introduction

1. On 2 October 2025, I issued a decision granting HMRC’s application for strike out of Mr Sagar’s appeal in terms of Rule 8(2)(a) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (as amended) ("the Rules") on the basis that the Tribunal had no jurisdiction.

2. On 29 October 2025, HMRC applied to the Tribunal for its costs (“the Application”). The Application had been made pursuant to Rule 10(1)(b) of the Rules on the basis that Mr Sagar had acted unreasonably in bringing and conducting the proceedings. The quantum of costs sought was £6,037.50.

3. On 13 January 2026, as directed by the Tribunal, Mr Sagar lodged with HMRC and the Tribunal his reply to the Application. In short, he opposed it in its entirety.

4. On 21 January 2026, HMRC filed a reply to Mr Sagar’s reply.

5. On 22 January 2026, Mr Sagar asked the Tribunal to strike out HMRC’s reply on the basis that no Direction had been issued by the Tribunal in that regard. On the same day he lodged an application for “unless order directions” on the basis that the Application was inadequate.

6. On 26 January 2026, in response to these issues, I issued Directions confirming that neither the application to strike out HMRC’s reply nor the application for the Unless Order Directions was granted.

7. One of Mr Sagar’s arguments in his reply was that HMRC litigators were party litigators so I also directed that, by no later than 6 February 2026, HMRC should file with Mr Sagar and the Tribunal, submissions in relation to the status of HMRC litigators and the applicable rates.

8. On 6 February 2026, HMRC filed their response to the Directions and on 9 February 2026 they requested that that response be read as a Skeleton Argument. Mr Sagar had already filed his Skeleton Argument.

9. On 13 February 2026, HMRC filed with Mr Sagar and the Tribunal an updated Schedule of Costs in the sum of £13,263.80 and intimated that counsel would be representing HMRC.

10. I had HMRC’s documents Bundle extending to 461 pages and Mr Sagar’s Bundle which included a list of eight authorities upon which he relied and which extended to 25 pages.

11. With the consent of the parties, the hearing was conducted by MS Teams. Prior Notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public. Decision

12. The Tribunal decided that the Application was refused. The Facts

13. It is not in dispute that on 30 January 2023 Mr Sagar had filed an in time self-assessment tax return for the tax year ending 5 April 2022 and that that return showed that he was entitled to a repayment of £504.20.

14. On 27 February 2023 (“the February Letter”), HMRC wrote to the appellant stating that as part of their security procedures they verify a number of returns to make sure that the repayment amount claimed was correct. The letter stated: “This is not a check into your Self Assessment tax return under section 9A”.

15. It went on to state that the information and documents requested should be provided within 30 days and if he did not reply, HMRC would remove him from self-assessment. Under the heading : “ What you need to do now ”, it stated: “Please send me good quality copies (in colour if possible) of the following: • a recent bank or building society statement which shows the account number you stated in your tax return – if you do not have a bank or building society account, please confirm this in writing • printed copies of your bank or building society statements – they must show full details …”.

16. On 8 March 2024, Mr Sagar telephoned HMRC referring to the February Letter and another letter dated 20 February 2024, which had apparently made similar requests, and questioned why he would have to produce unredacted copies of all of his bank statements.

17. He was very concerned that HMRC had embarked on a “fishing” expedition and asked for an explanation. He was told that the February Letter was an “information request” and was in effect a Schedule 36 Information Notice. He was told to provide copies of all of his bank statements whether in his own name or in joint names with others. He was also told that none could be redacted. The request was for every bank statement without limit of time.

18. Apart from Mr Sagar’s entirely credible explanation of that telephone call which he described as his “due diligence”, he has produced an email from the Complaints Division of HMRC. Having lodged a formal complaint with HMRC on 25 June 2025, a Customer Service Officer wrote to him on 16 September 2025 (the “September email”) in the following terms: “I have read the letters issued on 20 th and 27 th February 2023 and I can see how they can be interpreted as an enquiry or information notice. I listened to the phone call recording from the 8 th March 2023 and again I can see that issue. I apologise for this. This is not how we intend to communicate to our customers”.

19. The email went on to say that a compliance officer had issued a letter, dated 10 September 2025, seeking identification “for the relevant bank account only”.

20. The letter of 10 September 2025 (“the September letter”) made it clear that all that HMRC required was a copy of a bank statement, which was dated (to evidence that it was recent) but it could be redacted provided it identified the name of the account holder, the account number and sort code.

21. On 1 April 2024, Mr Sagar had filed a complaint with HMRC and on 26 April 2024, HMRC replied apologising for the delay in checking his self-assessment record. They referred him to their guidance on complaints.

22. On the same day HMRC wrote another letter to him as Mr Sagar had not submitted the documents that had been requested in the February Letter. He was informed that, as part of HMRC’s security procedures, his self-assessment Unique Taxpayer Reference (“UTR”) was no longer valid.

23. This time they stated: “ What we will be checking We will be checking your identity and your tax records for the year ending 5 April 2022. What you need to do now You must send us good quality copies (in colour if possible) of the following: • the recent bank or building society statement which shows the account number you stated in your tax return • your recent bank or building society statement which shows your full details, for example, your name and address – if you do not have a bank or building society account, please tell us in writing …” .

24. HMRC requested a reply by 26 May 2024.

25. Mr Sagar then filed a further complaint with HMRC on 19 June 2024 and on 21 June 2024 , HMRC replied in the same terms as they had done in April 2024 (see paragraph 21 above) and sent an identical letter about the information they required but with a deadline of 21 July 2024.

26. On 25 June 2024, Mr Sagar lodged a further complaint with HMRC and on 27 June 2024 HMRC responded rejecting his complaint (“the June email”). They stated that the information sought was intended as a security measure as well as to ensure no incorrect repayment was released. It stated specifically that: “Your record has been selected for an enquiry review … To do this we have sent you the information notice request to see all bank statements”

27. On 22 September 2024, Mr Sagar lodged the appeal with the Tribunal stating that it related to a repayment of income tax. In summary, he argued that: (a) HMRC’s requests for information were disproportionate and discriminatory; they should not be asking for unredacted copies of all of his bank statements. (b) HMRC had removed his UTR so he could not file a 2022/23 tax return with the result that he had been served with a £900 and a £300 penalty which he wished to appeal. He enclosed copies of the February Letter and the £300 penalty.

28. Mr Sagar had previously appealed the penalties to HMRC on 7 September 2024.

29. HMRC cancelled the penalties on 26 September 2024.

30. On 21 November 2024, the Tribunal issued Directions to HMRC to provide a Statement of Case within 60 days. The application for strike out was lodged on 16 December 2024. Mr Sagar lodged an objection (“the Objection”) on the same day.

31. HMRC had raised a number of issues in the strike out application, but the primary issue was that the Tribunal had no jurisdiction as there was no appealable decision. No law was cited.

32. Mr Sagar objected on the basis that: (a) There should be no mini-trial of the matters under appeal thereby pre-empting a proper hearing. (b) HMRC bear the burden of proving why bank statements are required as that would “contradict TMA (1970) and case law but also would infringe on the appellants (sic) Data Protection rights”. HMRC should identify the legislation upon which they rely. (c) He was concerned that HMRC had embarked upon a “fishing expedition” by asking for bank statements and they were illegally withholding the repayment.

33. On 18 February 2025, the Tribunal wrote to the parties and directed that the Tribunal would hear both the strike out application and the Objection at a video hearing and issued Directions (“the February Directions”) in relation to procedural matters such as lists of documents etc.

34. At 9.10 am on Monday 24 March 2025, the deadline for lodging his list of documents having expired at 5pm on the preceding Friday, Mr Sagar wrote to the Tribunal stating that he did not have any documents that he wished “to share for this appeal”. He said that he would be seeking amended Directions.

35. On 26 March 2025, HMRC wrote to Mr Sagar asking him to confirm by 4 April 2025 which section of the Taxes Management Act 1970 (“TMA”) he relied upon (see paragraph 32(b) above).

36. On 3 April 2025, Mr Sagar wrote to the Tribunal with proposed amendments to the February Directions relying on Direction 8 which had stated that either party could apply to amend the Directions. He explained that he needed “more time and the ability to control my own paper trail.”.

37. HMRC responded the following day with a 20 paragraph objection to most of the proposed amendments. It included: (a) Pointing out that if Mr Sagar now wished to file any documents he had adopted the wrong procedure and should have requested an extension of time. (b) They objected to the delays that would be involved. (c) In any event, Mr Sagar had previously stated that he had no documents, and (d) Mr Sagar “ should have researched the tribunal’s jurisdiction prior to commencing their appeal and so requesting additional time to do this is unreasonable.”.

38. Mr Sagar responded that day objecting to HMRC’s objection stating that he could provide evidence of “urgent personal matters which will need attention which have been the fuel for these amendments”. He again expressed concern about HMRC’s request for bank statements and asked for evidence of their authority to request those.

39. HMRC responded stating that the issue of jurisdiction had to be resolved before there could be any consideration of their right to make those requests. In turn, Mr Sagar responded stating that he would deal with the statutory position in relation to jurisdiction in his Skeleton Argument.

40. On 10 April 2025, HMRC filed the Hearing Bundle (which they amended on 17 April 2025 as it had not been compliant with the February Directions).

41. On 17 April 2025, the Tribunal wrote to Mr Sagar asking him to respond within seven days providing reasons for the requested amendments, evidence in support of the amendments and full compliance with the February Directions in case a Judge declined to amend those.

42. O n 23 April 2025, Mr Sagar responded complying with the February Directions and offering to provide a medical certificate relating to the illness of a close relative.

43. On 24 April 2025, HMRC lodged with Mr Sagar and the Tribunal a formal objection discussing correspondence between HMRC, Mr Sagar and the Tribunal in two other appeals. They argued that that evidenced his ability to look after his affairs timeously. They reiterated the arguments in the previous objection. They requested that Mr Sagar identify the legislation upon which he relied in order to bring the appeal.

44. Mr Sagar responded the following day pointing to the disparity of arms in that HMRC could delegate matters but he was looking after a relative and trying to do the best that he could.

45. On 25 April 2025, on the instructions of Judge Brown KC, the Tribunal wrote to the parties directing, amongst other things that: (1) As previously indicated, the strike out application was to be determined by way of a video hearing and at that hearing a judge would determine whether the Tribunal has any jurisdiction. It was pointed out that “The Tribunal does not have jurisdiction in every dispute with HMRC… and does not therefore consider the fairness of HMRC’s actions or how internal procedures are set or followed.” (2) The appellant was directed to specify on what basis he considers the Tribunal to have jurisdiction by way of a response to the specific points raised in the strike out application including, as relevant, the statutory provisions on which he intended to rely.

46. On 2 May 2025, Mr Sagar complied with those Directions furnishing to the Tribunal copies of the February Letter and the June email. He relied on those documents for the proposition that HMRC had opened an enquiry.

47. He also enclosed a document entitled “Basis for appellants (sic) appeal”. In summary, he argued that: (a) The February Letter was a formal Schedule 36 Information Notice albeit it was not stated to be such. It was therefore appealable. He had been told it was an Information Notice. (b) If it was not a Schedule 36 Information Notice then HMRC should have put a clear statement to that effect on the letter just as they had stated that it was not a check under section 9A. Further, HMRC had not identified what they meant by section 9A and which Act they were referring to; that made it very difficult for a taxpayer to undertake any research. (c) It did not appear to him that it could have been a reference to section 9 of the Commissioners for Revenue and Customs Act 2005 so the February Letter must have been a Schedule 36 Notice which was appealable or an enquiry and thus appealable. (d) Alternatively, relying on the June email, the February Letter was an enquiry under section 9 Taxes Management Act 1970 (“TMA”) where he could ask the Tribunal for a closure notice.

48. On 13 May 2025, the Tribunal listed the hearing for 25 September 2025. Unfortunately, there appears to have been some error and both parties indicated to the Tribunal that the costs applications (by Mr Sagar) in other appeals should not be conjoined.

49. On 19 May 2025, HMRC lodged with the appellant and the Tribunal, submissions in reply to the effect that: (a) The February Letter was not a Schedule 36 Information Notice and the burden of proof was on the appellant to prove otherwise. (b) It is an agreed fact that the appellant is entitled to a repayment of £504.20 for the tax year ending 5 April 2024 (it should have read 2022) and HMRC had no concerns about that tax return. (c) In relation to the argument about section 9 TMA, section 9 does not cover enquiries and the relevant legislation is section 9 A TMA; no enquiry had been opened. If the Tribunal found that there was an open enquiry, then a closure notice would be issued immediately. (d) Alternatively, if the Tribunal found that the February Letter was a Schedule 36 Information Notice, then HMRC would withdraw it. (e) The repayment would not be made until the appellant’s identity had been confirmed. The Tribunal has no powers to force a repayment. (f) The Tribunal has no jurisdiction in relation to complaints about HMRC. (g) The matter should be decided on the papers and there was no need for a hearing.

50. Mr Sagar replied that day insisting on a hearing. On 27 May 2025, I issued Directions to that effect.

51. On 29 May 2025, the Tribunal issued a new Notice of Hearing and directed that the parties should provide outline arguments seven days prior to the hearing, and if not already directed, a Bundle should be provided.

52. On 4 July 2025, HMRC intimated that they saw no need for a Skeleton Argument given the detail in the Application and the submissions dated 19 May 2025.

53. On 22 August 2025, HMRC intimated that they had reconsidered and would be lodging a Skeleton Argument seven days before the hearing. Mr Sagar responded objecting on the basis that there was no Direction requiring Skeleton Arguments. On 28 August 2025, the Tribunal wrote to Mr Sagar stating that if he wished to object then he could do so at the outset of the hearing but the purpose of a Skeleton Argument was to give advance notice of oral arguments.

54. On 29 August 2025, HMRC filed their Skeleton Argument. HMRC asked Mr Sagar to reconsider the merits of his arguments on jurisdiction and reiterated their view that a hearing was not necessary but left that to the Tribunal to decide.

55. Mr Sagar replied insisting on a hearing.

56. On 10 September 2025, HMRC emailed the Tribunal and Mr Sagar enclosing a copy of the September Letter which had been sent to Mr Sagar by post (see paragraph 20 above). The email stated that: “It is hoped that this will resolve the issue in dispute and the appellant will reconsider their position…it is hoped that this letter will provide the Appellant with the remedy that they seek.”. The Law

57. There was no dispute about the legislative provisions relating to the Tribunal’s power to award costs which read: “ Section 29 of the Tribunals, Courts and Enforcement Act 2007 provides that all costs of and incidental to proceedings in the First-tier Tribunal shall be in the Tribunal’s discretion, subject to Tribunal Procedure Rules.

58. Insofar as relevant, Rule 10 of the Rules provides as follows: (1) The Tribunal may only make an order in respect of costs... (a) … (b) if the Tribunal considers that a party or their representative has acted unreasonably in bringing, defending or conducting the proceedings; ... (5) The Tribunal must not make an order under paragraph (1) against a person (the “paying person”) without first – (a) giving that person an opportunity to make representations; and (b) if the paying person is an individual, considering that person’s financial means. … (6) The amount of costs (or, in Scotland, expenses) to be paid under an order under paragraph (1) may be ascertained by— (a) summary assessment by the Tribunal; …”.

59. Rule 2 of the Rules reads: “2. —Overriding objective and parties’ obligations to co-operate with the Tribunal (1) The overriding objective of these Rules is to enable the Tribunal to deal with cases fairly and justly. (2) Dealing with a case fairly and justly includes— (a) dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties; (b) avoiding unnecessary formality and seeking flexibility in the proceedings; (c) ensuring, so far as practicable, that the parties are able to participate fully in the proceedings; (d) using any special expertise of the Tribunal effectively; and (e) avoiding delay, so far as compatible with proper consideration of the issues. (3) The Tribunal must seek to give effect to the overriding objective when it— (a) exercises any power under these Rules; or (b) interprets any rule or practice direction. (4) Parties must— (a) help the Tribunal to further the overriding objective; and (b) co-operate with the Tribunal generally.” The issues for the Tribunal

60. The approach to the application of Rule 10(1)(b) of the Rules is a three stage process, namely: (1) Did Mr Sagar act unreasonably? (2) Should the Tribunal decide to exercise its discretion to award costs? (3) In the event that costs are to be awarded then what is the quantum in accordance with Rule 10(6) of the Rules? Did Mr Sagar behave unreasonably? The case law on unreasonable conduct

61. HMRC rightly referred to Judges Sinfield and Poole at paragraphs 44 and 45 in Distinctive Care Limited v HMRC [2018] UKUT 0155 (TCC) (“DCL UT”).

62. Those paragraphs read: “ How is conduct to be assessed?

44. In Market & Opinion Research International Limited v HMRC [2015] UKUT 0012 (TCC) (“MORI”) at [22] and [23], the Upper Tribunal endorsed the approach set out by the FTT in that case to the question of whether a party had acted unreasonably. That approach could be summarised as follows: (1) the threshold implied by the words “acted unreasonably” is lower than the threshold of acting “wholly unreasonably” which had previously applied in relation to proceedings before the Special Commissioners; (2) it is possible for a single piece of conduct to amount to acting unreasonably; (3) actions include omissions; (4) a failure to undertake a rigorous review of the subject matter of the appeal when proceedings are commenced can amount to unreasonable conduct; (5) there is no single way of acting reasonably, there may well be a range of reasonable conduct; (6) the focus should be on the standard of handling the case (which we understand to refer to the proceedings before the FTT rather than to the wider dispute between the parties) rather than the quality of the original decision; (7) the fact that an argument fails before the FTT does not necessarily mean that the party running that argument was acting unreasonably in doing so; to reach that threshold, the party must generally persist in an argument in the face of an unbeatable argument to the contrary; and (8) the power to award costs under Rule 10 should not become a ‘backdoor method of costs shifting’.”

45. We would wish to add one small gloss to the above summary, namely that (as suggested by the FTT in Invicta Foods Limited v HMRC [2014] UKFTT 456 (TC) at [13]), questions of reasonableness should be assessed by reference to the facts and circumstances at the time or times of the acts (or omissions) in question, and not with the benefit of hindsight. ”

63. At paragraph 46, the Upper Tribunal went on to state: “46. In assessing whether a party has acted unreasonably, this Tribunal in MORI went on to say this (at [49]): ‘It would not, we think, be helpful for us to attempt to provide a compendious test of reasonableness for this purpose. The application of an objective test of that nature is familiar to tribunals, particularly in the Tax Chamber. It involves a value judgment which will depend upon the particular facts and circumstances of each case. It requires the tribunal to consider what a reasonable person in the position of the party concerned would reasonably have done, or not done. That is an imprecise standard, but it is the standard set by the statutory framework under which the tribunal operates. It would not be right for this Tribunal to seek to apply any more precise test or to attempt to provide a judicial gloss on the plain words of the FTT rules.’”

64. The decision in DCL UT was upheld by the Court of Appeal, at neutral citation [2019] EWCA Civ 1010 (“DCL AC”), which was cited by both parties. In that case, Rose LJ, as she then was, at paragraph 19, endorsed the description by the Upper Tribunal in Catanã v Revenue and Customs Commissioners [2012] UKUT 172 (TCC) (“Catanã”) of the phrase “bringing, defending or conducting the proceedings” as being: “an inclusive phrase designed to capture cases in which an appellant has unreasonably brought an appeal which he should know could not succeed, a respondent has unreasonably resisted an obviously meritorious appeal, or either party has acted unreasonably in the course of the proceedings, for example by persistently failing to comply with the rules or directions to the prejudice of the other side”. (Emphasis added) Discussion

65. I have added emphasis to the quotation in the previous paragraph and I have set out the history of this litigation in full detail because at paragraph 46.3 of the Application, HMRC argued that Mr Sagar had acted unreasonably “in failing to comply with Tribunal deadlines”.

66. Although his one failure to comply with deadlines was the failure to produce a list of documents by 21 March 2024 and HMRC averred that he missed the deadline by three days, the fact is that two of those days were a weekend. The actual delay was a matter of 10 minutes and I do not find that that caused any prejudice to HMRC.

67. Mr Sagar is a party litigant and before the other deadlines arose in terms of the February Directions, he had applied for amendment of the Directions.

68. Paragraph 49 of MORI which is quoted at paragraph 63 above makes it explicit that the objective test of reasonableness involves a value judgment which depends on the particular facts and circumstances. I observe that the Upper Tribunal in MORI went on to say at paragraph 56 that the particular circumstances “will include the abilities and experience of the party in question”.

69. Whilst HMRC accept that the appellant is a litigant in person, they argue that he has claimed to be a “qualified tax professional” in two other cases before the Tribunal where he has made costs applications (they are still extant). I see no evidence of that. In the application included in the bundle (page 126) he certainly states that he is a qualified chartered accountant but that is not the same thing. In my experience, many chartered accountants would not profess any knowledge of tax or of litigation.

70. HMRC argue that in one of the other appeals he had appealed a Schedule 36 Information Notice and the appeal had been struck out for want of jurisdiction. It was, but it was struck out because the Notice related to statutory records for his business as a perfume sales and department store; that is not in any way analogous to the position in this appeal.

71. Mr Joseph argued that the entire proceedings in the appeal had been unnecessary and unreasonable because all that HMRC had wished to do was to make sure that any repayment went to the right person. The appeal process had been a waste of time because all that HMRC had asked for was a bank statement for the purposes of verification of identity in order that the repayment could be made. It was a standard request and not complicated.

72. Although the Application had also relied on what Mr Joseph described as “secondary misdemeanours” , t he principal problem had been Mr Sagar’s failure to recognise that the request for a bank statement was not an appealable decision.

73. I have to agree with Mr Sagar that prior to the appeal being lodged with the Tribunal, HMRC had not simply asked for one bank statement. Further, they had not allowed bank statements to be redacted.

74. Of course, I accept that paragraph 44(4) of MORI means that “a failure to undertake a rigorous review of the subject matter of an appeal when proceedings are commenced can amount to unreasonable conduct”. However, I have some difficulty with HMRC’s argument that a party litigant should have researched the Tribunal’s jurisdiction prior to commencing an appeal and, in their view, Mr Sagar had not done so and thus had acted unreasonably. Of course, some research is required and Mr Sagar had done that .

75. On receipt of the February Letter, Mr Sagar had very properly contacted HMRC to request assistance and as can be seen from paragraph 16 above, eventually, on 16 September 2025, HMRC confirmed that both the February Letter and the telephone call on 8 March 2023 could be interpreted as an enquiry or Information Notice.

76. I have highlighted the word “can” in paragraph 74 because research is but one factor and, as I have indicated, all of the facts and circumstances must be considered. HMRC have acknowledged that the February Letter and the telephone call were misleading.

77. Although the letters to which I refer in paragraphs 21 and 23 above did actually talk about only one bank statement, the June email was in unequivocal terms and is worthy of repetition “To do this we have sent you the Information Notice request to see all bank statements”. It was on that basis that Mr Sagar lodged his appeal with the Tribunal believing that an Information Notice was appealable.

78. Given the terms of the June email, I cannot find that lodging the appeal was, in itself, unreasonable not least because he was also appealing the penalty notices.

79. Mr Joseph’s alternative argument was that it was unreasonable to insist on an oral hearing after the 10 September 2025 letter had been issued. Mr Sagar’s response was that he did not always read his post immediately and his post did not always arrive promptly. The problem with that is that although the letter was sent by post it was also sent by email and it is clear that Mr Sagar does respond promptly to emails.

80. Mr Joseph relied on the fact that in the strike-out decision I had unequivocally found that the February Letter was neither a Schedule 36 Information Notice nor the commencement of an enquiry. I did, but that was because I was in possession of all of the facts in the case and I have extensive experience of both enquiries and Information Notices.

81. Having said that, however, the September email made HMRC’s position to the same effect clear. Furthermore, as can be seen from paragraph 49 above, HMRC had made it clear that even if the Tribunal came to the conclusion that there was an enquiry or Information Notice they would remedy it forthwith. The September Letter did deal comprehensively with the Information Notice issue and the September email with both.

82. Given Mr Sagar’s stated basis for his appeal (see paragraph 47 above) the September Letter, read with the 16 September email, should have concluded matters but sadly did not.

83. One of the “secondary” arguments in the Application was that the hearing had only lasted for 15 minutes and Mr Sagar had not made any submissions at the hearing in order to establish jurisdiction. That is easily explained because I opened the hearing by indicating that I had read all of the paperwork and I explained that there was no appealable decision and I had no discretion in terms of the Tribunal Rules. Mr Sagar accepted and said that he would pursue HMRC elsewhere.

84. It was entirely reasonable of him to take that stance given that Judge Brown KC had already explained that the Tribunal did not have jurisdiction in every dispute with HMRC (see paragraph 45 above).

85. I find that Mr Sagar’s insistence on continuing to proceed to an oral appeal after receipt of the September Letter and email was unreasonable conduct. I also find that his uncooperative approach in April 2025 (see paragraphs 39 and 42 above) which meant that the Tribunal had to issue a Direction requiring him to specify the statutory provisions upon which he relied was unreasonable conduct. In summary, I do accept that to a limited extent he had acted unreasonably in conducting the proceedings. Should the Tribunal decide to exercise its discretion to award costs? The case law on discretion

86. Mr Joseph, quite rightly pointed out that even if I found that Mr Sagar had acted unreasonably, that was not the end of the matter. As I indicated in the hearing, my starting point is the Upper Tribunal in Tarafdar v HMRC [2014] UKUT 0362 (TCC) at paragraph 20 which reads: “20. Even if the tribunal is satisfied that a party has acted unreasonably in the terms of rule 10, the tribunal nevertheless has a discretion whether or not to make a costs order, or as regards the extent of a costs order. Such a discretion, like any other discretion conferred on the tribunal, must be exercised judicially. ”

87. I was not referred to the case of McPherson v BNP Paribas (London Branch) [2004] EWCA Civ 56 (“McPherson”) but it is well known and often cited.

88. Paragraphs 39-41 of McPherson are relevant to the extent of the Tribunal’s discretion and read: “39. Ms McCafferty submitted that her client’s liability for the costs was limited, as a matter of the construction of rule 14, by a requirement that the costs in issue were ‘attributable to’ specific instances of unreasonable conduct by him. She argued that the tribunal had misconstrued the rule and wrongly ordered payment of all the costs, irrespective of whether they were ‘attributable to’ the unreasonable conduct in question or not. The costs awarded should be caused by, or at least be proportionate to, the particular conduct which has been identified as unreasonable.

40. In my judgement, rule 14(1) does not impose any such causal requirement in the exercise of the discretion. The principle of relevance means that the tribunal must have regard to the nature, gravity and effect of the unreasonable conduct as factors relevant to the exercise of the discretion , but that is not the same as requiring BNP Paribas to prove that specific unreasonable conduct by Mr McPherson caused particular costs to be incurred….

41. In a related submission Ms McCafferty argued that the discretion could not be properly exercised to punish Mr McPherson for unreasonable conduct. That is undoubtedly correct, if it means that the indemnity principle must apply to the award of costs. It is not, however, punitive and impermissible for a tribunal to order costs without confining them to the costs attributable to the unreasonable conduct. As I have explained, the unreasonable conduct is a precondition of the existence of the power to order costs and it is also a relevant factor to be taken in to account in deciding whether to make an order for costs and the form of the order.”

89. I have highlighted the wording in paragraph 40 of McPherson because, as I have indicated, it is only to a limited extent that I have found that Mr Sagar acted unreasonably and that should be considered in context. In his Skeleton Argument, Mr Sagar argued that costs should be awarded to him because HMRC had acted unreasonably because of their “ambiguous letters and intent which forced him to make an appeal”. In that regard, paragraph 44(6) of MORI is in point, because I should only be considering HMRC’s handling of the appeal in the Tribunal and not the underlying issues. As Judge Brown pointed out to Mr Sagar, the Tribunal does not, and cannot, consider the fairness of HMRC’s actions. That is a matter for the HMRC complaints process.

90. I find that, at worst, it is unfortunate that HMRC’s strike out application did not refer to any law and under the heading “GROUNDS FOR STRIKE OUT” simply made several similar statements such as “ The Respondent’s (sic) submit that this is not an appealable matter and so the Tribunal does not have any jurisdiction to hear thi s.”. It would have been more helpful to explain, as I did in the hearing, that the Tribunal is a creature of statute and has only the jurisdiction given to it by statute etc. However, HMRC had consistently explained that there was no jurisdiction and told Mr Sagar that he would have to specify what statute(s) he relied upon. I do not accept that HMRC acted unreasonably in defending the proceedings.

91. What I do accept is that, unfortunately, and possibly because of the other litigations involving them, both parties held entrenched positions and the problems with the telephone calls, the February Letter and the June email exacerbated matters. Although I have found that there was some unreasonable conduct on the part of Mr Sagar, it was limited and had only a minor impact on the conduct of the appeal.

92. Weighing everything in the balance, I do not consider that in the particular circumstances of this appeal, Mr Sagar’s behaviour in conducting the appeal warrants an award of costs.

93. Therefore, I refuse the Application for costs.

94. That being the case, I have no need to address the third issue articulated at paragraph 60 above and any observations are, of course, therefore obiter but having received submissions from both parties, I did consider them. In the event that costs are to be awarded then what is the quantum in accordance with Rule 10(6) of the Rules?

95. As I have indicated, Mr Sagar’s argument is that Mr Khan, the HMRC litigator, is an officer of HMRC and as such a party to the proceedings. For the avoidance of doubt, although Mr Sagar has referred to “wasted costs”, in that context that forms no part of these proceedings. I am concerned only with unreasonable conduct.

96. In the Directions that I issued (see paragraph 7 above) I drew the parties attention to the decision in Asset House Piccadilly Limited v HMRC [2023] UKFTT 00279 (TC) (“Asset”) which in turn refers to the decision in Elder v Revenue and Customs [2014] UKFTT28 (TC) (“Elder”) because in both cases the Tribunal concluded that in those cases the HMRC litigators were acting as a party to the litigation and not through representatives.

97. HMRC’s argument is that in litigation in relation to the award, or not, of costs the litigator is acting as a representative for HMRC and that for a number of reasons.

98. The rights and privileges of the t he General Counsel and Solicitor to HM Revenue and Customs (“the Solicitor”) are granted by section 1 of the Revenue Solicitor’s Act 1828 (“RSA”), which states: “Whenever any person has been, or is, or shall be appointed to be solicitor or attorney on behalf of his Majesty, under the orders and directions of the commissioners of the Treasury, customs, excise, or stamps, or under the orders and directions of any commissioners or other persons or person having the management of any other branch of his Majesty’s revenue, for the time being, it is and shall and may be lawful for such person to act and practice as such solicitor or attorney under such orders and directions in all and every court and courts, jurisdiction and jurisdictions, place and places, in any and every part of the United Kingdom; anything in any Act of Parliament, or in any order or rule of any court of justice, or any law, usage, or customs, in force in any part of the United Kingdom, relating to solicitors or attornies, or to the admission or practice of such solicitors or attornies, to the contrary in anywise notwithstanding.”

99. HMRC litigators, whether or not legally qualified, and whether or not they are HMRC officers, are at all material times working on any case as part of HMRC’s legal group which is run by the Solicitor for HMRC and, as such, they derive their authority from the Solicitor.

100. HMRC have cited and rely upon Walsh v HMRC [2019] UKFTT 350 (TC) where Judge Mosedale referred to Re Eastwood (Deceased) [1975] Ch 112 (“Eastwood”) which was the major case upon which HMRC relied because it found that costs awarded to a government department, which is represented by the Treasury Solicitor, should be awarded in the same manner as would have been the case had an independent solicitor been instructed for the party. HMRC argue that the Solicitor is a statutory office analogous to the Treasury Solicitor. It is.

101. Judge Mosedale explained it thus: “29. As was summarised by the Court of Appeal in the later case of Berne Insurance Company v Jardine Reinsurance [1998] EWCA Civ 220 , in Eastwood it was held that … where a party was represented by a salaried solicitor [it is appropriate] to treat it as though it were the bill of an independent solicitor, assessing the reasonable and fair amount of a discretionary item having regard to all the circumstances of the case and to the principle that the taxed costs should not be more than an indemnity to the party against the expense he had incurred in the litigation. There might be special cases where costs awarded on the conventional basis would exceed the principle of indemnity, but it would be wrong and impracticable in cases of a salaried solicitor to require a break down of the expenses of a department in order to insure that the principle was not infringed. …

30. While non-legally qualified persons do not have rights of audience in the courts, that is not the case in a Tribunal. And it is well established that there is no bar on a litigant in a tribunal claiming for the cost of instructing non-legally qualified representatives. It seems to follow, in my view, that the Eastwood principle would apply as much to an in-house non-legally qualified representative as to an in-house legally qualified representative, at least in a tribunal where the non-legally qualified representative is undertaking a role that would otherwise be undertaken by a lawyer.

31. I note that the FTT has already considered this matter and reached the same conclusion in the case of Vardy Properties and another [2013] UKFTT 96 (TC) where Judge Poole said: [15] It is clear (see Re Eastwood deceased [1975] Ch 112 (Court of Appeal) that HMRC may recover costs in respect of their Solicitor’s Office employees, and the hourly rates claimed are in line with the relevant Guideline Hourly Rates set out in Appendix 2 to the Costs Guide.”

102. I agree.

103. If that were not enough, the Solicitor is the solicitor to a public department and therefore falls within section 193(1) (b) of the Legal Services Act 2007 (“LSA”).

104. Section 193 reads: “ Solicitors to public departments and the City of London (1) Nothing in this Act is to prejudice or affect any rights or privileges of— (a) the Treasury Solicitor, (b) the solicitor to any other public department, (c) the solicitor to the Church Commissioners, or (d) the solicitor to the Duchy of Cornwall. (2) Nothing in this Act requires a person to whom sub section (1 ) applies, or any clerk or officer appointed to act for such a person, to be entitled to carry on an activity which is a reserved legal activity in any case where, by virtue of section 88(1) of the Solicitors Act 1974 (c 47), it would not have been necessary for that person to be admitted and enrolled and to hold a practising certificate under that Act if this Act had not been passed.”

105. Accordingly, the Solicitor, and those clerks or officers acting in his/her name, are entitled to conduct litigation and exercise a right of audience before the Tribunal even if not admitted, enrolled and holding a practising certificate. What that means is that, in terms of the LSA, they are not required to be entitled, ie qualify to carry out reserved legal activities.

106. Asset was only concerned with whether HMRC litigators were in breach of section 14(1) LSA by conducting litigation in the Tribunal and the decision at paragraph 24 was to the effect that because the litigators were “part of HMRC and therefore parties to the proceedings…the LSA is not relevant”.

107. The arguments advanced in these proceedings were not advanced in Asset (I was the Judge).

108. Lastly, Mr Sagar had relied on paragraphs 49 and 62 of Mazur and another v Speechleys LLP [2025] EWHC 23451 (KB) (“Mazur”) which deals with whether employees of “authorised persons” were entitled to carry on reserved legal activities. The High Court found that mere employment, being what Mr Sagar founded upon, did not suffice to grant a litigator an entitlement in terms of section 13(2) LSA to carry on reserved activities (ie to litigate).

109. I agree with HMRC that, since for the reasons canvassed above, HMRC litigators, whether solicitors or not, do not require to be “entitled” (see paragraph 105 above), Mazur does not apply and can be distinguished.

110. For the reasons given, had I been required to decide whether the HMRC litigator was a party litigant, I would have decided that that was simply not the case. Accordingly, the hourly rates have been correctly applied. Right to apply for permission to appeal

111. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 13 March 2026