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88% increase in legal costs awarded to taxpayers

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There has been an 88% increase in the amount of money HMRC paid out in legal costs to taxpayers in cases HMRC lost, from £1.3m in 2018/19 to £2.5m in 2019/20, according to law firm Pinsent Masons. The firm said this jump in court costs awarded suggests that HMRC is relentlessly pursuing more disputes and more complex issues through the courts system.

The costs HMRC paid out relates to 43 cases found in favour of taxpayers in 2019/20, meaning HMRC paid out an average of £58,277 in costs per case. In 2018/19, an average of £39,014 per case in costs was paid out by HMRC in 34 cases it lost. This rising average suggests that HMRC is losing more complex and drawn-out cases against taxpayers, where the taxpayer’s legal costs are much higher.

Steven Porter, partner at Pinsent Masons, says: ‘The rise in the number of cases where taxpayers were awarded costs may suggest HMRC has been too bullish in some of the cases it has chosen to litigate.’

The rigidness of HMRC’s litigation and settlement strategy did not help, Porter added, as ‘cases in which both HMRC and the taxpayer feel they have a high chance of winning can’t be settled. There is no room for splitting the difference under the LSS.’

Issue: 1520
Categories: News