Contentious Tax Quarterly Review – Summer 2026

In this quarterly review, we consider a number of important decisions concerning: (1) HMRC's increasing use of strike out and the FTT's approach to such applications; (2) costs incurred as a result of HMRC's unreasonable conduct before an appeal is filed; and (3) the difficulties faced by taxpayers when pursuing applications for disclosure against HMRC.

This blog is based on an article written by Adam Craggs and Liam McKay that was published in Tax Journal on 8 July 2026.

Recent decisions

Strike Out

Rule 8 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (FTT Rules), confers on the First-tier Tribunal (FTT) significant case management powers, including the power to strike out a party's case. Where an appellant fails to comply with a direction, fails to co-operate with the FTT, or the FTT considers that the appellant's case (or part of it) has no reasonable prospect of success, the FTT may exercise its discretion to strike out all or part of the proceedings. 

In certain circumstances, strike out is not discretionary. The FTT must strike out proceedings (or part of them) where it lacks jurisdiction. Strike out also follows automatically where an appellant fails to comply with an 'unless' order. Equivalent provisions apply to respondents, although the consequences are slightly different. Rather than the proceedings being struck out, a respondent may be barred from further participation in the proceedings.

The strike out and barring powers, contained in Rule 8, are important tools by which the FTT manages its caseload, promotes compliance with its rules and directions, and ensures the efficient use of judicial resource. In turn, these powers assist the FTT in furthering the overriding objective, contained in Rule 2 of the FTT Rules, of dealing with cases fairly and justly.

Historically, Rule 8 was invoked relatively infrequently. However, in recent times there has been a noticeable increase in the number of applications made by HMRC to strike out taxpayers' appeals, suggesting that HMRC increasingly regards strike out as an important component of its litigation strategy. 

Since our last quarterly update, the FTT has considered strike out applications in a number of cases, and we consider three of those decisions below.

Stefan-Valentin Moscal v HMRC [2026] UKFTT 640 (TC) 

In Moscal HMRC applied to strike out the taxpayer's appeal on the basis that the FTT lacked jurisdiction and/or that there was no reasonable prospect of the appeal succeeding. 

The taxpayer challenged an assessment and Closure Notices issued under section 29 and section 29A, Taxes Management Act 1970 (TMA 1970). The basis of the taxpayer's appeal was that he had been "scammed" by his former agent, which had given rise to the liabilities sought by HMRC. HMRC contended that: (1) the taxpayer had appealed directly to the FTT, failing to give notice to HMRC first as required by section 31A, TMA 1970, such that the FTT did not have jurisdiction to hear the appeal; and (2) the taxpayer's allegation against his former agent was not a valid ground of appeal and he had accepted that HMRC's position was correct in any event. 

The FTT agreed with HMRC on both counts and struck out the appeal. 

Thomas Joseph Dowey v HMRC [2026] UKFTT 626 (TC)

Dowey concerned an appeal against HMRC's decision to refuse the taxpayer's claim for repayment of overpaid VAT. The taxpayer had sought repayment on the basis that his supplier had incorrectly charged him VAT on supplies that were in fact zero rated. 

HMRC argued that the FTT had no jurisdiction to entertain the appeal because the only person entitled to claim repayment of overpaid VAT from HMRC, under section 80, Value Added Tax Act 1994 (VATA 1994), is the person who accounted for that VAT to HMRC on its VAT return. The taxpayer, as the recipient of the supply, did not account for the VAT to HMRC. Accordingly, there was no valid claim under section 80, and no corresponding right of appeal to the FTT under section 83(1)(t), VATA 1994. 

The FTT agreed with HMRC, finding that the absence of a valid claim under section 80 meant the FTT had no jurisdiction. The appeal was therefore struck out.

TP (Evenlode) LLP v HMRC [2026] UKFTT 831 (TC) 

In Evenlode, HMRC applied to strike out the taxpayer's appeal against various VAT assessments on the basis that there had been a failure to comply with directions issued by the FTT. The proceedings had been ongoing since 2021, with a lengthy procedural history. 

The FTT had issued directions requiring, amongst other things, that the taxpayer serve on HMRC various documents and information. The directions were made on an 'unless' basis, and provided that the appeal would be automatically struck out in the event that the taxpayer did not comply. HMRC contended that the taxpayer had failed to comply, and applied to have the appeal struck out. HMRC also argued that the taxpayer had failed to comply with a subsequent direction requiring the parties to provide an update on certain matters within seven days, such that the appeal should be struck out on that basis too.  

The FTT rejected HMRC's contention that the taxpayer had failed to comply with its directions because the relevant documents had in fact been provided. The FTT determined that HMRC’s complaint appeared to be that the documents did not evidence certain payments, which was a separate question. 

The FTT also found that the subsequent direction did not state that failure to comply would lead to the striking out of the appeal, as required by Rule 8(1) of the FTT Rules, or that failure to comply could lead to the striking out of the appeal, as required by Rule 8(3)(a) of the FTT Rules. Further, the FTT decided that the taxpayer's failure to provide an update within seven days did not come close to meeting the threshold for strike out, under Rule 8(3)(b) of the FTT Rules, for failing to cooperate. 

HMRC's application was therefore dismissed. 

The FTT's strike out jurisdiction undoubtedly serves an important function. Where, for example, the FTT lacks jurisdiction to determine an appeal, it is both necessary and appropriate that this is identified at an early stage. Doing so ensures that the FTT's limited resources are deployed efficiently and avoids the need for unnecessary proceedings and potential appeals to the UT and higher courts. However, recent decisions, such as Evenlode, suggest that HMRC is increasingly pursuing strike out applications in circumstances where the relevant threshold is clearly not satisfied. In some cases, those applications are withdrawn prior to being heard, but after significant time and resource has been expended by taxpayers in responding to them. While taxpayers must ensure that their appeals are properly constituted and comply with directions issued by the FTT, misconceived strike-out applications can themselves generate significant delay and additional cost to taxpayers. Such applications risk undermining, rather than advancing, the overriding objective.

Costs relating to HMRC's unreasonable conduct

In Madeleine Clark v HMRC [2026] UKFTT 00559 (TC), the taxpayer sought an award of costs in accordance with Rule 10(1)(b) of the FTT Rules, arguing that HMRC had acted unreasonably in defending the proceedings. 

The taxpayer's underlying appeal concerned an alleged liability arising from her former employer's failure to deduct PAYE from a termination payment made to her. Having taken professional advice, the taxpayer engaged with HMRC in August 2018 and advised it of the employer's failure, and requested that HMRC seek payment of the unpaid tax from the employer. HMRC issued a holding response, confirming to the taxpayer that she should return the payment in her self-assessment, which she did.

HMRC subsequently advised the taxpayer that she was liable for the unpaid tax. There followed correspondence between the taxpayer and HMRC over several years, with significant delay on HMRC's part. In her correspondence, the taxpayer had made clear that she wanted a final decision that she could appeal to the FTT. In June 2024, HMRC advised the taxpayer that she did not have an appeal route available to her because the tax was due on the basis of her own self-assessment, which she was now out of time to amend. Instead, HMRC advised the taxpayer that she could consider judicial review proceedings.

The taxpayer appealed to the FTT, and the appeal was assigned to the Standard track. The taxpayer also sent HMRC a judicial review pre-action protocol letter. In response to that letter, HMRC conceded the proposed claim and the taxpayer sought her costs of more than £161,000 in the FTT.

In rejecting the taxpayer's application, the FTT noted that, when considering unreasonable conduct, any conduct before the sending or delivering of a notice of appeal, no matter how unreasonable, could not be taken into account by the FTT. As most, if not all, the costs sought by the taxpayer were incurred before she notified her appeal to the FTT, and HMRC's behaviour after the appeal was notified was not unreasonable, the taxpayer was not entitled to her costs. That was despite HMRC's concession that its conduct leading up to the issue of proceedings had been unreasonable which, in the words of the FTT,  was "something of an understatement".

There have been an increasing number of cases in which the FTT has rejected applications for costs by taxpayers on the basis that HMRC's unreasonable conduct occurred before the commencement of the taxpayer's appeal. Many taxpayers and advisers will be familiar with lengthy HMRC enquiries characterised by delay, repeated requests for information, and an apparent inability on the part of HMRC either to engage in a meaningful manner with the taxpayer or to articulate a coherent basis for its position. Taxpayers can incur significant professional fees attempting to progress matters towards a conclusion, only for HMRC to concede shortly before their appeal is heard and frequently the concession is made by HMRC for precisely the reason(s) advanced by the taxpayer throughout the enquiry.

Where unreasonable conduct on the part of HMRC occurs before an appeal is commenced, a taxpayer has no effective means of recovering the costs they have incurred as a consequence of that conduct. The FTT's costs jurisdiction does not extend to such expenditure, and HMRC's complaints process is not designed to provide a comprehensive remedy and, in practice, rarely compensates taxpayers for the costs they have incurred.

Cases such as Clark highlight an important policy question. If taxpayers are expected to engage constructively and in a timely manner with HMRC during an enquiry, HMRC should be held to equivalent standards. Whether through legislative reform or policy change, consideration should be given to introducing a mechanism by which taxpayers can be compensated for the costs they incur as a result of unreasonable conduct by HMRC during the course of an enquiry and not simply once they have filed their appeal with the FTT. Such reform would not only encourage more efficient and proportionate decision-making by HMRC, but would also help to strengthen confidence in both HMRC and the tax system more broadly.

Disclosure

For many taxpayers, disputes with HMRC increasingly involve not only questions of substantive tax law, but also the more fundamental challenge of understanding HMRC's position and the reasoning that underpins it. Practitioners will be familiar with HMRC enquiries in which information flows predominantly in one direction, with taxpayers expected to provide extensive explanations and voluminous documentation while receiving limited insight into HMRC's analysis, or the basis for its concerns.

Aside from being a source of frustration, such an imbalance is unlikely to promote the efficient resolution of disputes and sits uneasily with the collaborative approach envisaged by HMRC's Litigation and Settlement Strategy. Taxpayers are therefore often compelled to seek information through formal procedural mechanisms, including applications to the FTT for disclosure.

Rule 5(3)(d) of the FTT Rules, empowers the FTT to direct a party to provide documents, information or submissions to the FTT or, importantly, to another party. This Rule is a significant case management tool which can be of particular value to taxpayers seeking greater clarity and understanding of HMRC's case. However, obtaining such a direction is rarely straightforward. As two recent decisions demonstrate, a successful application for disclosure against HMRC requires a carefully framed application that clearly identifies both the material sought and importantly its relevance to the issues in dispute.

Smartprice (NE) Ltd v HMRC [2026] UKFTT 721 (TC)

In Smartprice, the taxpayer had appealed against a number of VAT decisions made by HMRC, which resulted in the denial of input tax and consequential assessments. HMRC argued that the transactions on which the input tax claims were made related to fraudulent evasion of VAT and that the taxpayer knew, or should have known, of that connection. The taxpayer disputed that the transactions related to fraud and denied that it had the requisite knowledge.

The appeal had a lengthy procedural history, including earlier criminal proceedings involving the taxpayer’s director arising out of the same or related business activities. 

Against that backdrop, the taxpayer made a disclosure request seeking a wide range of documents, including material referred to in HMRC’s case and documents arising from the criminal investigation. HMRC provided some material, but refused to provide other material, prompting the taxpayer to apply to the FTT for disclosure of the requested documents.

The FTT noted that Rule 27 of the FTT Rules sets out the default position regarding disclosure, namely, the exchange of lists of documents which the parties intend to rely upon at the appeal hearing, and provides a deliberately limited disclosure regime. The burden was therefore on the taxpayer to demonstrate that it was appropriate to depart from the default position. Further, as the dispute was high-value and complex, the principle in McCabe v HMRC [2020] UKUT 266 was engaged, namely, when considering whether to order further disclosure, relevant documents were required to be disclosed, unless there was a good reason not to do so. However, "relevance" was required to be assessed by reference to the issues identified in the pleadings, with disclosure being the means to ensure that the FTT had before it all the information that the parties reasonably required the FTT to consider in deciding the appeal.

The FTT determined that the taxpayer had not discharged its burden and noted, amongst other things, that much of the material was sought on the basis that it might undermine HMRC's position or lead to material helpful to the taxpayer's case being identified. The FTT therefore accepted HMRC's argument that the scope of the application was too broad and insufficiently tied to the issues arising on the pleadings. Nor was the FTT persuaded that the fact there were previous criminal proceedings demonstrated that relevant material existed which ought to be disclosed. Rather, the issues before the FTT were those arising on the pleaded case before it. Finally, the FTT noted that the introduction of a materially expanded disclosure exercise carried a real risk of further delay and inefficiency in the progress of the appeal, against a background of existing significant delay, which was inconsistent with the overriding objective.

UK Luxury Heights Ltd v HMRC [2026] UKFTT 796 (TC)

This case concerned an appeal against determinations and penalties issued by HMRC under the Construction Industry Scheme (CIS). The taxpayer's case was that, notwithstanding its failure to make deductions and file returns under the CIS, no liability arose because the subcontractor had accounted for and paid the relevant tax. Accordingly, the taxpayer argued that it was entitled to relief under Regulation 9(4) (Condition B) of the Income Tax (Construction Industry Scheme) Regulations 2005.

The taxpayer applied to the FTT for disclosure of various HMRC internal documents, asserting that HMRC had failed to explain the basis upon which it had acted. In particular, the taxpayer contended that, despite repeated requests, HMRC had not provided any coherent account of why it concluded Condition B was not satisfied, placing the taxpayer at a significant procedural disadvantage and unable to understand or properly meet HMRC's case. 

In determining the application, the FTT noted that the question was not whether the taxpayer would find it helpful to understand HMRC’s reasoning, but rather whether the FTT had jurisdiction to consider that reasoning at all. In that regard, applying the Court of Appeal's decision in Beech Developments Ltd v HMRC [2024] EWCA Civ 486, the FTT concluded that it did not have jurisdiction to determine whether Condition B was satisfied. That question could only be considered on judicial review. The application was therefore refused. 

Applications for disclosure are an increasingly important part of a taxpayer's procedural toolkit and in some cases the prospect of such an application may itself be sufficient to persuade HMRC to adopt a more pragmatic approach in litigation before the FTT. However, decisions like Smartprice and Luxury Heights demonstrate that the FTT will consider disclosure applications carefully and will not readily depart from the default position provided for in Rule 27 of the FTT Rules.

While taxpayers will often wish to better understand how and why HMRC reached the decision under challenge, that objective alone is unlikely to be sufficient to persuade the FTT to order disclosure. An application to the FTT for disclosure must be firmly based on the issues identified in the parties' pleadings and focused on the relevance of the material sought, to the determination of those issues. The critical question is not whether the documents might shed light on HMRC's reasoning but rather, is the disclosure necessary and appropriate in order to assist the FTT in determining the issues before it.