A row over bundles has marked the conclusion of a long-running dispute between Eclipse Film Partners, the promoters of a film partnership tax avoidance scheme, and HMRC.
Eclipse Film Partners No 35 v HMRC [2016] UKSC 24 arose after Eclipse filed a tax return for the year ending 5 April 2007. HMRC issued a closure notice determining that Eclipse did not carry on a trade or business—causing potentially severe problems for Eclipse and its clients. Eclipse challenged the decision.
The First-TierTribunal (Tax Chamber) agreed to Eclipse’s request that “the proceedings be excluded from potential liability for costs or expenses under” a rule of the tribunal. It ordered that the parties agree an appropriate bundle of documents. However, the parties were unable to agree, therefore the tribunal gave an oral direction that Eclipse could prepare the bundle and costs would be shared.
The company’s appeal on the tax matter was rejected by the Court of Appeal and it was refused permission to appeal to the Supreme Court in April 2016. Eclipse sent HMRC an invoice for £108,395.48 for half the costs of the bundle.
HMRC refused to pay on the grounds the tribunal had no jurisdiction to make such an order, and the dispute went to the Supreme Court, which unanimously dismissed Eclipse’s appeal this week.
Lord Neuberger, giving the only judgment, rejected Eclipse’s argument that the tribunal’s order was for the sharing of costs not an order for payment of costs, and therefore valid. He also rejected Eclipse’s argument that it was inherent in the rules that the tribunal’s orders could include terms on costs.
Lord Neuberger commented that Eclipse had produced a bundle of more than 700 lever-arch files, the size of which was “in part attributable to requests by the Revenue for the inclusion of documents of what some might think were of marginal relevance”.
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