In Carbon Six Engineering Ltd v HMRC [2026] UKFTT 177 (TC), the First-tier Tax Tribunal (“FTT”) denied HMRC’s application to set aside a barring order made following HMRC’s repeated failure to meet procedural requirements, including a final “Unless Order” requiring a response by a fixed deadline. When HMRC missed that deadline, the Tribunal barred them from the case and the appeal was made in the Claimant's favour.
Why HMRC was barred
The Tribunal found that HMRC had:
- repeatedly failed to comply with several Tribunal directions,
- failed to file a statement of case, and
- failed to provide a required response to the barring application made by the Claimant despite clear warnings that non compliance would result in HMRC being barred.
The FTT described HMRC’s conduct as “shambolic and haphazard” and held that HMRC did receive the directions and orders - they simply did not act on them.
HMRC argued these failures were administrative errors due to internal handovers, but the Tribunal rejected this as a “bad” reason for non compliance.
What the Tribunal decided
The FTT refused to lift the Barring Order and confirmed:
- HMRC cannot participate further in the appeal.
- The appeal is determined in the taxpayer’s favour because HMRC had filed no case or evidence in response. The Tribunal used its powers to allow the appeal via summary judgement.
- HMRC’s attempt to stay the case and argument that the outcome of the lead cases should be applied to it was rejected. Granting a stay would allow HMRC to influence the outcome indirectly, undermining the effect of the bar.
What this means for Taxpayers
This decision does not mean taxpayers should expect HMRC to be barred routinely. But it does highlight important practical points:
- Non compliance has real consequences - even for HMRC.
- Procedural discipline is now a strategic issue, particularly in complex areas like the Managed Service Company (MSC) rules.
- Taxpayers who engage early and comply with directions put themselves in a stronger position, especially where HMRC’s case handling is inconsistent.
Why this case matters
Although fact specific, the decision sends a clear signal:
1. The Tribunal is getting tougher on deadlines: The Tribunal applied recent guidance emphasising that compliance with directions must be taken seriously, and that persistent failure, even by HMRC, can lead to the most serious consequences.
2. HMRC is not immune from sanctions: It is rare for HMRC to be barred, but this case shows the Tribunal will act when non compliance becomes systemic. HMRC’s procedural approach was criticised, including confusion over which MSC provider was involved and repeated missed deadlines.
3. Procedure can decide outcomes: Because HMRC had filed no case, the taxpayer effectively won by default. This underscores how essential it is for parties, including taxpayers, to stay on top of case management steps.
This decision should serve as a crucial learning point, not only for substantive MSC appeals but for all litigation strategies: procedural discipline can determine outcomes independently of the merits. The judgment also provides an extensive review of case law on barring orders, which will be particularly valuable to anyone involved in tax disputes or Tribunal litigation.
