What does the Emile Heskey case mean for costs battles with HMRC?

Former England striker Emile Heskey forged his professional reputation in the 2000s by scoring a number of celebrated goals playing for his country. And many more - 110 goals in 516 Premier League appearances - playing for Leicester City, Liverpool, Birmingham City, Wigan Athletic and Aston Villa. But in his protracted battle with HMRC, he has continuously been on the losing side with potentially enduring consequences for his personal reputation.

HM Revenue & Customs (HMRC) initially decided to take legal action against Heskey in 2017 in relation to his unpaid taxes: proceedings were launched against him over 15 penalty notices that were issued to him from 2005 onwards. But a High Court trial, scheduled for November 2019, was avoided after he admitted liability for the outstanding debt.

Last month, as part of the legal battle relating to his unpaid tax bill of £1.637m, a specialist costs judge Mark Whalan ordered Heskey to pay HMRC’s legal costs totalling £194,795. Potentially, additional interest may yet be calculated and added to this cost figure. In what he described as "a complex case,” Judge Whalan said that the sum was "reasonable and proportionate." Notably, Heskey did not attend the hearing and was not legally represented.

Given the very large amount of tax at stake in this case, it is no surprise that the fees were deemed to be proportionate. The issue of proportionality is not only commensurate with the amount at issue, but also with the complexity of the dispute, the importance to the parties and other factors.

Inevitably, those factors cut both ways. Even in a case where the amount involved makes the legal spend appear proportionate, the sums could still be regarded as being disproportionate if the case lacked the necessary level of complexity.

In my experience, the amount of legal fees incurred by HMRC are invariably difficult, and often impossible, to dispute. The UK government department has an army of in-house lawyers at its disposal. When calculated by apportioning the relevant percentage of their state-funded salary, their hourly rates are well below both the legal market rate in private practice and the guideline figures usually allowed on assessment. Commonly, counsel also tend to work on reduced fees for HMRC.

Inevitably, if this legal spend had been secured in the open market, it is highly probable that the cost would have been significantly higher than the sum recovered. Mr Heskey's own costs would undoubtedly make for an interesting comparator.

The total amount of costs was deemed to be proportionate to all of the above factors and possibly more. On the face of it, this is not surprising. Given the result - and possibly that Heskey may now be acting as a Litigant in Person – it could be that his representation was somewhat stifled by lack of funds.

One might reasonably expect that a very successful former professional footballer would be in a position to pay a skilled legal team to run his case robustly. But that assumption may not be correct. In January 2024, it was widely reported that HMRC had filed a bankruptcy petition against Heskey in the High Court. In such circumstances, his legal spend may not have been as significant as would have been anticipated.

HMRC routinely chooses not to recover fees in disputes of public importance. Such decisions are based on the principle that it may be unfair for an individual tax payer to bear this burden on a case that is also of wider public importance. Equally, the department’s pursuit of costs implies that wider tax issues were not necessarily involved.

Based on Judge Whalan’s decision, and the fact that HMRC sought costs, some observers might assume either that Heskey’s position was untenable, or that his case potentially lacked sufficient merit. Or both.

But on a human level, it is hard not to feel a degree of sympathy for Heskey and the position in which he now finds himself. The current UEFA European Football Championship, better known as the Euros, brings to mind the historic travails of several celebrated players who graced past tournaments. Rather than mundane problems with the tax man, they often lost their fortune as a result of more human frailties: drink, drugs, gambling, former spouses and girlfriends.

It should be concluded that the only way to avoid such a disappointing end to an illustrious and very lucrative career is to undertake proper tax planning. Of course, this lesson applies far beyond the rarified world of highly-paid international sports professionals. Like sensible and informed litigation planning, it is something which applies to ordinary individuals and companies alike.