Underwood Barron, Chartered Accountants

 

Appeals

The formal route for challenging HMRC decisions

Tax return image

In the course of checking tax returns or records, HMRC often disagree with the choices made by the taxpayer and will decide that an alternative declaration is correct. We will then appeal against the decision on behalf of our client. Historically, almost all appeals were settled by agreement after further discussions. However, HMRC officers have been instructed to take a firmer line and so we are expecting a gradual increase in the number of appeal that we take down the formal route.

Procedure since 1 April 2009

There were two major changes on 1 April 2009:

  1. The First-tier Tax Tribunal (FTT) replaced several different tribunals for different taxes.
  2. HMRC has established a system of internal reviews.

There are still some differences in procedure.

Income or corporation tax and capital gains tax VAT and customs duties
HMRC sends a decision to the taxpayer. HMRC sends a decision to the taxpayer and MUST offer a review.
Within 30 days. Taxpayer sends an appeal notice to HMRC. Taxpayer either (1) accepts the offer of a review or (2) sends an appeal notice to the FTT. There is no opportunity for further discussion with HMRC.
HMRC may offer a review or the taxpayer may request a review or the taxpayer may inform FTT the he wishes them to deal with the case.
Within 30 days Taxpayer either (1) accepts the offer of a review or (2) informs the FTT of the appeal.
Within 45 days.

If there is a review

HMRC must inform the taxpayer of the result or the original decision is treated as upheld.
Within 30 days Taxpayer must inform FTT if he is dissatisfied with the result of the review.

Taxpayers might be cynical about whether a review conducted by HMRC staff is worthwhile. So far, the experience is that a small but useful number of reviews are decided in favour of the taxpayer. In any event, a review will produce a clear statement of HMRC's views.

Note that it is for the taxpayer to inform the FTT when he wishes them to deal with the case.

Classification of cases

The Tribunal Administration Centre will allocate an appeal to one of three categories:

  1. Paper cases. These are appeals against fixed penalties and are dealt with by post, though the taxpayer can elect for a transfer to the Basic category.
  2. Basic (nicknamed "turn up and talk") cases. These are dealt with at a short hearing, with only simple documents. They include Construction Industry gross status appeals, penalties for lack of reasonable care, procedural applications relating to HMRC enquiries and cases transferred from the Paper category.
  3. Standard cases are all the other types of appeal, though there will far fewer of them. The Tribunal will usually hold a preliminary hearing to decide on the documents that both sides must produce.

Are Tribunal hearings difficult?

The Tribunal's main aim is to reach a fair decision. The procedures are straightforward and the panel are helpful in explaining what is needed. Each side pays its own costs and so disagreements with HMRC can be resolved fairly and cheaply.