In the course of HMRC enquiries and tax investigations, HMRC will make decisions which commonly fall into one of four categories:
- Decisions over the amount of tax due.
- Decisions whether a tax relief is available to reduce or defer a tax liability.
- Decisions to request further information or to review documents from a taxpayer.
- Decisions as to whether to charge the taxpayer with a financial penalty.
In most cases where the taxpayer disagrees with a decision by HMRC they, or their advisor, will need to appeal within 30 days of the decision being made. Care should be taken because in some circumstances the deadline to appeal a decision may not be the standard 30 days.
What happens after an appeal has been submitted?
When the appeal is submitted, the grounds for appeal will need to be stated (i.e. why the decision is disputed) and this presents an opportunity to provide extra information to support the taxpayer’s case. For cases not involving VAT the appeal will, in the first instance, be considered by the HMRC case officer who made the original decision. In cases where HMRC are seeking financial redress relating to an alleged underpayment of tax or where they believe a penalty applies, it is important to remember to make an application to postpone action being taken to collect the amounts alleged to be due.
The postponement application will ordinarily request that the postponement ought to last until such time as the appeal has been considered and the decision has become final.
If the dispute relates to VAT, then the appeal will be considered by another HMRC officer who was not involved in the original decision. The slight difference with VAT decisions as compared to non-VAT decisions, is the appeal is not considered in the first instance by the original decisionmaker.
For both direct and indirect tax decisions, at the independent review stage an HMRC officer who was not involved in making the original decision will review the background and representations made by both their HMRC colleague and the taxpayer or their representative. This stage can be skipped at the request of the taxpayer, but those instances where this would be recommended are rare.
At the independent review stage HMRC has 45 days from being notified of a request for a review to arrive at a decision. However in our experience in the majority of cases HMRC will request more time and, given the amount of additional time requested is reasonable, it seems sensible in most cases for the taxpayer or their advisor to agree to the request.
One of the purposes of the independent review stage is to reduce the number of cases that proceed to the Tribunal which can be an avoidable cost to both HMRC and the taxpayer.
We have generally had very positive experiences of advising clients who request an independent review. Whilst some commentators will say this is HMRC “marking their own homework”, provided robust arguments can be put forward at the time of accepting an offer for a review then HMRC reviewing officers (typically someone from HMRC’s Solicitors Office) will reverse or vary an HMRC decision if they believe that to be the correct action to take. One note of caution is that it is possible for the amount being requested by HMRC to increase, if the HMRC reviewing officer disagrees with their colleague.
Notification to the Tribunal
On receipt of the decision from HMRC’s reviewing officer, if the taxpayer still disagrees with HMRC’s decision then they can make an application to appeal the decision at the Tribunal.
- Before a decision is challenged at the Tribunal, for a number of reasons it may be advantageous to all parties to try and settle the matter using Alternative Dispute Resolution (ADR).
- If the time limit to appeal a decision (typically 30 days) has elapsed, all is not lost. It is possible to submit a late appeal but the taxpayer will need to have a reasonable excuse for having not submitted their appeal in time. In theory HMRC can accept late decisions at their discretion, but relying on this discretion being exercised would be a high risk strategy.
If HMRC has issued you or your client with a decision which you disagree with and want to discuss what the options for challenging these are, please contact Menzies’ Tax Disputes and Disclosures team below