A new system for dealing with disputes with the taxman
It has always been a fundamental part of the UK tax system that there should be a way in which the taxpayer can dispute decisions made by the taxman. For nearly 200 years that has been via the Special Commissioners and General Commissioners.
The Special Commissioners were individuals with a tax legal background who generally heard the more complex cases either in London or one of the main cities in the UK. The General Commissioners on the other hand were laymen – much like the tax equivalent of magistrates. They sat in local areas known as ‘divisions’ of which there were several hundred around the country.
When VAT was introduced a parallel body – the VAT Tribunal – was set up to deal with disputes with Customs and Excise.
Appeals by taxpayers could be heard by either type of Commissioner and the losing party had the right to have the appeal heard on a question of law by the High Court and then higher courts if appropriate. From these decisions comes a large body of case law which helps to interpret the tax legislation.
On 1 April 2009 all of this changed with the introduction of a new tribunal system. The bodies of General and Special Commissioners and the VAT Tribunal have been abolished and replaced by what is known as the Tax Chamber in the First-tier Tribunal. This has an administrative base in Birmingham but appeals will be heard in a number of centres around the country.
The losing party in the First-tier Tribunal will be able to appeal to the Upper Tribunal which has a status equivalent to the High Court.
The right of the taxpayer to appeal a decision made by HMRC remains enshrined in the new system. Such appeals will be made to the Tribunal which will deal with more routine matters by simply looking at written evidence and producing a decision. Only more contentious matters will be dealt with by a formal hearing.
Issues of costs and formality could put people off deciding to appeal, allowing HMRC to win an argument by default. To avoid this happening HMRC have been required by law to introduce a new review system to come into play when an appeal is made.
When an officer of HMRC has made a formal decision, the taxpayer will have the right to appeal against that decision as before but, in addition, the taxpayer will be able to ask for a review of the decision. This will be carried out by another HMRC officer who is not connected to the officer who made the original decision. That officer will generally have 45 days in which to carry out the review and can either agree the original decision or decide to change it in some way. If they uphold the original decision then the taxpayer has a further 30 days to advise the Tribunal that they wish the appeal to be considered.
HMRC have gone to great pains to try to make the system as impartial as possible. They are creating separate review teams who will sit outside the normal taxpayer contact and will not be part of the line management system in the tax office. They have been given detailed guidance on how to carry out the review and that guidance is available for all to see on the HMRC website. It certainly envisages that the taxpayer should have the right to present further evidence and meet the review officer to discuss the case.
Inevitably the new system will take time to bed down and it will be closely scrutinised both by HMRC and by professional bodies to ensure that it is really working and that taxpayers’ rights are protected.
Disclaimer - for information of users: This newsletter is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this newsletter can be accepted by the authors or the firm.
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