14/04/09: The Introduction of the Reforms to the HMRC Internal Review Procedures and to the Independent Tax Appeals System
As we have described in an earlier new article, a significant reform of the tax appeals system has been in hand for some time now. As from 1st April 2009, that reform has been implemented. As a consequence of this reform, the previous four tax appeals tribunals (the VAT and Duties Tribunal, the General Commissioners, the Special Commissioners and the Section 706/04 Tribunal) have been abolished and replaced by a new two-tier tribunals system.
Appeals against HMRC’s decisions will now be heard by the First-tier Tribunal’s Tax Chamber with a right of appeal (if approved by the First-tier Tribunal) lying to the Upper Tribunal’s Finance and Tax Chamber. In what are anticipated to be rare cases, a complex matter may be transferred directly to the Upper Tribunal at the direction of the Tribunal and with the agreement of the parties.
The Tribunal is required under the Rules to allocate all cases to one of four categories: default paper (ie. generally heard on the papers alone); basic (ie. listed for hearing and argued on the day); standard (ie. generally progressing by way of generic Tribunal directions in relation to such matters as HMRC’s service of a Statement of Case); and complex (ie. normally requiring a directions hearing at the Tribunal for tailor-made directions to be issued).
This reform of the tax appeals system has been accompanied by changes made by HMRC to the way in which it handles disputes regarding its decisions. From the beginning of April, there is now a new right to a statutory optional internal review of such decisions; following which an appeal may be made to the Tribunal, depending upon the outcome of the internal review. Alternatively, the taxpayer may appeal the matter directly to the Tribunal rather than follow the internal review process. The statutory entitlement to an optional pre-Tribunal review is a new feature of the appeals procedure in direct tax; and in indirect tax (other than in restoration decisions), it replaces the previous non-statutory optional reviews (or reconsiderations) in VAT matters and the mandatory review process prior to Tribunal appeal in excise matters. The optional internal review process will operate across all of the various taxes and duties for which HMRC is responsible, enabling a more consistent approach to cases, regardless of which tax or duty is in dispute.
Where the taxpayer requests an internal review of a decision made by HMRC, HMRC have 45 days to complete that review. If it is not possible to complete the review within 45 days or other agreed period, then it will be deemed that the review has concluded that the relevant decision has been upheld. The taxpayer will then have 30 days from the date of having been advised of the conclusion of the review to appeal the matter to the Tribunal. Given our experience of the attitude of some HMRC Review Officers in several cases in recent weeks, we at M & R Tax Advisers will be watching matters carefully as these reforms ‘bed in’ in the weeks and months to come. We will be seeking to ensure that our clients are not effectively denied their right to a full and proper review of the decisions concerned as a result of the Review Officers’ inability (or unwillingness?) to conclude their reviews within the proscribed time limit, and their reticence to agree an extended period to conclude the review; thereby leaving the taxpayer no option, if they propose to continue to challenge the HMRC decision, but to proceed to a Tribunal appeal (with the potential costs involved) against what is merely the deemed decision of an incomplete review. We consider that the failure to complete an internal review within the 45 days time limit should be very much the exception rather than the rule.
Please contact us if you consider that we can be of assistance to you in any issue arising with HMRC.
