The role of the Tribunal System in tax investigations
Taxpayers under investigation by, or otherwise in dispute with, HMRC may find that matters upon which agreement cannot be reached will ultimately be considered in the Tax Chamber of the First-Tier Tribunal or possibly the Upper Tribunal. These bodies replaced, effectively, the General and Special Commissioners and the High Court respectively.
This article sets out the new framework for hearing appeals and explains the role of Tribunals in tax investigations.
Tribunals hearing tax appeals are part of the statutory two-tier body comprising the First-Tier Tribunal and the Upper Tribunal.
The First-Tier Tribunal considers most appeals in the first instance although appeals categorised as complex may be heard by the Upper Tribunal if the parties agree.
It is said that “If it ain’t bust, don’t fix it.”
Whether the appeals system via the General and Special Commissioners was bust and whether the new Tribunal System will fix it, we will simply have to see.
Appeals may be sent to the Tribunal in investigation cases in the following circumstances:
- within 30 days of a decision by HMRC with which you disagree
- the taxpayer wants the enquiry closed down
- HMRC refuse to accept late appeals
- you have made an appeal to HMRC but wish the matter to be considered by the Tribunal without having the appeal reviewed internally by HMRC
However, in terms of Tax Investigations, the Tribunal also serves another useful purpose since it is now possible for the taxpayer and HMRC to make a joint application to the Tribunal, during the course of an enquiry, to make decisions on matters already under enquiry. This will most usually occur where the matter is complex or particularly important and where specialist officers are likely to be involved.
Other potential areas of dispute or disagreement between the taxpayer and HMRC during the course of an investigation which may involve the Tribunal can arise where:-
- the taxpayer considers that the enquiry is unjustified
- the taxpayer disagrees with HMRC’s interpretation of the facts or legislation whilst HMRC may similarly disagree with the taxpayer’s view
- there are delays on either side in dealing with correspondence
- there are delays in providing documentation because the taxpayer considers the request inappropriate or unreasonable
When opening an investigation HMRC do not usually give reasons as to why they have opened it, although it may be apparent from the nature of the questions asked. Once the enquiry is underway however it is likely that they will be prepared to discuss their concerns in more detail, if only to prevent an application to the Tribunal by the taxpayer to close down the enquiry.
Procedures
When the First-Tier Tribunal receives a notice of appeal the case is allocated to a set category:
- Default Paper Case
- Basic Case
- Standard Case
- Complex Case
Tribunals will normally hold a meeting at which both the taxpayer and HMRC can attend before they make a decision unless, inter-alia
- it is a Default Paper Case and there has been no request for a hearing
- all parties have agreed that the matter can be dealt with without a hearing
If a hearing takes place in which the onus of proof is on the taxpayer he will present his case first and HMRC will respond. The taxpayer will then have a further opportunity to respond. This is similar to the procedure in place when such matters were considered by the General Commissioners.
Where the onus of proof is on HMRC they would expect to present their case first.
Following a decision by the First-Tier Tribunal it may be possible to appeal that decision to the Upper Tribunal.
Finally, it should be remembered that the Tribunals are independent judicial bodies whose members are independently appointed and whose overriding objective is to deal with cases fairly and justly. They are not part of HMRC and there is no reason to be afraid of them. However, should you be faced with an appearance before a Tribunal, then you may wish to have the reassurance of an expert at your side.
