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A tax investigation by HMRC is concluded by the issue of a closure notice. If you do not agree with the conclusion reached in the closure notice, you have a 30-day period from the date of the issue of the closure notice in which to appeal. This must be sent to the HMRC investigator, setting out the grounds of appeal and requesting postponement of the payment of the tax in dispute.
You can draft and send this notice of appeal yourself, but it is often sensible to get tax counsel to prepare it. They will be able to succinctly set out the grounds and arguments why the tax is not due and ensure that no relevant arguments that may be helpful in any subsequare omitted.
Following receipt of your appeal, there will be an informal HMRC review so that HMRC can give its “current view of the matter”. This is likely to confirm the conclusion in the closure notice, and following that, you would usually be offered a formal “independent’ review of the matter by someone else within HMRC.
Generally, that review (which usually takes a couple of months) also endorses the conclusion in the closure notice (sometimes with minor adjustments to things like proposed penalties).
Following receipt of the conclusion of the “independent” review, you have 30 days in which to notify the appeal to the tax tribunal, if you still disagree with HMRC.
You can lodge your appeal on-line here.
When you have sent your notification of appeal, the tax tribunal will acknowledge receipt. Several weeks later, you will be issued with standard directions for the future conduct of the dispute.
These directions require HMRC to prepare and issue a detailed written statement of case within 60 days, which will set out in detail HMRC’s legal and factual arguments.
On receipt of the statement of case, you are free to offer to settle the dispute with HMRC without risk as to costs. Sometimes, the process of having to prepare a detailed statement of case may lead HMRC to appreciate any weaknesses in its case.
It is worth keeping in mind the possibility of settling the dispute at this stage and, if appropriate, inviting HMRC to meet to discuss the prospects of a settlement.
Mediation can avoid a potentially long, expensive and publicly reported tax tribunal hearing. Often, an HMRC mediator will be used, but you can choose to use an independent third-party mediator. Mediation has the advantage that it is confidential, and the outcome will not be reported. Do note however that unlike non-HMRC mediations where what is revealed during the mediation process is without prejudice and cannot be used against the other party later on in legal or other proceedings, in HMRC mediations HMRC will not agree to treat information supplied by the taxpayer as without prejudice. This is a major drawback to mediations involving HMRC.
ADR is best used before an appeal is lodged with the tax tribunal. If you have already lodged an appeal and HMRC’s statement of case has been served (or is due within 10 days of you applying for ADR), your application will only be accepted in exceptional circumstances.
Click here to hear the recent statement made by the Chamber President, regarding Tribunal’s practice in appeals against HMRC decisions where the parties wish to engage in ADR after an appeal has been made to the Tribunal.
Patrick Cannon today to get advice and representation against HMRC.
The best chance of resolving a dispute with HMRC normally lies in full cooperation on a timely basis. It’s also sensible to have a realistic acceptance of any errors you may have made, as well as a willingness to settle over matters where you have no realistic chance of resisting HMRC’s arguments in any appeal to the tax tribunal.
Increasingly, however, HMRC operates on an aggressive and antagonistic basis in tax investigations. These seem intended to intimidate the taxpayer and to maximise the tax and penalties collected, even where honest mistakes were made.
In cases where the HMRC investigator is proceeding unreasonably, you are advised to take your case to the tax tribunal, where you stand a very good chance of receiving a fair hearing.
This depends on the complexity of the facts and legal issues making up the dispute.
As a very general guide, it can take 3-6 months from submitting an appeal to HMRC following receipt of a closure notice until you have the result of the “independent” internal HMRC review.
If you then notify your appeal to the tax tribunal, it will be a further 4 to 6 months before you get a hearing – possibly longer, if there are delays with witness or counsel availability or new issues arise that need to be addressed.
Yes, penalties can be appealed against in the same way as the tax can be appealed against – even when the amount of tax is not being appealed. Often the penalty appeal will relate to the way that HMRC have characterised the taxpayer’s behaviour as either “careless” or “deliberate”, with the latter carrying much heavier penalties than the former.
“Deliberate” behaviour is much harder to prove than “careless”, and because the burden of proof is on HMRC in penalty cases, an appeal against a “deliberate” penalty should always be given serious consideration.
In their ADR guidance HMRC state that ADR can be used when:
If you have received an enquiry or investigation from HMRC and wish to appeal or consider ADR, contact Patrick Cannon today to get advice and representation against HMRC.