Tax Tribunals – good evidence needed

I produced an article for another site, providing a template for a taxpayer to represent himself at Tribunal. Read the article here at http://www.taxguide.co.uk/content/vat-and-tax-penalties. The template applies equally to an adviser representing a taxpayer, and is relevant to most ‘reasonable excuse’ appeals.

Loads of paperwork has passed across my desk since then, including a number of cases where HMRC have issued penalties. Although I am a VAT specialist, I do sometimes see documentation relating to Direct Tax penalties and appeals. The underlying issues, and the grounds of appeal are frequently the same, whether  the appeal relates to Direct or Indirect Tax.

If a taxpayer is challenging a penalty, this may be an HMRC Internal Review, or the Tax Tribunal. Cases are frequently lost simply because the evidence provided is poor. So:

• If the case is based on the unexpected cancellation of a sales order, provide relevant correspondence;
• If the case is based on cashflow difficulties, then provide relevant bank statements;
• If the case is based on a sudden reduction in overdraft facility, provide correspondence with the bank;
• If the case is based on the sudden closure of a customer’s business, then provide relevant documentation; and
• If the case if based on a dramatic increases in the cost of raw materials, provide relevant invoices, etc.

Neither HMRC nor the Tribunal can decide in the taxpayer’s favour when the only evidence is vague statement that business is difficult.

“SMALL PRINT” – in principle, a taxpayer’s chances of success are usually enhanced if he/she is well represented. However, cost considerations often become an issue, especially as the Tribunal will now only rarely award costs against HMRC. Therefore, it may be appropriate, in a penalty case, for the taxpayer to represent himself.