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HMRC's new litigation strategy shifts pressure onto tribunals

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7th Jul 2008
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Following the introduction of HM Revenue & Customs’ (HMRC) new Litigation and Settlement Strategy both the number of applications and appeals to tax tribunals has increased.

City law firm Reynolds Porter Chamberlain LLP (RPC) has obtained figures to show that the number of cases heard by the VAT and Duties Tribunal and the Special Commissioners Tribunal has increased from 708 in 2006 to 791 during 2007. The VAT and Duties Tribunals and the Special Commissioners hear appeals lodged by taxpayers against decisions made by HMRC.

RPC says that the increase in cases heard by tax tribunals comes partly as a result of HMRC’s Litigation and Settlement Strategy, introduced last summer. Mark Whitehouse, Tax Litigation Partner at RPC comments: “Until recently HMRC avoided the costs of litigation by negotiating a settlement with the taxpayer. However, its new strategy means that if it does not receive the full settlement it is prepared to go all the way to Tribunal if it believes it has a strong enough case.”

RPC says that a 37% jump in the number of applications made to the tax tribunals in the past year, up from 3,146 in 2006 to 4,311 during 2007, confirms that taxpayers are increasingly prepared to challenge HMRC’s aggressive tax collection tactics and harsh penalties.

Table showing number of applications and number of cases heard by the VAT and Duties Tribunals and Special Commissioners

Number of applications Number of cases heard
2007 4311 791
2006 3146 708
2005 3008 613

HMRC has proposed that an internal review of appeals made against HMRC decisions should take place before the appeal goes to a tax tribunal. This would come into force with the introduction of the Tax Chamber of the new Tribunal Service, expected in April 2009.

Says Mark Whitehouse: “ Despite that fact that the new tribunal processes are due to be in place by April 2009, there is still considerable uncertainty as to how they will work in practice. The new rules potentially offer taxpayers access to better case management. A lot of work will need to be done if all is to be in place in time for an April start.”

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