Concern has already been voiced over new proposals put forward in a consultation document published with the pre-budget report: ‘Tax appeals against decisions made by HMRC’.
A key proposal is that appeals against decisions made by HM Revenue and Customs (HMRC) will be conducted exclusively by HMRC’s own staff. CCH, the accounting and tax information provider says the moves could delay repayment of taxes by months, may not be transparent or impartial and could delay the dispute resolution process.
The consultation proposes that HMRC review tax disputes ahead of the proposed new independent tribunal system. The Tribunals, Courts and Enforcement Act, which received royal assent in July is set to eventually dispense with the General Commissioners and Special Commissioners appeal tribunals.
In the consultation document HMRC suggests that reviews could be a statutory requirement, meaning that taxpayers could not take disputes to independent tribunals until the review panels had reached their decisions. However, there is no indication of how long such reviews could take, more complex cases could take months to review depending on the resources allocated to deal with this proposed new process and bearing in mind HMRC’s latest “Settlements and Litigation Strategy”.
Neil Tipping, Senior Consultant at CCH, comments: “Taxpayers should have the right to decide if they want an internal review or to go straight to a tribunal hearing. Otherwise this could just become a delaying tactic.”
“Tribunals, whether under the old or proposed new system, can be expensive, so there is a need to have a less costly alternative, but there is real concern that if reviews are conducted by HMRC staff and are not seen as impartial, taxpayers will not have confidence in their decisions and will continue to refer many disputes to the tribunal system.”
In an article in September’s Taxation magazine, tax expert Robert Maas suggested that the HMRC should look no further than United States’ Internal Revenue Service (IRS) - the US equivalent of HMRC and consider setting up a “Taxpayer’s Advocate Service". In the US this is an independent organisation, which is promoted by the IRS. It also works with the IRS in resolving a wide range of issues. Robert argues that there are "huge benefits" from having advocates who know the system and yet are truly independent, and can also report independently to parliament.
HMRC’s consultation document appears to rule out an independent body on cost and duplication grounds, instead it appear that staff from the same office will be called upon to review each others work. Neil Tipping adds: “It would be preferable if different regional offices reviewed each others’ work, so that personal relationships do not impinge on decisions, but this safeguard is not given as an option in this consultation.”
He also points out that a benefit of the current general commissioners proceeding is that taxpayers can have cases heard by relatively local tribunals and suggests that it would be a retrograde step if the new review proceedings were to be held in (say) London and would erode one of the stated aims of the new process, being to make it a “simple, cheap and informal process”.
He adds: “All interested parties should take the opportunity to contribute to the consultation process to ensure that all these concerns are aired before HMRC settles on the final procedure.”