First tier tribunals: What to expectby
As daunting a prospect as it might be, the first tier tax tribunal (FTT) is something accountants and tax advisers are likely to face at some point during their career.
Set up in 2009 to replace the four separate tax tribunals (Special and General Commissioners, VAT and Duties and Section 706 Tribunals), the tax chamber deals with direct and indirect tax-related decisions made by HMRC, including:
- Income tax
- Corporation tax
- Capital gains tax (CGT)
- National insurance
- Stamp duty land tax (SDLT)
Appeals can be made by individuals, organisations, single tax payers or multi-national companies.
If you’ve never dealt with this relatively new tax tribunal before, what can you expect?
Winch appeared at a tribunal as an expert witness, while Ludd pondered whether to take HMRC to a tax tribunal on behalf of a client.
The following guide on what to expect in a FTTT is based partly on members’ experiences, and partly on notes on some of the basic practicalities extracted with the permission of publisher Claritax from tax barrister Keith Gordon’s book, Tax Chamber Hearings: A User’s Guide 2013.
Winch appeared for his first time in a FTTT as an expert witness, acting for the taxpayer, who was a former Big Four firm tax partner.
FTTT are considered less formal than traditional than normal courtrooms, something Winch experienced while there.
“Although both SOCA and the appellant were represented by barristers, neither of them donned the normal wigs and gowns. And surprise, surprise, there was no jury,” he said.
“What I did find odd was that throughout the proceedings, the barristers and the witness giving evidence, remained seated."
According to Tax Chamber Hearings, signs of informality are sometimes difficult to discern, especially where the hearings are held in the small courtroom-like tribunal hearing rooms.
There are two places where these tribunals are held: the main tribunal centres and centres elsewhere in the UK.
An extract from Gordon's book provides a good summary of what to expect:
Main tribunal centres and other courts
As noted, the Tribunal’s permanent hearing rooms are usually decorated like small courtrooms, with a slightly raised platform for the judges.
HMRC’s representative and the taxpayer (or, the taxpayer’s representative) will usually sit at desks facing the judges. There is usually a second row of desks behind which one would usually find the taxpayer (if a representative is sitting in the first row) and also anyone else attending from HMRC.
The usual seating arrangement is that the taxpayer (and anyone attending with the taxpayer) would sit on the left side of the room (i.e. on the judges’ right) with HMRC’s representatives on the right side (i.e. on the Judges’ left). However, this is not strictly adhered to and, particularly, when there are a lot of people in the room, some flexibility should be expected.
Any members of the public and other observers will usually be able to sit on chairs at the back or side of the room.
In front of the Judges will be an area for witnesses to give their evidence and usually a desk for the clerk to sit at. The clerk will not always remain in the Tribunal for the entire hearing.
Other tribunal centres
To prevent taxpayers from having to travel to the main tribunal centres (London, Manchester and Edinburgh) in every case, the tribunal will often sit elsewhere in the UK. This is predominantly the case where hearings are less complex.
Where there is a good reason for a case to be heard away from the normal Tribunal centres (perhaps one of the parties or key witnesses is unable to travel or the Tribunal will be required to conduct a site visit) then it will usually be possible for a more local hearing to be arranged.
Sometimes, the Tribunal will sit in a local courtroom. However, sometimes a meeting room at a local town hall or other civic building will be used.
A similar ad hoc arrangement will often be used for some hearings held in London if accommodation at the main tribunal centre is fully occupied.
In such cases, the layout of the room will be subject to some adjustments to take into account the temporary nature of the space. However, it will generally be based on the normal layout described above.
As Winch mentioned, no wigs or gowns are worn. Instead, business suits are worn by judges and other attendees are expected to dress similarly.
Communication in the chamber
As Winch highlighted in his post, there are some pros to being in a tax tribunal rather than a crown court or court which includes people "off the street" in terms of communication.
He said during his case, there was no time wasted trying to explain technical tax language, as everyone was aware of the terms.
In Gordon's book, part 8.5.3, goes on to explain how attendees should address judges, HMRC and other parties in the tribunal;
Although it is common for the Judges to have name plates in front of them, the custom in the tribunal is for male individuals sitting on the tribunal to be addressed as "Sir" and female individuals as "Madam". In those circumstances when someone wishes to address all the judges or members in one go, the tradition is for the third party phrase "the tribunal" to be used. However, the author would not expect any judge to be particularly concerned if the protocol is not fully observed, as long as proceedings do not become too informal.
Referring to the parties or HMRC's representative:
As one might expect in a formal meeting, it would rarely be appropriate for the taxpayer (or the taxpayer’s representative) to speak directly to HMRC’s representative during the course of the hearing and vice versa: all remarks ought to be addressed through the tribunal. Consequently, HMRC and their representative will generally be referred to in the third person. The only exception is where HMRC’s representative is also acting as a witness: during cross-examination, it will be certainly be acceptable to speak to the representative directly.
There are all sorts of traditions about the way one should address another party or HMRC’s representative. Traditionally, the parties would not be referred to by name but as "the appellant" or "the respondents" (HMRC usually being the respondents in the Tax Chamber) and one party’s representative would often refer to the other side’s representative as "my friend" or if a barrister "my learned friend".
However, the author suggests that, in the slightly more informal proceedings that the tribunal is supposed to adopt, the tribunal would not object to HMRC being referred to simply as “HMRC”, “the Revenue” or “Customs” and any individual (whether the taxpayer or HMRC’s representative) as “Mr”, “Mrs”, “Miss”, “Ms” or “Dr” etc. Similarly, if the taxpayer is a company, it should be appropriate to refer to it simply by name.
8.5.5 Speaking to the tribunal
Any person addressing the tribunal should remember that the tribunal will usually be making notes of what the person is saying. Therefore, one should usually pause between sentences to ensure that the tribunal has kept up.
Even if one has not been asked to provide a summary of arguments in advance, it is often helpful if a written note can be prepared of what one is likely to be saying. This will not only ensure that nerves do not take over on the day but should also give the Tribunal considerable help in understanding the nature of the argument.
Where such a note has been prepared, it will be useful to bring some spare copies (one for the HMRC representative and one to retain and use as an aide-mémoire). However, it will often be possible for photocopies to be made by the tribunal if necessary.
As an attendee, you may also wonder about formalities such as when you stand up and sit down.
Gordon's book further explains these:
As the judges enter or leave the room
In many hearings, the judges will enter the room formally. Those present in the tribunal room will be asked to stand as they enter.
The judges will make their way to their seats, face those in the room and give a small bow (effectively a slow nod of the head). Those present in the room should give a similar nod in response. The judges will then invite those present to sit down again.
Similarly, at the end of any hearing (or whenever the Judges adjourn, all present will be asked to stand up, the judges will give a nod to those present (and those present will respond) before the judges leave the room.
At some hearings, however, particularly those outside the main tribunal centres, the judges will remain seated in the tribunal room throughout and individual cases will be invited to come inside in turn. In such cases, there is no formal standing up and/or nodding to the judges.
During the hearing
Tribunal proceedings are conducted sitting down. So, even when one is speaking, it is the custom to remain seated.
If a witness is swearing an oath (or making an affirmation), the witness will usually do so standing up. However, when actually giving the evidence and/or responding to questions from one or more of the representatives or the Judges, that will all be done sitting down.
When an individual leaves or enters the room
Except when a witness is swearing an oath, there is no reason why an individual cannot leave the room partway through a hearing. Nor is there any reason why a latecomer cannot be admitted (subject to any risk of the individual causing a distraction etc. or a direction that the hearing be in private). In each case, as the person is at the door of the Tribunal room, it would be traditional for a nod to be given to the judges. Such a nod will not normally be acknowledged by them.
What to expect as an expert witness
In his post, Winch outlined what to expect when appearing as an expert witness. He was instructed by a solicitor based on his expertise in the particular area.
It was an "enjoyable" experience for Winch, he said, but has to remain confidential about the contents of the case.
Winch spent over two-and-a-half hours in the witness box, going though his prepared written report. He was then cross-examined, briefly questions by the taxpayer's counsel and finally dealing with queries raised by tribunal members.
Accountants rarely represent their clients at FTTTs, as HMRC now appoints tax barristers and they don't want to be "outgunned", according to AccountingWEB member Malcolm McFarlin.
Winch agreed in a later post: "There will be an underlying ‘legal’ approach to the hearing of the appeal and the deciding of the outcome. That ‘legal’ approach will not come naturally to most accountants in general practice and this may place them and, more importantly, their client – at a disadvantage before the tribunal," he said.
Taking a client appeal to the FTTT
More commonly experienced by accountants is the prospect of taking client appeals to a FTTT.
Member Ned Ludd brought his concerns to Any Answers, faced with his first time at a tribunal rather than accepting an internal review by HMRC.
In short, his appeal concerned HMRC raising a £35,000 plus assessment on a limited company client whose company was dissolved, then bought out a shop nearby. The client operated as a bookmakers but were unaware of betting duty so didn't register, which came out when HMRC came to visit the business.
While the member became uncertain about taking his appeal to the tribunal after receiving member comments, some posters had some good advice, including:
- Check out guidance from the Tribunal Centre before you go, which explains the procedures - leshoward
- Check the tribunal rules about costs, as you can be liable for the other side's costs if you (a) behave unreasonably and (b) the case is a "complex" one and you lose and you have not previously 'opted-out' of the costs regime, which you must do before the hearing - David Winch
- If based on an interpretation of case and statute law, instruct a lawyer to put the case before the tribunal
- Even though they may be your clients and you are convinced they are in the right, take a detached view of proceedings before opting to go to tribunal - fawltybasil2575
- If given a choice of a review and you are unsusre, take it as you can still appeal the assessment after this
- You cannot win a case purely on the basis of common sense and fairness, you need to have a solid, fact-based argument prepared before the tribunal
- There is only a 21% success rate for taxpayers in tax tribunals - so consider your other options first - Malcolm McFarlin
While in this case, the member chose to opt for an internal review before taking the case to tribunal, it might be an option for others -- as long as you prepare properly and are sure that this is the route for you.
The 2013 edition of tax barrister Keith Gordon's book Tax Chamber Hearings is available to buy at £68.50 from Claritax Books. It was recently reviewed for the AccountingWEB Book Club. Have you been to a FTTT? Share your tips and advice for those approaching one for the first time below.