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When HMRC doesn't play by the rules

30th Jan 2015
Tax Writer Taxwriter Ltd
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When a taxpayer or HMRC asks the tax tribunal to settle a tax dispute both sides have to abide by the Tribunal Procedure rules.

This means, amongst other things, meeting the deadlines for delivering documents to the tribunal and respecting time limits set by the tribunal.

In a recent VAT case, Pacific Computers Ltd v HMRC,  both sides were asked to provide their closing submissions in writing and requested a period of six weeks in which to do this.

The taxpayer provided its submissions on time and Judge Shipwright noted that they were helpful, to the point and of a sensible length. The HMRC team submitted closing submissions of 116 pages, much of which was not of assistance to the tribunal.

The HMRC team then attempted to make further submissions although the judge had said that as it was the taxpayer’s appeal the taxpayer should have the last word. After further argument a second 'final' submission was accepted and the taxpayer was invited to reply, which it did in eight pages.

At the end of this long case, which was heard over 10 days in early 2014, the tribunal found in favour of the taxpayer. But Judge Shipwright was not happy with the behaviour of the HMRC team throughout the case.

He said: "We remind HMRC the tribunal directions are there to be obeyed and not there for HMRC to decide whether it wishes to comply. For the sake of completeness we remind both parties the directions of the tribunal are there to be obeyed.”

But this is not an isolated instance of HMRC missing court deadlines. AccountingWEB reported recently that training group BPP is going to the Court of Appel to try and block HMRC from participating in a VAT tribunal after the tax department failed to supply full explanations of its decisions by the deadline set by the first tier tribunal judge.

In aother upper tribunal case, Leeds City Council v HMRC, the matter concerned an application for costs following a case whose decision was released on 3 December 2013. Such applications must normally be made within a month of the tribunal’s decision, and in this case by 3 January 2014. 

Leeds City Council submitted its application by the required deadline, but HMRC’s application arrived six days late and without the required schedule of costs. Leeds objected, but the tribunal extended the deadline to allow the HMRC submission of costs.  

If you are taking a case to the tax tribunal you should try to meet the deadline for submission of documents. If that appears to be impossible, seek an extension in advance from the tribunal. Also keep your submissions to a reasonable length and relevant to the facts of the case.

Rebecca Cave is the author of Tax Rates and Tables 2014/15 published by Bloomsbury Professional.

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By NYB
02nd Feb 2015 11:53

HMRC TRIBUNALnot playing by rules
How reassuring I am not the only one. But you are quoting large organisations
Only last week I as a payroll provider - a tiny firm- was at a Tribunal. We had all our papers filed within the timescale.
The HMtRC inspector arrived 15 minutes before the start time & gave us a supplementary bundle which was 70 pages. He also had a discussion with the judge prior to the hearing. Obviously we had no time to read aforementioned bundle. This was our first point mentioned. HMRC said there was only a very small supplement. The Judge said " never mind we will carry on and hear the case". When we got going it became apparent that the whole of the HMRC paperwork was in a shambles. We had appealed under Section 80 - failure to deduct tax. The basis of their statement was all referenced under Sectio n 72 - failure to deduct tax but with the option to recover from employee. We had never been offered an appeal under Section 72. Once again the Judge said " never mind we will hear the case & then we will look at the rules & regs after". HMRC wriggled throughout. The case was heard and we shall get a result in about Two months.
On returning my accountant adviser read the supplementary bundle and theire are things in there he would have challenged if he had had the chance.
Please forgive me with some of this. I am not a tax expert and had to take advice from an accountant on this case.
It all seems very very wrong that their is one rule for one and one for another. I have no faith in the supposed independence of these tribunals.

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By chatman
02nd Feb 2015 12:00

Didn't get the bundle till we arrived at the hearing

On two occasions, HMRC has not provided us with their bundle until we arrived at the hearing. And I've only been to the Tribunal three times!

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By Casterbridge Hardy LLP
02nd Feb 2015 12:07

The End of Justice

After 47 years in this game (a statistic which I have quoted before - sadly) I am drawn to the inevitable conclusion that H M Revenue and Customs retain an increasing number of staff who have scant regard for professional courtesy (seemingly regarding this as an anachronistic irrelevance) and an almost thuggish approach to dealing with the profession and clients.  The days of reasonable negotiation seem to be closing fast and the financial clout and power of the state are being employed more and more to crush resistance irrespective of the merits of the case.

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By charles.underwood
02nd Feb 2015 13:06

Be prepared

A few comments as a Tribunal Member and a practicing accountant.  There are four categories of case.  Bundles for Basic ("turn up and talk") cases are only produced on the day.  They should only contain correspondence and related documents that both parties have already seen.  If you are not satisfied with the time available to check that is the case, ask for a quarter or half hour postponement.  Every Judge I  have sat with would allow a reasonable period.  If there really is something significant and new in the bundle, the Judge will be critical of HMRC and give the taxpayer time to prepare.  If necessary postponing until another day.

Remember, though, that the taxpayer and his accountant have a duty to prepare themselves for the hearing.  It is quite common to have a taxpayer who admits that he did receive an important letter from HMRC but did not bother to read it.

As for a private discussion between HMRC and the Judge, I would be astonished if that had happened and it would be a cause for complaint.  What is much more likely to have happened is that the HMRC Presenting Officer had just presented a case about a different taxpayer, perhaps one who had chosen not to turn up.

At every hearing I have been to, we have been very careful to make sure that both sides have a proper opportunity to put their case.  If the taxpayer choses not to turn up we are careful to explore, as far as we are able, the points that he might have put.

If you ever feel that you are not being treated fairly, speak up immediately.  We will deal with your point as best we can.

I will finish by repeating the point that the taxpayer and his accountant have a duty to prepare properly.  Do not close your eyes to important correspondence and hope it will be alright on the day. Do not try and spring a surprise on HMRC or the Tribunal. Use the Tribunal properly and you will find it a great asset.

 

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Replying to Galaxian:
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By NYB
02nd Feb 2015 14:51

HMRC Unfairness BE PREPARED

I can assure you in this case  we were were fully prepared. This case has been sitting with me for over 2 years one way or another. The accountant in question is my husband. I would not have been able to tackle an appeal/tribunal on my own. I am experienced in payroll but not the tax legislation that is involved surrounding this very small case.Which brings ijn another point - these tribunals are not for the faint hearted nor the "small" person. In this particular case the "whole" was incorreect by HMRC. It was being handled by one officer and then at the last minute transferred to someone else. This resulted in the additional bundle. It would seem that it was realised the case had been poorly prepared. In addition, a previous case was sited in the Statement of Appeal which had nothing to do with my case. We asked for this to be disregarded and the HMRC officer admitted it was nothing to do with it. I would have liked to have gone through the additional bundle myself. Although not the expert in the legal side I do have the capability of understanding what is in front of me but I would need time to absorb it. An adjournemount would have been appropriate. With regards to the incorrect application of tax Rule 80 versus 72 I think the whole thing should have been thrown out.

But unllike a court of law I presume that never happens.

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Replying to Galaxian:
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By dstickl
03rd Feb 2015 10:29

@charles.underwood What are the other 3 categories of case, pl ?

charles.underwood wrote:

A few comments as a Tribunal Member and a practicing accountant.  There are four categories of case.  ...

What are the other 3 categories of case, please ?

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Replying to C.Y.Nical:
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By charles.underwood
03rd Feb 2015 10:49

Case categorisation

Leaflet T242 available on the Tribunal website outlines the four categories and how they are treated.  They are default paper, basic, standard and complex.  

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By Satwaki Chanda
02nd Feb 2015 13:18

The rule of law

These remarks by the judge are very pertinent:

"We remind HMRC the tribunal directions are there to be obeyed and not there for HMRC to decide whether it wishes to comply. For the sake of completeness we remind both parties the directions of the tribunal are there to be obeyed.”

They provide a very good illustration of the rule of law in practice. The idea that no one is above the law, including the executive branch of government (very timely reminder given the 800th anniversary of Magna Carta).

"Be you ever so high, the law of England is above you." - Chief Justice Lord Coke to James I.

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By dstickl
03rd Feb 2015 11:26
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By dstickl
03rd Feb 2015 13:36

Leaflet T243: "At your hearing" link ...

Unfortunately, Leaflet T242 page 9 doesn't seem to set out this Leaflet T243 link: 

http://hmctsformfinder.justice.gov.uk/courtfinder/forms/t243-eng.pdf 

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By dstickl
03rd Feb 2015 13:42

& Upper Tribunal link ...

http://www.justice.gov.uk/downloads/tribunals/tax-and-chancery-upper-tri...

that states: This leaflet does not deal with appeals from the First-tier Tribunal in tax and charities cases. A separate leaflet, which may be obtained from our offices or downloaded from our website, describes the procedure to be followed in those cases. 

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