An extract from The Tax Disputes and Litigation Review, 8th Edition

The courts and tribunals

i Internal review process

A taxpayer generally has 30 days to appeal against an HMRC decision by way of notice of appeal. The taxpayer may, however, also request a review of the decision. In VAT cases, HMRC is obliged to offer a review of the matter, and seeking a review will delay the period for seeking an appeal until 30 days after the review decision. In direct tax cases, the taxpayer can request, or HMRC can offer, a review of the matter, but only after HMRC has been notified by the taxpayer of the appeal.

An officer who has not previously been involved with the decision will carry out the internal review process; his or her aim is to provide a balanced and objective view. If HMRC offers a review, the taxpayer then has 30 days to accept HMRC's offer or, if they do not wish to accept the offer of a review, to notify the appeal to the tribunal. If the taxpayer accepts HMRC's offer, HMRC has 45 days to complete the internal review procedure and notify the taxpayer of its conclusions, unless varied by agreement. The taxpayer then has 30 days to notify the appeal to the tax tribunal. The taxpayer will require leave to appeal from the tax tribunal once the 30 days have passed. The matter will be considered settled in HMRC's favour if the taxpayer neither declines nor accepts HMRC's offer, nor notifies the tribunal in time.

ii Complaints

HMRC published 'Your Charter' in February 2013. This was updated in January 2016 and currently outlines seven rights that taxpayers can expect from HMRC. These are the rights to expect HMRC to:

  1. respect you and treat you as honest;
  2. provide a helpful, efficient and effective service;
  3. be professional and act with integrity;
  4. protect your information and respect your privacy;
  5. accept that someone else can represent you;
  6. deal with complaints quickly and fairly; and
  7. tackle those who bend or break rules.

A taxpayer may submit a complaint to HMRC in circumstances where it believes that HMRC has failed to uphold one or more of these rights. The taxpayer should submit as much information as possible in order for HMRC to investigate the complaint.

After receiving the complaint, HMRC will try to resolve the issue as quickly as possible. Possible remedies may include an apology, payment for worry or distress or reasonable costs (these may include professional fees). If the taxpayer is unhappy with the decision, they may request that it is referred for consideration to a different HMRC complaints adviser. Following the second HMRC decision, the taxpayer may request a referral to the Adjudicator's Office. The Adjudicator will act as a fair and unbiased referee in the matter. If the taxpayer is unsatisfied with the Adjudicator's decision, they may request their MP to refer the complaint to the Parliamentary and Health Service Ombudsman. This may be a lengthy process, depending upon the particular facts and the willingness of either side to reach an agreement, and taxpayers should continue to pay any tax due pending the resolution of the complaint.

iii Courts and tribunals

The first instance tribunal for most tax disputes is the Tax Chamber of the First-tier Tribunal. It sits as a tribunal of one to three tribunal judges, depending on the issue's complexity. Appeals from decisions of the First-tier Tribunal are to the Tax and Chancery Chamber of the Upper Tribunal by leave only on questions of law. The Upper Tribunal can also determine cases transferred from the First-tier Tribunal and judicial reviews of the tax functions of HMRC, and can hear cases at first instance (i.e., bypassing the First-tier Tribunal), but only if such cases meet the category of 'complex' and the Upper Tribunal and both parties consent. The Upper Tribunal also sits as a tribunal of one to three judges, one of whom must be a judge of the Chancery Division of the High Court. Both bodies are independent of HMRC. There are no set parameters for the time period for determining cases, but a case requiring a hearing of less than a week should be capable of being heard by either tribunal within a year.

Appeals from the Upper Tribunal are to the Court of Appeal (which sits as three judges), then to the Supreme Court, again only with permission and (except in extreme cases) only on questions of law. Appeals to the Supreme Court will not be granted permission unless the matter is of general public importance. It sits as a panel of an uneven number of no less than three (but usually either five or seven and exceptionally eleven) judges. The judges are independent of HMRC. Periods for hearings in the higher courts naturally tend to be longer. We would usually expect cases to take around 18 months to complete in the Court of Appeal, and two years in the Supreme Court.

Certain types of claim, as discussed below, must be brought in the High Court (either in the Chancery Division or the Administrative Court), rather than via the tribunal system. As an appellate body created by statute, the First-tier Tribunal has no general supervisory jurisdiction; claims concerning public law matters are therefore best brought by way of an application for judicial review in the High Court. Cases in the High Court should not take much longer than those in the First-tier Tribunal and in the area of judicial review tend to be quicker. Appeals from the High Court lie by permission to the Court of Appeal and then the Supreme Court.