Disputes with HMRC officers are almost part of daily life now, driven by a combination of HMRC’s stated policy to maximise revenue and the forceful attitude of inexperienced case officers, who are under pressure to deliver. The end result is often an impasse between the taxpayer and the tax officer and a contentious dispute with little prospect of an amicable resolution.
Q: What type of disputes are you talking about?
A: Disputes which arise in tax and VAT investigations and other compliance checks which lead to a disagreement about some figures, or the treatment of a particular transaction.
Q: What are the common options to resolving a dispute?
A: Appealing against a decision made by the tax officer, requesting an independent review or a formal complaint. As a last resort, a dispute can also be heard at a Tax Tribunal hearing.
Q: What happens if an appeal is made?
A: An appeal usually has to be made within 30 days of the decision being made by the tax officer. The decision may have been to raise an assessment to collect additional tax, or the tax officer may have adopted a different view to the interpretation of tax practice or legislation.
Q: What happens next?
A: Once an appeal is made it can be settled by agreement with HMRC, withdrawn, discussed as part of an independent review or determined by a Tax Tribunal.
Assuming the taxpayer is already locked in a dispute with the tax officer it is unlikely an agreement will be reached to settle the appeal. There will obviously be little desire to withdraw the appeal either. This leaves the remaining options of either requesting an independent review and/or proceeding towards a Tribunal hearing.
Tribunal hearings take a long time to arrange, involve huge amounts of preparation and are usually cost prohibitive.
Q: What about the complaints procedure?
A: The complaints procedure has long since been discredited and is no longer the viable option it once was.
Complaints are initially directed to the tax officer’s manager but given the manager will have already approved the officer’s decision, to all intents and purposes they are one and the same voice.
After the tax officer and manager have expressed their own views on the complaint, it is referred to one of the centralised complaints teams for consideration. These teams are only interested in the procedural conduct of a case, which considerably restricts their remit and precludes them from being able to comment on many aspects of the original complaint.
In most cases the tax officer’s position is supported but, even if a complaint is upheld, an apology and the occasional pitiful redress payment is the best that can be hoped for. Unfortunately, however, this does little to resolve the impasse which already exists.
Q: Is there no other route to resolving a dispute with HMRC?
A: There is one further informal option called Alternative Dispute Resolution (ADR). ADR is a relatively new tool which has all the benefits of arbitration, without compromising the normal rights of appeal. The ADR route can be applied for and used at any time an impasse is reached provided the right of appeal is still available.
Most types of dispute are suitable for ADR and although there are some specific exclusions, around three quarters of all applications are accepted into the process.
It is a civil process established by Lord Justice Jackson, as a means of resolving disputes without the need for costly litigation. It has since been adopted by many organisations including HMRC and, whilst it is does not have any legislative standing, it is supported by HMRC’s Litigation & Settlement Strategy and Tribunal rules and procedures.
Q: How does ADR work in practice?
A: The process is administered by a small team of externally qualified and impartial HMRC facilitators who cover the whole of the UK.
Their role is to provide the setting for all parties to meet and discuss difficult issues in a controlled environment. It is almost like going to Tax ACAS!
The appointed facilitator’s influence over proceedings should not be underestimated and they ensure all parties are called upon and given the opportunity to fully account for their respective positions. From a taxpayer’s point of view, this can often leave the tax officer with nowhere to hide if they have an exposed or flawed position.
All discussions are confidential and held on a ‘without prejudice’ basis, which allows the dispute to be discussed openly in a setting designed to bring about a resolution to the dispute.
Q: Is ADR successful?
A: The ADR team boasts impressive results, settling 89% of all cases on the day of the meeting, of which a majority are settled in the taxpayer’s favour. Even in cases which cannot be resolved, at the very least both parties will gain a much better understanding of each other’s position moving forward.
The main benefit is that ADR is a much more collaborative process, is far less resource intensive and is free to use. There are also no future plans to introduce charges to the taxpayer as in Tribunal applications. This makes it an attractive, viable proposition compared to the time, effort and costs of litigation.
Essentially there is everything to gain by using the ADR process and absolutely nothing to lose.
Abbey Tax has been involved in the development of the ADR process since its inception in 2012 and has strong professional links with the ADR team. We have been successfully representing clients within this process from the start and have achieved spectacular results.
During 2017, we are running ADR workshops where you can learn more about how to successfully navigate the process. A booking form can be accessed here
Alternatively Steve Price, an ex HMRC tax inspector within our Investigations Team can provide consultancy support. Steve can be contacted via telephone on 01788 702764 or via email at email@example.com