Tax Problems

Tax issues & disputes

Resolving disputes with HMRC

The first step to take when you have a tax dispute is to try and resolve the issue directly with Her Majesty’s Revenue and Customs. The Revenue has a broad discretion to negotiate with taxpayers to reach a settlement, and often they will be prepared to compromise. You should take advice from an experienced tax professional regarding your strength of your case, as it may be in your best interests to make some concessions in return for the tax office backing down on another issue.

In many cases, the tax authorities will be keen to avoid court because of the expense and inconvenience involved. If you have a strong case, the tax authorities may be concerned that you will win and the court will set a precedent which other people will use in their disputes.

If you have taken advice from a tax advisor and have been unable to agree an outcome with HMRC then you may have to consider taking legal action against HMRC by appealing against their decision to a court.

Tax courts

Until recently the process of disputing a tax issue was extremely complicated and there were a wide range of different judicial authorities involved. General Tax Commissioners, Special Tax Commissioners and VAT Commissioners were just some of the organisations involved in hearing tax related cases. The judge or court which would hear the case depended on the type of tax and the complexity of the case.

In 2009 all of these organisations were abolished and responsibility for judging tax related cases was brought under the new Tribunal Service which had been set up by the government. Initial appeals against decisions made by HMRC are now heard by the First Tier Tribunal (Tax) where a judge and a non-lawyer member who is a specialist in taxation will decide the case. If you dispute the decision of the First Tier Tribunal then you can appeal to the Upper Tribunal (Tax & Chancery) and if you are still dissatisfied with the outcome then a further route of appeal lies to the Court of Appeal and if necessary the Supreme Court.

Even though the system for challenging decisions of HMRC has now been streamlined in that cases about all types of tax dispute are dealt with by the same courts, taking legal action in a tax dispute can still be confusing. The tribunals have complicated rules of procedure which may be difficult for people who are not legally qualified to understand and apply, and presenting a case in court is something which few people are able to do with confidence.

Expert witnesses

Sometimes qualified tax professionals and lawyers may be asked to attend court to act as an expert witness, giving detailed evidence on accounting and financial planning practice. Expert witnesses can have a substantial impact on a judge’s opinion of your case and may well benefit your claim.