HMRC Outlines Major Changes To Tax Tribunals System

by Robin Pilgrim, LawAndTax-News.com, London

17 March 2009

A new tax appeals system and internal review process will be implemented in the UK on April 1 under major changes to the current system of tax tribunals, HM Revenue and Customs has announced.

A Revenue and Customs Brief, released on March 16, explained that the new review process will provide a more "consistent approach" to the way HMRC seeks to resolve disputes with those who disagree with appealable tax decisions made by the authority.

Currently, there are three main tribunals which deal with appeals against HMRC decisions. From April, these tribunals will be abolished and replaced by a single Tax Chamber in the First-tier Tribunal which will consider all disputes and hear appeals in relation to both direct and indirect tax.

The Tribunals, Courts and Enforcement Act 2007 introduced two new bodies, the First-tier Tribunal and the Upper Tribunal. Over time most existing tribunal jurisdictions including the tax tribunals will be transferring into the new bodies. The new system went live on November 3, 2008. These new statutory bodies are administered by the Tribunals Service which is part of the Ministry of Justice.

Both First-tier and Upper Tribunals are divided into 'chambers' where similar types of appeal are heard. On November 3, appeals formerly heard by the Social Security Appeals Tribunal successfully transferred to the First-tier Social Entitlement Chamber.

Tax appeals will transfer to a new First-tier Chamber, to be known as the Tax Chamber, on April 1. A right of appeal against decisions of the First-tier Tax Chamber will also be created to a new chamber in the Upper Tribunal to be known as the Finance and Tax Chamber.

The First-tier Tribunal will deal with the vast majority of appeals, apart from a very small number of the most complex appeals that will transfer to the Upper Tribunal at first instance. The Upper Tribunal will mainly deal with appeals against decisions of the First-tier Tribunal. Work within each tier of the tribunal will be organised into specialist chambers, one of which will deal with tax.

As part of the reforms, the General Commissioners and Special Commissioners of Income Tax, the Section 706/704 Tribunal and the VAT & Duties Tribunals will be abolished after March 31, 2009 and their existing functions will transfer into the new First-tier Tax Chamber. Some straightforward appeals will in future usually be dealt with on paper without the need for HMRC or taxpayers to attend a hearing.

To coincide with tribunal reform, taxpayers will be entitled to request an internal review of appealable tax decisions. This new legal right to a review will replace reconsiderations and mandatory reviews in indirect taxes. HMRC says that reviews will be optional and will be carried out by a trained review officer who has not previously been involved with that decision and who will thus be able to provide a "balanced and objective" view. In the vast majority of cases the review officer will be outside the immediate line management chain of the decision maker, HMRC said. Taxpayers disagreeing with the result of the review can appeal to the tribunal for a decision.

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