UK Tax Appeals Jump As HMRC Gets Tough

by Robin Pilgrim, LawAndTax-News.com, London

14 January 2010

New figures suggest that HM Revenue and Customs' (HMRC's) more aggressive approach to tax collection and litigation in recent years has led to a substantial increase in the number of appeals by taxpayers to tax tribunals.

According to UHY Hacker Young, the national accountancy group, the latest data shows that tougher tax collecting tactics and penalties imposed by HMRC have contributed to a 14% increase in appeals in 2008 by taxpayers claiming to be overtaxed or unfairly punished.

Figures obtained by the firm show that the number of cases received by the Value-Added Tax (VAT) and Duties Tribunal and the Special Commissioners Tribunal increased from 4,311 in 2007 to 4,897 during 2008.

UHY Hacker Young says that HMRC’s introduction of a new “Litigation and Settlement Strategy,” under which it pledges to fight a case through the courts rather than negotiate a settlement if it believes “it has a strong enough case,” has also helped drive up the number of cases heard by the tax tribunals.

Roy Maugham, Tax Partner at UHY Hacker Young, comments: “HMRC seems to be less and less deterred by the cost of litigation. It is now much more prepared to go all the way through the Tribunals rather than negotiate a fair settlement with the taxpayer as it used to. It is doubtful whether this is the most effective and pragmatic way to solve problems.”

The firm says that with HMRC's significantly enhanced powers over the last few years, coupled with instructions from the government to pursue tax evasion more aggressively, many taxpayers feel that their civil liberties are being infringed.

However, given the bleak fiscal landscape, Maugham warns that HMRC is under more pressure than ever to maximize the tax take.

"The Treasury needs every penny it can get its hands on," he notes. “For example, the government has just doubled the maximum penalty for tax evasion in relation to offshore bank accounts from 100% to 200%.”

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