Only Half Of Those Daring HMRC Win Their Tax Cases

Taxpayers who dare to challenge a decision by HM Revenue & Customs (HMRC) have a 50:50 chance of overturning the result on review, according to new data.

HMRC has published statistics detailing the number of cases going to review – and the outcomes for taxpayers.

It’s difficult to work out whether the figures are meant to discourage taxpayers from challenging a tax inspector’s decision or to encourage them to argue their case.

The study shows that the total number of calls for a case review dropped, but HMRC’s ongoing record of winning – or losing, depending on how the figures are viewed – was maintained.

Taxpayers asked for 37,668 case reviews in 2013 – down from 38,975 in the previous year and representing a drop of almost 5%.

How the cases break down

The reviews are across the range of taxes – including income tax, capital gains tax, corporation tax and VAT.

Most of the reviews, says the HMRC report, relate to penalties for late filing of returns and late payment of tax. These penalty assessments are issued automatically if HMRC’s online systems believe documents or tax payments are late.

Many of the calls for review were from businesses against VAT penalty decisions, but a significant number arose from personal tax issues.

Here’s how the figures break down:

  • VAT penalty reviews: 18,109 in 2013-14, compared with 20,046 in 2012-13
  • Other tax penalty cases: 14,150 up from 13,178 in 2013-13
  • Non-penalty reviews: 6,362 up from 5,932 in 2012-13

HMRC’s tribunal success rate

On review, almost half of VAT penalties were cancelled (49%), while 39% of other penalty cases and 26% of non-penalty cases were won by challengers.

The case reviews are carried out by HMRC staff not involved in issuing the penalty decision.

In the last tax year, 7,081 cases were appealed to tax tribunals.

Around 6,620 cases were settled at the hearing or by negotiation before going before the tribunal. Of these, 1,631 cases had previously been argued at the review stage.

Cases that were not closed are in the tribunal pipeline for a formal hearing or held pending a decision in another case.

HMRC won three-quarters of cases at first-tier tribunals. Around a third of tribunal appeals go before the tribunal – the rest are agreed out-of-court. Less than half of taxpayers win at a tribunal (44%).

Only 15% of taxpayers brief a lawyer or accountant to help them with a review and only 34% take a professional into a tribunal. These figures have been a trend for the past three tax years.

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