"Aggressive" UK Tax Authority Fuels Rising Tribunal Backlog, Says Law Firm

Tom Burroughes Group Editor 8 March 2019

The law firm says that rising numbers of judicial reviews and an "aggressive" HMRC approach are causing tribunal cases - with damaging delays - to accumulate.

UK tax tribunals are struggling to handle appeals against rulings, with HM Revenue & Customs’ “aggressive” anti-avoidance approaches to blame, according to international law firm Pinsent Masons.

In the year ended 31 March 2018, a total of 28,000 First-Tier Tax Chamber cases were reported, rising from 25,250 in the previous 12-month period. The backlog has swelled for three straight years and more than doubled from 13,460 in 2009/10. Small, medium and large firms are covered by the data, as well as private individuals.

“HMRC’s inflexible approach to dealing with disputes is exacerbating the growing backlog of tax tribunals. It’s generally recognised that this backlog needs to come down but it has hardly shifted at all,” Steven Porter, partner at Pinsent Masons, said. “Businesses can often wait for years between when an investigation is first launched and when a final judgement in the courts is handed down. This uncertainty can be hugely damaging and may result in a business falling behind its peers as decisions and spending get shelved until the outcome is clearer,” Porter continued. 

The law firm said that while HMRC recently updated the framework to make it easier to settle with taxpayers, this appears to have had a limited effect on the backlog so far. In the new framework HMRC has set the target of reaching an agreement as its “default approach”, which was not the case previously.

The Tribunal Service said that it wanted to recruit more judges last year, which Pinsent Masons said suggested there is a bottleneck.

The rise may also suggest that more firms and people are challenging HMRC through judicial review. 

The number of judicial reviews faced by HMRC increased by 36 per cent last year to 122, up from 90 in 2016. Many judicial reviews involve taxpayers appealing against the imposition of Accelerated Payment Notices, the law firm said. 

An APN requires a taxpayer to pay the full amount of disputed tax immediately without waiting for a court or tribunal decision on the dispute. The tribunal does not have jurisdiction to consider whether HMRC was correct in issuing an APN, but does have the jurisdiction to consider the penalties issued for non-payment of the APNs, which may be part of the explanation for the backlog before the tribunal.

Backlog of tax disputes hits 28,800, more than double the level in 2009/10 (first recorded year).

Source: Pinsent Masons.

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