If you have a complaint or any other issue with HMRC, it very much depends on what the problem is, before you attempt to challenge our wonderful tax office, as there a variety of ways to do so.
It goes without saying, that choosing the best course of action, very much depends on what exactly is the problem you’re attempting to resolve. So, today. I will give you a basic guide as to what actions you should take, dependent upon the issue you are aggrieved about.
“HMRC haven’t been fair in how they’ve dealt with me” could well the start of a legitimate complaint, but it should never be the basis of an appeal to the tax tribunal (FTT). A number of recent tax tribunal decisions serve as useful reminders that perceived failings or a suspicion of unfairness is not enough to overturn an HMRC decision. You need to show that the decision made by HMRC, is incorrect in law.
The ‘unfairness’ argument
The facts of a recent FTT case were simple; the taxpayer for a number of years had made claims for tax relief on their travel expenses as an employee via their annual SA tax returns, which had been allowed by HMRC. Then, on the most recent tax return HMRC opened a routine enquiry and decided to disallow the claim. To make matters worse, they also disallowed all previous years’ claims.
The aggrieved taxpayer appealed and tried to argue that the earlier years’ claims were valid and based his appeal argument on what he perceived to be the unfairness shown by HMRC. He argued that the tax office had allowed multiple years of identical claims and had not identified any errors. He also argued that his appeal should be allowed in any case, as his claims were based on advice received from an HMRC officer some years earlier.
The tribunal had little difficulty in looking past these arguments and finding that on the facts, the claims were not permissible under the tax legislation in force when the claims were submitted. Also, whilst they accepted that the appellant may well have been given incorrect advice some years earlier, as it was verbal in could be proved or disproved. It is common for taxpayers to raise the ‘unfairness’ argument, especially as most members of the public would probably agree that most of HMRC’s actions are inherently unfair.
It is also true in most cases of this type, the tax tribunal is sympathetic to the taxpayer’s argument, but unfortunately for the appellant, sympathy is most definitely trumped by the law, which the tribunal cannot override. There are, in general, only three ways to challenge HMRC, and the most appropriate route to challenge will depend on what it is that you seek to address.
The legal ways to challenge HMRC
My experience, after many years of locking horns with various tax inspectors, is that in essence, there are only four ways to challenge HMRC, and the most appropriate route to challenge will depend on what it is that you seek to address.
- Internal review – Most instances of poor service and administration by HMRC should be taken up via its complaints procedure. This will include instances of delay, poor communication and failure to follow guidance etcetera. Such complaints are referred to its internal complaints team, and, if upheld, will normally result in an apology, corrective action and, where appropriate, compensation, including reimbursement of additional costs incurred as a direct result.
A successful complaint will not however, mean that any tax correctly due, will be written off, although it is likely that HMRC will waive any interest potentially due. It will also not prevent the tax inspector from continuing his/her enquiries into you tax affairs or make him cease as this is the exclusive domain of the inspector and the tax tribunal.
- The Adjudicator/Ombudsman – If, having gone through the internal review process, you still feel aggrieved, you can escalate your tax complaint to the Adjudicator’s Office or the Parliamentary Ombudsman. The Adjudicator acts independently to investigate complaints about customer service, delays, or mistakes made by HMRC, once you have finished HMRC’s internal complaints procedure.
The Parliamentary Ombudsman investigates unresolved maladministration by government departments, especially HMRC, but will normally investigate your case once it has been reviewed by the Adjudicator and referred to them.
- Judicial review – In some circumstances, HMRC may make a decision that appears unreasonable and when such a decision has no right of appeal to the tax tribunals, the only way to hold HMRC to account is by way of judicial review. For any decision to be unreasonable, it must have been made at HMRC’s discretion, and it must be clear that the average ‘man in the street’ would not have arrived at the same conclusion.
- Tax Tribunal (FTT) – This is the route followed by most taxpayers complaining at HMRC’s decisions, whether it be tax assessments, penalty notices or liability decisions. Remember, that any challenge must be based on the law rather than reasonableness or fairness as regrettably the powers granted to FTTs are restricted to matters of law.
Therefore, before you start your appeal, you must identify a specific legal point or an error by HMRC when reaching a decision or an incorrect interpretation of the law by the tax office, such as in many of the cases involving VAT (the great ‘jaffa cake’ debate comes to mind!).
Other grounds for an appeal to the FTT include challenging a HMRC decision to issue a penalty for not doing something, based on the ‘having a reasonable excuse’ provisions’.
Any appeal that is based on the claims that HMRC could have acted sooner, previous SA tax returns were processed without enquiry or the enquiry has caused distress or inconvenience are pretty much certain to fail. Therefore, before appealing, ask yourself what you are actually challenging. Is HMRC’s decision wrong in law, or has HMRC reached the right legal result through a process you consider unfair?
Accountant’s view
In my long experience, mounting an appeal is stressful, expensive and time consuming. So, before you consider going down this route, make sure that your appeal is legal under tax law and that you have deep pockets as you’re definitely going to need them unless you can enlist the support of a pro-bono expert, such as tax lawyer Dan Niedle or Victoria Todd, of the Low Incomes Tax Reform Group.
And the very best of luck!
