Tax Tribunal Process

When a taxpayer disputes a decision made by HM Revenue & Customs (HMRC) and takes the case to a tax tribunal, the process involves several stages.

Here’s a breakdown of the process:

Step 1 – Internal Review with HMRC (Optional but Recommended) – Before going to a tribunal, the taxpayer can ask HMRC to conduct an internal review of its decision –

• HMRC has 45 days (or longer if agreed) to complete the review.
• If the taxpayer is still unhappy, they can proceed to the First-tier Tax Tribunal.

Step 2 – Filing an Appeal to the First-tier Tax Tribunal

If the dispute is not resolved through internal review, the taxpayer can appeal to the First-tier Tribunal (Tax Chamber).

Here are the steps to file an appeal (Appeals must usually be filed within 30 days of HMRC’s decision) –

• Complete the appeal form (e.g., Form T240 for direct tax disputes or Form T242 for VAT and other indirect taxes).
• Submit supporting evidence, such as financial records or expert opinions.
• Pay any required fees, though many tax tribunal appeals are free.
• The tribunal acknowledges the appeal and assigns a case category (Simple, Standard, or Complex).

Step 3 – Case Management and Exchange of Arguments

HMRC and the taxpayer exchange statements of case, setting out legal arguments and evidence. The tribunal may hold a case management hearing to agree on procedures and deadlines. Witnesses may be called to provide statements.

Step 4 – Tribunal Hearing/Decision

The case is heard by a judge (and sometimes a tax expert panel). Both HMRC and the taxpayer present arguments, cross-examine witnesses, and provide legal precedents. The tribunal may ask for further information before making a decision.

Then the tribunal issues a written decision, usually within a few months. If the taxpayer wins, HMRC must comply with the ruling (e.g., issue a refund or cancel penalties). If the taxpayer loses, they can appeal to the Upper Tribunal, but only on points of law.

Step 6 – Appeal to Upper Tribunal – Appeals must be based on a legal error, not just disagreement with the outcome. Further appeals can go to the Court of Appeal, Supreme Court, and even the European Court of Human Rights (if human rights issues arise).

(A legal error may include the following –

1. Misinterpretation of the Law – the tribunal incorrectly applies tax law (e.g., misreading a statute or case law). For example, the tribunal wrongly interprets Business Asset Disposal Relief (BADR) conditions, leading to an unfair tax charge.
2. Ignoring or Misapplying Precedent – If the tribunal fails to follow binding case law from higher courts. For example, the tribunal decides a VAT dispute contrary to a previous Court of Appeal ruling.
3. Procedural Errors – The tribunal does not follow fair procedures, which affects the outcome. For example, the taxpayer was not given a fair chance to present evidence, or a key witness was excluded unfairly.
4. Irrational or Perverse Decisions – The decision defies logic or is completely unreasonable based on the evidence. For example, the tribunal finds a taxpayer guilty of deliberate tax evasion despite clear evidence of an innocent mistake.

What is NOT a Legal Error?

1. Disagreeing with the Tribunal’s Findings of Fact
2. The Tribunal Preferring HMRC’s Evidence Over Yours
3. Claiming the Outcome is “Unfair” Without Legal Basis

Additionally, a taxpayer cannot introduce new facts once the dispute has been appealed to the Upper tribunal and any other appeal court if these facts were not presented in the first-tier tribunal..