Rise in Businesses’ Disputes with HMRC

In the intricate landscape of the UK’s taxation system, mid-sized firms find themselves entangled in a web of disputes with the tax authorities. According to a recent survey conducted by BDO, a prominent consultancy firm, over 61% of the 500 surveyed companies are currently embroiled in tax disputes with Her Majesty’s Revenue and Customs (HMRC). This escalating trend sheds light on the challenges that businesses encounter as they attempt to decipher the convoluted network of levies and regulations, illustrating a dire need for simplification and modernisation of the system.

Our tax barristers and solicitors provide the very best representation in negotiations, throughout the HMRC internal review process and in front of the Tax Tribunal. Our team specialises in successfully challenging HMRC decisions and will assist you in every aspect including developing a strategy. Our ex-HMRC team provide advice in relation to:

• Appealing against a tax assessment;
• Appealing against a tax penalty;
• Negotiating with HMRC;
• Navigating the HMRC internal review process; and
• Advising on statutory tax appeals within the Tax Tribunal.

If you want to challenge a decision made by HMRC, we can help you understand the issues raised, gather necessary information, and ensure a comprehensive and accurate response to HMRC. Just book an initial conference with our leading tax counsel (former HMRC in-house tax barrister and Head of Indirect Tax Litigation at Deloitte and National Tax Litigation Director at PWC) and our Senior Partner who worked at KMPG, Goldman Sachs and ING Barings and is dual-qualified as a Barrister and Solicitor-Advocate. Both lawyers will be available to you at the outset in your first advice conference.

Our taxation practice is the foundation of the firm. Have a conflict with HMRC? Our tax team is composed of knowledgeable tax lawyers who can help you handle your tax issues. For the best outcome, our ex-HMRC lawyers will advise you on intricate tax laws. We have years of expertise in dealing with complex tax problems, including negotiating with HMRC and handling tax appeals before Tax Tribunals and in the High Court.

The Anatomy of Tax Disputes

Tax disputes are notorious for their prolonged processes, which drain resources from both businesses and tax authorities. In HMRC’s annual report, it was revealed that large businesses on average spend 36 months to resolve an inquiry. This staggering time frame not only consumes significant time and energy but also leads to increased expenses for both parties involved. Adding to the complexity, there were approximately 39,500 open tax tribunal appeals at the close of March, marking an 8% surge from the previous year. This accumulation of unresolved cases further exacerbates the issue, underscoring the need for swifter and more efficient resolution mechanisms.

Complexity of Britain’s Tax System

The proliferation of tax disputes among mid-sized businesses can be attributed to the intricate nature of Britain’s tax system. Critics argue that the complexity of the tax regime often leads to unintentional non-compliance, as companies struggle to comprehend the numerous levies they are subjected to. Simplifying the system is touted as a potential solution that would not only reduce the strain on businesses but also alleviate the burden on HMRC staff, who currently grapple with an overwhelming workload.

The Burden of Rising Tax Rates

As if navigating the complex tax system isn’t challenging enough, mid-sized firms now face the additional burden of higher tax rates. The corporation tax, imposed on company profits, surged from 19% to 25% in April, placing more pressure on businesses to manage their finances efficiently. This elevation in tax rates further highlights the urgency of streamlining the tax system and resolving disputes promptly.

Solution for Quicker Resolutions

Experts suggest that allocating more resources and personnel to HMRC could expedite the resolution of cases. With investigations into potential unpaid taxes yielding £34 billion last year – a significant increase from the previous year’s £30 billion – it becomes apparent that investing in HMRC’s capacity could result in more efficient revenue collection. This, in turn, would benefit both the tax authority and businesses, allowing them to focus on their core operations rather than being entangled in protracted disputes.

Proposals for Change

Talia Greenbaum, a partner at BDO, underscores the need for simplification and modernisation of the tax system. She advocates for a system that is easier to navigate, reducing the likelihood of unintentional non-compliance and disputes. Additionally, Greenbaum emphasises the importance of empowering HMRC with additional resources to enhance its services to small and medium-sized businesses, which form the backbone of the UK’s economy.

Alternative Dispute Resolution

Amidst the complexities of tax disputes, a glimmer of hope emerges in the form of Alternative Dispute Resolution (ADR). Both companies and individuals have the option to collaborate with HMRC officers overseeing their disputes, exploring innovative and efficient ways to resolve inquiries. This approach holds the potential to streamline the resolution process, providing a more favorable outcome for all parties involved.

HMRC’s Commitment to Mid-sized Businesses

Recognising the pivotal role mid-sized businesses play in the UK economy, HMRC has acknowledged the need to better understand the challenges these entities face. Through enhanced customer insight initiatives, HMRC aims to tailor its services to cater to the unique needs of this diverse group, fostering a more constructive and efficient tax dispute resolution process.

In conclusion, the surge in tax disputes among British mid-sized firms sheds light on the inherent complexities of the UK’s tax system. The prolonged resolution processes, intricate regulations, and rising tax rates pose significant challenges to businesses and tax authorities alike. As the need for a simplified and modernised tax system becomes increasingly evident, the allocation of additional resources to HMRC and the adoption of Alternative Dispute Resolution mechanisms offer promising avenues toward efficiency and fairness in resolving tax disputes.

Expert Tax Investigation Lawyers

If you need HMRC Tax Investigation advice, we are available to aid you at every stage of the HMRC investigation process. Members of our legal team have first-hand experience and knowledge of the internal workings of HMRC. We can provide you with the very best representation in negotiations with HMRC and defending all forms of HMRC fraud, tax inquiry, tax fraud investigation, criminal tax evasion and HMRC enquiries and investigations. Our team specialises in successfully challenging HMRC decisions and will assist you in every aspect of the investigation.

Our specialist Tax Solicitors and Barristers deliver expert technical knowledge, strong negotiation skills and respected advice, which can make a pronounced difference to eventual tax penalties, charges and liability.

We provide urgent advice and representation to clients from our unique expert team of established Tax and Duties specialist solicitors and barristers with a proven track record of delivering authoritative results. Just call us on 0207 1830 529, or email [email protected].