Anyone who has been through an HMRC tax investigation knows that the dispute rarely ends with HMRC’s decision letter. If the matter proceeds to an appeal at the First-tier Tribunal (Tax Chamber), the outcome will often turn not on abstract points of tax law, but on the quality of the evidence put before the judge. At the centre of that evidence sits the witness statement and a poorly drafted one can quietly sink an otherwise strong case.

This article explains what a witness statement is, when the Tribunal requires one, what the case law says a compliant statement should (and should not) contain, and how taxpayers can avoid the pitfalls that so often undermine appeals against HMRC. It is written for company directors, individuals and advisers who are facing an HMRC tax appeal and want to understand how their evidence will be tested.

Why Witness Statements Matter in Tax Tribunal Appeals

A witness statement is a written account, signed with a statement of truth, of the facts a person can speak to from their own knowledge. In tax appeals it typically comes from the taxpayer, a company director, a bookkeeper, or another individual with direct involvement in the transactions or decisions HMRC has challenged.

Unlike a criminal trial, tax tribunal proceedings are largely conducted on paper before the final hearing. Once directions are issued, the parties exchange witness statements, and the content of those documents is “taken as read” the judge will already have reviewed them before the witness ever steps into the hearing room. That makes the drafting stage, not the oral evidence, the moment where most of the persuasive work is actually done. A statement that is vague, inconsistent with the documentary record, or contaminated with argument rather than fact will attract challenge long before the day of the hearing.

When Are Witness Statements Required?

Once an appeal is notified to the Tribunal, the Tribunal issues case management directions setting out a timetable for the exchange of statements of case, lists of documents, and witness evidence. These directions are governed by the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 and the Tribunal’s overriding objective to deal with cases fairly and proportionately.

In VAT and indirect tax appeals involving allegations of fraud or MTIC-type trading, the Tribunal frequently applies what are known as the “Fairford directions”, derived from HMRC v Fairford Group plc [2014] UKUT 0329 (TCC). These require an appellant, after receiving HMRC’s witness evidence, to state clearly whether it accepts HMRC’s underlying factual case and, if not, to identify precisely which parts of HMRC’s witness statements are disputed. Failing to engage properly with these directions can result in the Tribunal refusing permission to cross-examine HMRC’s witnesses at all, a serious procedural setback that is difficult to reverse once the hearing timetable is set.

Fact, Not Argument: What the Tribunal Expects a Statement to Contain

One of the most consistent themes running through modern tax tribunal case law is the distinction between evidence of fact and expressions of opinion, submission or argument. In CF Booth Ltd v HMRC [2017] UKFTT 813 (TC) and in Elbrook (Cash & Carry) Ltd v HMRC [2019] UKUT 0201 (TCC), the Tribunal reiterated that a witness statement should confine itself to matters the witness can speak to from personal knowledge, what was said, what was done, what documents were seen and when, rather than commentary on other witnesses’ evidence, speculation about motive, or submissions on the law. The Tribunal itself is well placed to draw conclusions from primary facts; it does not need, and should not receive, a witness’s own legal or evaluative conclusions dressed up as evidence.

This matters enormously in practice. A statement that reads like a piece of advocacy asserting that HMRC’s officer “acted unreasonably” or that a penalty was “clearly disproportionate” invites the Tribunal to give it less weight, or for HMRC to apply to have those passages struck out. A statement that instead sets out, chronologically and specifically, what happened and why, supported by contemporaneous documents, carries far greater persuasive force. Getting this balance right is a skill, and it is precisely the kind of drafting discipline that a specialist tax barrister brings to a case that a taxpayer, or even a well-meaning accountant, may not appreciate until it is too late.

Who Should Give Evidence?

Deciding who should provide a witness statement is itself a strategic decision. In company cases, this is often the director who made the relevant decisions or dealt directly with HMRC, but it may also include a finance manager, a bookkeeper, or a professional adviser who can corroborate the taxpayer’s account. Each additional witness brings both value and risk: more corroboration, but also more opportunity for HMRC to identify inconsistencies on cross-examination.

Where a case turns on the credibility of a single individual as in many penalty appeals concerning “reasonable excuse” or “reasonable care” the quality and internal consistency of that one statement can be decisive. The Upper Tribunal has made clear that findings of fact, including on credibility, are largely for the First-tier Tribunal and are very difficult to overturn on appeal, which underscores why it is worth getting the evidence right first time rather than hoping to correct it later.

Common Mistakes That Undermine a Taxpayer’s Case

Having reviewed hundreds of HMRC disputes, some recurring problems stand out:

• Statements drafted too late, after documents have already been disclosed, so the account does not properly engage with the paper trail HMRC relies upon.
• Inconsistent chronology between the witness statement, the Notice of Appeal, and contemporaneous correspondence, a gift to any experienced HMRC presenting officer.
• Failure to exhibit supporting documents, leaving assertions unsupported and vulnerable to challenge.
• Overreliance on hearsay without acknowledging its status, particularly where the person with direct knowledge of an event is available but has not been asked to give evidence.
• Non-compliance with directions and deadlines. The Supreme Court’s decision in BPP Holdings Ltd v HMRC [2017] UKSC 55 confirmed that tribunals are entitled to enforce their own directions robustly, and that persistent or serious non-compliance can result in a party being barred from taking further part in proceedings. Late or defective witness evidence is a common trigger for exactly this kind of sanction.

Cross-Examination and the Fairford Directions in Practice

Where HMRC’s case rests on evidence from its own officers for example, in VAT repayment fraud or MTIC-type appeals the Tribunal’s Fairford directions require the appellant to state clearly whether the underlying facts are accepted, and if not, precisely why. In Elbrook, the Upper Tribunal confirmed that an appellant need not explain its reasons for disputing a witness statement, only identify which passages are challenged, but that a blanket, unparticularised objection may still be treated as sufficient if it genuinely reflects the appellant’s position. Getting this response wrong, however, carries real consequences: it can determine whether HMRC’s witnesses are required to attend the hearing at all, and therefore whether their evidence can be tested through cross-examination.

Navigating these directions correctly, and preparing a taxpayer’s own witnesses to withstand cross-examination, is precisely the kind of tribunal advocacy experience that separates specialist tax counsel from general practice advisers. It is also why litigation experience gained across related fields from winding-up petition disputes to professional negligence claims against advisers translates directly into stronger evidence-handling in the tax tribunal context, where the underlying principles of fair trial, disclosure and cross-examination are closely related.

How LEXLAW’s Tax Solicitors and Barristers Can Help

Our team routinely drafts and settles witness statements for clients facing HMRC investigations, penalty appeals and Tribunal litigation. Members of our team are qualified as solicitors and barristers, and include former HMRC counsel and Big 4 tax litigators, giving clients direct access to advocates who know how HMRC’s presenting officers approach witness evidence from the other side of the table. We assess the merits of your case at an initial conference, identify who should give evidence and on what issues, and then work with you to produce statements that are accurate, properly exhibited, and resilient under cross-examination. Where directions such as the Fairford directions apply, we advise on how to respond in a way that preserves your right to challenge HMRC’s evidence at the final hearing. You can read more about our approach to HMRC tax appeals and Tribunal representation, or find out more about our wider litigation practice at LEXLAW Solicitors & Barristers