First Tier Tax Tribunal

The Tax Tribunals can be used by a taxpayer when appealing a HMRC decision. If the appeal to HMRC after the penalty notice is issued is unsuccessful and the HMRC  internal review procedure has not yielded a satisfactory conclusions then recourse is available by appealing to the First Tier Tax Tribunal (section 49D, TMA 1970).

When a penalty notice is issued, a taxpayer should obtain legal advice as soon as possible. Our London Tax Solicitors and Barristers have vast experience of the Tax Appeal process and regularly appear before the First Tier Tax Tribunal on behalf of our clients. Members of our legal team have first-hand experience and working knowledge of the internal workings of HMRC. 

We have a proven track record of successfully contesting disputed tax assessments and penalties with HMRC. We are experts in adeptly presenting evidence and employing bespoke arguments combining the facts of your case, previous cases and current legislation to ensure your appeal is a successful one.The tax authorities have lost many cases that are appealed through negotiation, internal review or through the Tax Tribunal.

What is the First Tier Tax Tribunal?

A taxpayer can appeal immediately to the First Tier Tax Tribunal on HMRC decisions regarding indirect taxes such as VAT, excise duty or customs duty. However, for decisions about direct taxes (such as Income Tax, PAYE, Corporation Tax, Capital Gains Tax, Statutory Sick or Maternity Pay and Inheritance Tax), a taxpayer must appeal to HMRC first. For both direct and indirect taxes, there may have been an internal review. It is not permissible to appeal to the Tax Tribunal during the course of the internal review.

The current Tax Tribunal system came into effect in 2009 and unifies the old Tax Tribunal system into two tiers comprising: a First Tier Tribunal and an Upper Tribunal. The First Tier Tribunal is divided into Chambers with the Tax Chamber hearing tax appeals and all first-instance appeals against the exercise of Revenue functions by HMRC. An appeal against a HMRC penalty would first go to the Tax Tribunal. Appeals from the First Tier Tribunal, subject to leave, go to the Upper Tribunal (which is on the same level as the High Court), then potentially to the Court of Appeal and Supreme Court.

The procedural rules governing the First Tier Tribunal are found in the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273). The Tax Tribunal is completely independent of HMRC and is governed by an overriding objective to deal with cases fairly and justly (rule 2, First Tier Tribunal Rules (FTR 2009)). The Tribunal will consider the evidence of both parties, equally whilst the judge heavily relies on previous case law.

How to Commence Proceedings at the First Tier Tax Tribunal

To commence proceedings, the Appellant must notify the appeal to the Tax Tribunal. An appellant or their legal representative can appeal to the Tax Tribunal online or fill in a T240 notice of appeal form. Proceedings will commence once the Appellant has sent a notice of appeal to the tribunal within the specific time limits as set out by the particular Act. The First Tier Tribunal Rules 2009 sets out that the notice of appeal must include:

“(a) the name and address of the appellant;
(b) the name and address of the appellant’s representative (if any);
(c) an address where documents for the appellant may be sent or delivered;
(d) details of the decision appealed against;
(e) the result the appellant is seeking; and
(f) the grounds for making the appeal.”

[Rule 20(2), FTR 2009]


“The appellant must provide with the notice of appeal a copy of any written record of any decision appealed against, and any statement of reasons for that decision, that the appellant has or can reasonably obtain.”

[Rule 20(3), FTR 2009]

Following this step, the First Tier Tax Tribunal will give notice of the proceedings to HMRC (rule 20(5), FTR 2009). If the notice of appeal is served out of time, a request for an extension of time must be included with the notice (rule 20(4), FTR 2009). The Tax Tribunal has discretion whether to admit late appeal notices by generally considering:

  • the purpose of the time limit;
  • the length of the delay;
  • whether there was a good explanation for the delay; and
  • the consequences for the parties of an extension or non-extension of time.

In any event, it is recommended that legal advice is sought as soon as you become involved in a HMRC dispute to prevent a situation where a potential claim becomes time-barred.

The First Tier Tax Tribunal Process

The First Tier Tax Tribunal will then give a direction allocating the case to one of four categories, which all have different procedures:

  1. Default paper cases

Default paper cases ordinarily involve uncomplicated issues where the facts are simple and there is little dispute as to the law. For example, late filling penalties for small sums and appeals against small penalties generally, are dealt with through case allocation..

HMRC must serve a statement of case within 42 days after receiving notice of appeal (rule 25, FTR 2009). The appellant then has 30 days to serve a written reply to HMRC’s statement (rule 26, FTR 2009). We have years of experience in drafting detailed replies setting out the Appellant’s response and providing further information. Following this, the First Tier Tax Tribunal will determine the issue without a hearing (unless either party has requested one).

  1. Basic Cases

Basic cases typically include standard tax penalties and covers both direct and indirect taxes and includes VAT “migration appeals” as well as all “reasonable excuse” appeals. These cases are generally disposed of at a hearing and involve a minimal exchange of documents prior to the hearing.

HMRC are not required to provide a statement of case and ordinarily, a case will go straight to a hearing (rule 24, FTR 2009). If HMRC intend to raise new grounds at the hearing, then the Appellant must be notified as soon as practicable to enable their legal representative to respond at the hearing.

  1. Standard Cases

Any appeal against a tax assessment that is neither legally nor factually complicated enough to be allocated into the Complex track will be categorised as a standard case. Typically, the cases that can be diposed of in one day, in an area of uncomplicated law, with one witness providing uncontested evidence, is assigned to the Standard track.

For both Standard and Complex cases the procedural Tax Tribunal rules are the same. HMRC are required to submit a statement of case within 60 days on the Tribunal sending the notice of appeal (rule 25, FTR 2009). Both HMRC and the Appellant then have 42 days to serve a document list on the other side and the Tribunal (rule 27, FTR 2009). Each party has the right to inspect any document on the list, unless it is privileged.

  1. Complex Cases

The First Tier Tax Tribunal, at its discretion, may allocate a case as Complex only if the case satisfies one of the conditions under rule 23(4):

“The Tribunal may allocate a case as a Complex case under paragraph (1) or (3) only if the Tribunal considers that the case—

(a)  will require lengthy or complex evidence or a lengthy hearing;
(b)  involves a complex or important principle or issue; or
(c)  involves a large financial sum.”

[Rule 23(4), FTR 2009]

Once a case has been allocated as Complex, then the special costs regime applies. This is important as there is no requirement for either party to have acted unreasonably before a costs order is made. The allocation to the Complex track also ensures the possibility of a transfer of the case to the Upper Tribunal.

The First Tier Tax Tribunal Hearing

All Basic, Standard and Complex cases are determined by a Hearing. Usually two people sit on the tribunal: a legally qualified judge and a non-lawyer member (for example an accountant). Each party, their witnesses and their legal representatives are entitled to attend the hearing. In Basic and Standard cases, HMRC will be represented by a “presenting officer” from its Appeal and Reviews Unit. In complex cases, either a solicitor or barrister will represent HMRC.

The First Tier Tax Tribunal will provide 14 days notice of a hearing (rule 31, FTR 2009). Generally, all hearings are held in public (rule 32(1), FTR 2009), but a taxpayer can apply for private hearing on the grounds that a minor is involved; to protect one’s private life; or if it is believed that publicity might affect the hearing being fair and just.

During the hearing itself, the taxpayer’s representative opens the case by presenting the documents, arguments on the law, witness evidence and agreed facts. Following this, HMRC cross-examines the witnesses face-to-face if they seek to challenge witness evidence. HMRC will then present arguments on the law and the taxpayer’s representative will close by replying to these arguments.

The First Tier Tax Tribunal Procedure

The First Tier Tax Tribunal is in essence a fact-finding court, therefore it is imperative to prepare the optimum set of facts in advance and this usually requires the most extensive preparation. We are well-versed in the Hearing procedure itself and presenting our clients’ cases to the Tax Tribunal. We consider the preparatory stage an essential part of the Hearing process and extensively complete the best factual picture from which the First Tier Tax Tribunal will draw its inferences.

It is imperative to collect the relevant evidence in advance (oral and documentary). Moreover, an important part of the process is to agree facts with HMRC in advance of the hearing. The statement of agreed facts in required by the standard directions and in essence takes the form of a chronology of events. The importance of legal representation is apparent as HMRC are increasingly reluctant to agree all the facts in a case, we work with our clients to ensure that both parties can agree to the substantial facts in a case.

Furthermore, nowadays witness evidence is typically provided in the form of a written witness statement. It is important that a taxpayer starts to draft their witness statement as early as possible. The witness statement must be comprehensive and contain all the facts which the appellant wishes the witness to give.

In addition, evidence may be provided by experts- this is typically accountancy evidence. The tribunal prefers the two parties to use a single expert or to encourage their experts to meet to narrow the points of expert dispute.  HMRC and the taxpayer provides a list of documents to each other prior to the hearing. It is useful to have a clear, understandable and well-presented set of agreed documents at the hearing.

Our specialist Tax Solicitors and Barristers have successfully represented taxpayers before the First Tier Tax Tribunal. Our Tax Disputes team will typically:

  • advise you for a long period of time prior to the hearing;
  • advise you on the merits of your case;
  • discuss the evidence required;
  • prepare the appeal in detail; and
  • rehearse your case with you.

The First Tier Tax Tribunal Decision

Under rule 34 FTR 2009, the First Tier Tax Tribunal may make a Consent Order disposing of the proceedings if the appeal is settled in advance of or during the course of the Hearing.

For Default Paper and Basic cases hearings, the First Tier Tax Tribunal may provide a decision orally at the hearing (rule 35(1) FTR 2009).

For Standard and Complex cases, the First Tier Tax Tribunal will likely produce a written decision within six weeks. The decision notice will contain a summary of the factual findings and reasons for that decision (rule 35(3) FTR 2009). A losing party has the options of either accepting the decision, seeking a review or appealing the decision (rule 35(2) FTR 2009).

The Costs of Tax Tribunal Appeals

Costs are generally awarded on the standard basis. Each party will normally be liable for their own costs and cannot be ordered to pay the costs of the other party- even if they are the losing party. As such, a taxpayer will have to fund their own appeal but there is normally no risk in having to pay HMRC’s costs.

However, the First Tier Tax Tribunal may make a Costs Order where either party has acted unreasonably in defending, bringing or conducting the appeal. Therefore, you could be ordered to pay HMRC’s costs if the First Tier Tax Tribunal believes you have acted unreasonably (rule 10(1)(b) FTR 2009).

It is very uncommon for the Tax Tribunal to make an order for costs against an unsuccessful party simply because they should have realised that their case was weak (Invicta Foods v HMRC [2014] UKFTT 456 (TC)). However, in Gekko and Co Ltd v HMRC [2017] UKFTT 0586costs were awarded against HMRC for its “unreasonable” failure to abide by its litigation and settlement strategy. Moreover, in Sussex Cars Association v HMRC [2017] UKFTT 691 the First Tier Tax Tribunal made an order for costs against HMRC because HMRC had acted “unreasonably” in its failure to seek legal advice at an earlier stage in the proceedings.

However, unlike an appeal to the First Tier Tax Tribunal (which involves little risk of substantial costs), a losing appeal to the Upper Tribunal could leave you liable for HMRC’s costs as well as your own. Nevertheless, a taxpayer has the option of opting out of the costs regime. This ensures that neither party will be liable for the costs of the other party.

First Tier Tax Tribunal Case Study

Our client, the Appellant, was a special purpose vehicle (“SPV”) which bought and sold a commercial property. The property was let out to tenants already in occupation at the time of the purchase and also to tenants entering possession after the purchase. The SPV later sold the property and was issued with a VAT assessment of over £1m.  HMRC argued that the sale was not a transfer of a going concern (they alleged that the use of the property following the sale differed from the use before). The SPV instructed us as tax specialist lawyers to negotiate with HMRC and then prepare and represent them in an appeal before the Tax Tribunal. We took the following successful steps:

  • Appealed against the assessment outside of the 30 day limit. Ordinarily, failure to appeal within 30 days is fatal to any appeal. We were successful in presenting a good reason for our client’s default and as such the application to the Tribunal requesting more time to appeal was successful.
  • Delayed payment of the assessment pending appeal. Normally, once HMRC make an assessment on VAT liability, this amount is due and must be paid before the decision can be appealed (s84(2) VAT Act 1994). However, we were successful in presenting a Hardship Application and made persuasive arguments that our client would suffer hardship if required to pay before the conclusion of the appeal.
  • Ultimately, our representation ensured that the assessment was withdrawn reducing the assessment amount to nil.

Expert London Tax Lawyers

If you need HMRC Tax Disputes advice, we are available to aid you at every stage of the HMRC appeals process. Members of our legal team have first-hand experience and working knowledge of the internal workings of HMRC. We can provide you with 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.

We are experts in adeptly presenting evidence and employing bespoke arguments combining the facts of your case, previous cases and current legislation to ensure your appeal is a successful one. 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].

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