The HMRC internal review process can be used by a taxpayer when appealing a HMRC decision. If the appeal to HMRC after the penalty notice is issued is unsuccessful then either the taxpayer or HMRC can request an internal review of the decision. The review is conducted by a different HMRC official. Failing this, recourse is also available by appealing to the First Tier Tax Tribunal (section 49D, TMA 1970) or by considering alternative dispute resolution (ADR).
When a penalty notice is issued, the 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 follow the guidelines and appeal to HMRC on your behalf. We have a proven track record of successfully contesting disputed tax assessments and penalties with HMRC. The tax authorities have lost many cases that are appealed through negotiation, internal review or through the Tax Tribunal.
What is a HMRC Internal Review?
Internal reviews were introduced in 2009 as an alternative to the tribunal system and offer the taxpayer an additional means of resolving a HMRC dispute. The review process and the underlying principles apply to both direct and indirect tax decisions, although there are some differences in the way the actual review process is conducted. It is recommended that a taxpayer utilise a legal representative in the review process.
The review is a statutory process conducted by a different tax officer from the first reviewer and is seen as a useful tool in providing a fresh set of eyes on the interpretation of facts. Not on whether the decision was “fair” or for a technical dispute- but on determining whether the decision was made in line with HMRC guidelines.
The new reviewer is independent of the original HMRC decision maker and is not located within their management chain. For example, reviews on whether the taxpayer has a “reasonable excuse” for the late filing of a tax return or if there is a disagreement on PAYE coding, will be reviewed by a different specialist office. Moreover, compliance reviews (challenging HMRC’s request to inspect documents at the taxpayer’s premises) will generally be conducted by “local compliance offices”, which are far removed from the original decision maker.
What are the Advantages of a HMRC Internal Review?
There are a number of advantages in utilising the internal review procedure. The internal review process is conducted within strict time periods, allowing the taxpayer to gain control of the timing of the case and resolution may be achieved faster than using the Tax Tribunal option. The process ensures both the taxpayer (and their legal representative) and HMRC summarise their positions, which has the bonus of focusing the dispute, which is especially useful for complex claims.
Furthermore, the Tax Tribunal has the overriding objective of encouraging dispute resolution wherever possible and if the claim does eventually end up before a Tax judge, they will bear in mind the taxpayer’s attempt to seek alternative resolution.
Previously published official statistics shows that 49% of internal reviews have resulted in HMRC penalties being annulled or amended. This demonstrates that HMRC is prone to making errors when issuing a penalty notice. However, it is likely that successful taxpayers had legal representation as the statistics suggest that it is considerably more difficult for unrepresented Appellants to succeed with penalty appeals. Therefore, the statutory review process is a useful tool for the taxpayer especially when instructing a legal representative.
What is the HMRC Internal Review Procedure?
If you are not satisfied with the initial appeal discussions with HMRC then section 49A TMA 1970 provides three means to resolve an appeal:
- Taxpayer requests an internal review
You can request a review of your tax dispute at any time after notice of appeal has been provided to HMRC. However, the review cannot be requested once you have notified the appeal to the Tax Tribunal because both processes are independent solutions to the same dispute. Only once the review is conducted do you have the right to present your case to the Tax Tribunal.
HMRC must provide you with its response within 30 days of receiving the review request (section 49B TMA 1970). Following this, HMRC has 45 days from the date it notifies its response to present the conclusions of their review (section 49E TMA 1970). This 45 day period can be extended by mutual agreement.
- HMRC offers an internal review
When a taxpayer appeals to HMRC in stage 1, the original decision maker usually contacts the taxpayer to discuss the case further and provides the Appellant a further opportunity to present arguments in favour of their position. However, if these discussions do not satisfy the matter then HMRC has the right to initiate the review process by making an offer to the taxpayer after the taxpayer has given notice to appeal to HMRC in stage 1.
HMRC can only offer a review if they have not already done so or if the appellant has notified their appeal to the Tax Tribunal (section 49C(7) TMA 1970). HMRC’s offer of a review must be accompanied by a “notification of HMRC’s view of the matter” (section 49C(2) TMA 1970).
The taxpayer then has 30 days from this offer to either accept the offer of an internal review or to notify the appeal to the Tax Tribunal (section 49C(3) TMA 1970). This deadline is important because after 30 days the taxpayer may only notify the appeal to the Tax Tribunal with the Tribunal’s acquiescence.
In addition, if the taxpayer neither accepts the review process nor notifies the appeal to the Tax Tribunal, the tax dispute is considered settled under section 54 TMA 1970 in line with HMRC’s view of the matter. Therefore, it is important to seek legal representation to help navigate the internal review process because after missing this response deadline, it is impossible to resile from the settlement according to section 54(2) TMA 1970 (unless the Tax Tribunal allows late notification of the appeal).
If a taxpayer has accepted the review offer, HMRC has 45 days to deliver its review conclusions. This 45 day period can be varied by mutual agreement. The taxpayer does not have to agree to extend the review period and if an agreement cannot be reached, then HMRC must deliver a notice declaring that the review is concluded without a decision and allowing the right to appeal to the Tax Tribunal.
What are the Next Steps Following an HMRC Internal Review?
Following the 45 day review period, HMRC will notify the taxpayer of the outcome, either:
- The reviewer agrees with the taxpayer and cancels HMRC’s original decision. This is the end of the matter.
- The reviewer agrees partially with the taxpayer and varies HMRC’s decision.
- The reviewer agrees with HMRC’s first decision and rejects the appeal. The taxpayer can either accept this position and settle the dispute in line with section 54 TMA 1970. Alternatively, the taxpayer has a further 30 days from the date of the review conclusion letter, to provide notice of appeal to the Tax Tribunal (section 49E TMA 1970).
It is strongly recommended that legal representation is sought when appealing a tax dispute through HMRC’s internal review process. We have a team of specialist Tax Disputes Solicitors and Barristers that have the experience and ability to successfully present a taxpayer’s case to HMRC and navigate the review procedure. It is essential to ascertain when HMRC validly offers the internal review and the time limit deadlines in general as the consequences of missing a HMRC deadline will likely lead to the appeal being automatically determined in HMRC’s favour.
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].