Rise in appeals 'caused by HMRC aggression'

HMRC’s ‘aggressive approach’ to dealing with taxpayers has led to an upsurge in appeals to tax tribunals, according to UHY Hacker Young.

Figures obtained by the accountancy group show that the number of cases received by the VAT and Duties Tribunal and the Special Commissioners increased to 4,897 during 2008 from 3,008 in 2005: growth of almost 63%.

Tougher tax-collecting tactics and harsher penalties imposed by the Revenue provoked the rise in taxpayers claiming to be overtaxed or unfairly punished, said UHY Hacker Young.

The company added that HMRC’s introduction of a ‘litigation and settlement strategy’, under which the department pledges to fight a case through the courts rather than negotiate a settlement if it believes ‘it has a strong enough case’, also helped drive up the number of cases heard by tax tribunals.

Tax partner Roy Maugham remarked, ‘HMRC’s increasingly aggressive approach to tax collection and litigation has resulted in the soaring number of appeals to tax tribunals over the past few years.

‘[The department] seems to be less and less deterred by the cost of litigation. It is now much more prepared to go all the way through the tribunals rather than negotiate a fair settlement with the taxpayer. It is doubtful whether this is the most effective and pragmatic way to solve problems.’

Mr Maugham added that the Revenue’s powers ‘have been expanded enormously over the past few years to the point where many taxpayers feel that their civil liberties are being infringed’.

HMRC responded to UHY Hacker Young claims by saying the recent increase in appeals was ‘largely linked to a handful of VAT cases’.

‘The appeals process is there to help HMRC and taxpayers clarify points of tax law. Our updated powers and litigation and settlement strategy ensures that when the principle being contested is clear and well understood, the tax rules are properly enforced,’ said a Revenue spokesperson.

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