HMRC —popularly though incorrectly referred to as the tax man is always in the news. For good or bad, the government held department is frequently the topic of many round table meetings and a not very favourite amongst businessman. Annual Report 2016/17 is out now to reveal some very interesting statistics.
In a very surprising revelation, HMRC accepts that roughly 50% of all disputes between HMRC and taxpayers ultimately end in favour of the tax payers. This year the exact statistics are 52% compared to 57% in tax year 2015/16. It raises some grave concerns on how apt the HMRC system is in issuing tax challans at the first place.
This year HMRC was asked to review 29,500 cases as opposed to 27,000 cases last year. Any tax payer who disagrees with HMRC decisions have the right to apply for review. To the organization’s credit, it is fairly open to accepting cases for review. Reviews are faster and flexible means of dispute resolutions.
As expected, majority of review cases were pertaining to VAT penalties. But unexpectedly, most of the reviews ended in favour of the VAT filer. In an overwhelming 66% of cases, HMRC was gracious enough to accept that the penalties in question should never have been issued and HMRC apologised for discomfort caused to the filer.
However, in its defence HMRC stated that most of the penalty notices were issued by the automatic system. VAT returns are to be paid in frequent instalments as compared to income tax returns. Late filers are issued notices by default and it is only in the review that the filer has the chance to explain his valid reasons for late filing.
The statistics revealed that HMRC is usually successful in cases of disputes that are eventually taken to a tribunal or court. In 2016/17, decisions were in favour of HMRC in 84% of all cases heard in tribunals or courts. Most of these cases are dealt with in first tier tribunals . The robust system also handles a small number of statutory reviews.
Till present date, applying for review or tribunal case Is free of cost. However, the government has notified of its intention to introduce a potential fee for tribunal cases at a sooner date. The expected costs are £50 for filing a case and a higher cost of £200 for complex cases that will be heard in the first tier tribunal.
Hearing frees will be £200, £500 and £1000 for simple, standard and complex cases respectively. Upper tribunal cases may cost as high as £2,000. Most people believe that the potential charges will discourage applicants from bringing in complaints and issues. Some believe it will reduce needless review applications. We will have to wait and see what happens once the fee regime starts.
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