How HMRC resolves tax disputes

Latest report from the Tax Assurance Commissioner 

Published alongside HMRC’s 2016 report and accounts, at the end of last week, was theThe Tax Assurance Commissioner’s Annual Report 2015-16 

This report outlines HMRC’s performance in resolving civil tax disputes with taxpayers for the period from 1 April 2015 to 31 March 2016. It does not cover criminal investigations or prosecutions. 

The Tax Assurance Commissioner, Edward Troup, has the responsibility for ensuring that HMRC resolves civil tax disputes in a fair, transparent and even-handed way. He says in his Foreword: 

“This year’s report confirms that the high standards which HMRC has set itself have been maintained, and I continue to be proud of the high levels of tax professionalism and capability across the department. …. We continue to work on improving our standards across all of our casework and ensuring our focus on yield is always matched by getting the right tax outcomes as efficiently as possible. Continuing to promote the message that our settlement process is professional and even-handed and that we will never settle for less than the tax due under the law remains a priority.” 

The report provides a useful explanation of HMRC’s procedures for resolving tax disputes, including, for each type of case, who takes the decisions and at what level. 

From the top, the process is managed and overseen by three Commissioners of HMRC. They are advised by a Tax Disputes Resolution Board, below which are various resolution boards which look at cases in particular business areas across the department. In addition, there are Contentious Issues Panels which consider issues (ie disputed tax points) which affect multiple taxpayers. 

The report explains the statutory review and appeals processes, with some statistics in an appendix, and also touches on Alternative Dispute Resolution. 

Chapter 5 of the report explains the internal audit work done to test HMRC’s civil dispute processes in practice. Of 448 cases examined:  

  • 77% (347 out of 448) fully adhered to assurance and governance processes (80% in 2014/15)

  • in 21% (93 cases) processes were followed but with scope for some improvement (18% in 2014/15), and

  • in 2% (eight cases) one or more aspects that did not meet expected standards (2% in 2014/15).  

The report says: “There continues to be an overall high level of compliance with governance and case-handling standards, but the testing also identified areas where improvement activities are being focused.” These areas are similar to those identified in previous years, including improving case management and ensuring there are good audit trails.

The report stresses that HMRC prefers to resolve disputes by working collaboratively with taxpayers and their agents, and the majority of disputes are resolved that way. 

HMRC’s Audit and Risk Committee, chaired by John Whiting, looks at the department’s risks in handing civil tax disputes, with a focus on ensuring that HMRC has good processes in place and that these are operating properly. The committee’s statement in the Tax Assurance Commissioner’s report says that HMRC’s procedures in this area are operating satisfactorily, but that there are some cases where processes around the settlement of disputes could be improved; while this is not a matter of significant concern, the Committee has recommended further work in this area.