The new system of tax appeal tribunals goes live on 1 April 2009.
On 1 April 2009, the new tax appeals tribunal system goes live. The work of the existing tax appeal tribunals is being transferred into the new, unified central government tribunal system. Here we explain what the new system will look like and what the transitional rules will be, and provide links to sources of further of information.
The new tax tribunal system
The existing tax tribunals – the General Commissioners and Special Commissioners of Income Tax, the VAT and Duties Tribunal and the Section 704/706 Tribunal) – will cease to exist on 1 April and their function will be transferred to the new tribunal system. Any appeals against decisions of HMRC which are listed for hearing on or after 1 April 2009 will be heard by the new tribunal.
The new tribunal is a two-tier structure:
- At the First-tier, appeals are heard within a number of different chambers, dealing with different areas of law. Tax appeals and applications will be heard by a specific Tax Chamber with its own set of procedural rules. The only exception is appeals against tax credit decisions, which will continue to be heard by the Social Entitlement Chamber. Almost all tax cases will start at the First-tier. For the first time in tax, some cases can be judged on the papers alone, ie without a hearing.
- At the Upper Tribunal, there will be three chambers. The one dealing with tax will be the Finance and Tax Chamber. The Upper Tribunal will hear appeals from the First-tier on points of law. Some complex cases will start at the Upper Tribunal rather than at the First-tier. The Upper Tribunal is also a court of record (which means its decisions will be published and are binding).It will also have a judicial review function.
The new tribunal system is administered by the Tribunals Service, part of the Ministry of Justice (MoJ). It will arrange for cases to be listed and allocate each case to a suitable panel of tribunal members. Tribunal members will include judges (who are legally qualified) and non-legal members.
There are also changes afoot at HMRC, to do with the way appeals are handled:
- Listing appeals: HMRC will no longer be responsible for getting tax appeals listed for hearing. Appellants themselves will need to apply directly to the Tribunals Service (part of the MoJ) which will handle the administration and case management of listed appeals.
- Internal review: HMRC is introducing a new ‘internal review’ procedure from 1 April 2009. The purpose of this is for HMRC to have a fresh look at a decision which a taxpayer has disputed, before it is officially passed to the independent tribunal for listing.
The taxpayer will have a right to have HMRC carry out an internal review of an appealable decisions; but this will be optional not mandatory for the taxpayer. HMRC has 45 days to carry out a review once one has been requested, though this period can be extended by agreement. The intention is that reviews will be carried out by an officer independent of the original decision-maker, and will take an even-handed approach.
If the taxpayer does not want a review, or is unhappy with the outcome, he or she can take the appeal to the tribunal.
Transitional arrangements – the handover to the new system
Tribunal procedures: The Tribunals Service has published guidance for appeals in progress around the transition date. There is guidance for General Commissioners cases and for Special Commissioners and VAT and Duties Tribunal cases.
The key point is that all appeals listed for hearing on or after 1 April 2009 will be heard by the new tribunal, under the new procedural rules.
However, for appeals made before 1 April but heard after that date, the tribunal has the discretion to disapply some or all of the new procedural rules, and apply some or all of the old rules (excepti, if that is in the interests of fairness.
Internal review: HMRC has produced guidance about the introduction of the internal review process. The key points are:
- Internal review is available for direct tax appeals sent to HMRC on or after 1 April 2009, and for indirect tax decisions made on or after that 1 April.
- It will also be offered for direct tax appeals made before 1 April provided the appeal has not yet been sent for listing. In these cases HMRC will have 90 not 45 days to do the review.
- For VAT decisions made before 1 April, the existing provisions for non-statutory reviews continue to apply.
Costs: An important issue is costs, particularly for VAT cases, since the First-tier Tax Chamber will have a no-costs regime except for cases designated as ‘complex’ and situations where one of the parties has acted unreasonably. This is a change from the current costs regime in the VAT and Duties Tribunal.
HMRC has said that where an appeal was made to the VAT and Duties Tribunal before 1 April 2009, and the new tribunal exercises its discretion to apply the existing costs rules, HMRC will continue to operate the ‘Sheldon practice’ (under which HMRC does not seek costs from appellants in most cases).
Both the MoJ and HMRC have published further information and guidance about the new tax appeals system:
HMRC has a page about tribunals reform with links to further information, including latest news and FAQs, a flowchart of how appeals will be handled by HMRC, and more information about the internal review process.
The HMRC1 factsheet gives an overview of the new arrangements for appeals, reviews and tribunals from 1 April 2009, aimed at potential appellants, and there is also a new.
A more detailed Revenue & Customs Brief 10/09 describes the new system in more detail.
HMRC has also published the Tribunals Reform Awareness training package which has been produced for HMRC staff.
The MoJ’s Tax Appeals Modernisation website includes latest news and links to relevant legislation, rules, practice directions and practice statements about procedures in the new tribunal.