HMRC now successful in 86% of tax disputes in UK courts and tribunals

Tax disputes expert Jake Landman of Pinsent Masons said: “HMRC’s increasing success rate indicates that taxpayers should only take HMRC to a tribunal or court as a last resort”.

HMRC had an 86% success rate in appeals decided in the First-tier Tribunal (FTT) last year. However, the success rate was only 40% for the five cases that made it as far as the Supreme Court. It was 83% in the Upper Tribunal and 83% in the Court of Appeal.

HMRC counts decisions as a success for HMRC if the decision is in its favour or if it succeeds on substantive elements of its case.

“If possible, taxpayers should look to settle tax disputes outside of court through alternative dispute resolution (ADR) or resolve them in the most favourable way possible during HMRC’s enquiry process,” Landman said.

“The statistics suggest you need good grounds to litigate with HMRC. That said, there will be cases where the taxpayer has to litigate to get the right result even if the process can be costly and time consuming,” he said.

The figures include decisions issued in 38 cases involving or related to tax avoidance. Of these, 35 were decided wholly or partially in HMRC’s favour, protecting tax revenue of around £1.7 billion.

The number of tax disputes heard by tax tribunals dropped to 1,052 in the year to 31 March 2021, a 45% decrease from the 1,907 the year before. This was because face to face hearings were cancelled at the beginning of the Covid-19 pandemic and it took time to roll out video or telephone hearings more widely.

Appeals to the FTT which are not stood behind a lead case are typically resolved within 12 to 18 months, according to HMRC’s annual report and accounts.

Delays of sometimes more than a year in the issue of judgments and long delays in listing cases were reported by users of the FTT last year, in a report published by the Tax Law Review Committee of the Institute of Fiscal Studies.

The report made a number of recommendations including that the FTT should develop a plan for reducing the backlog of unwritten decisions and should publish targets for the time within which judgments are issued after hearing cases. The FTT should also increase the overall number of days that judges sit in the FTT and address understaffing in the tribunal administration centre, according to the report.