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Out-Law News 1 min. read

'More than half' of taxpayer challenges to HMRC decisions successful

More than half of the challenges brought by taxpayers against HM Revenue and Customs (HMRC) decisions last year were successful, according to figures obtained by Pinsent Masons, the law firm behind Out-Law.com.

Figures from the 2015/16 tax year showed a slight increase in the percentage of tax tribunal cases in which taxpayers were successful.

Corporate tax expert Heather Self of Pinsent Masons, the law firm behind Out-Law.com, said that the figures showed that "mistakes or over-reaches" by the tax authority were "more common than many might assume".

"Many of HMRC's recent successes relate to complex avoidance schemes implemented some years ago," she said. "We are now seeing them challenge straightforward commercial planning, and expect taxpayers to win an increasing proportion of future cases."

"The statistics suggest that if your professional adviser thinks it is sensible, challenging an unfair or disproportionate action by the Revenue is worthwhile – by either review or, where necessary, full appeal. Where appropriate, decisions will be amended," she said.

Taxpayers can request a review of any decision by HMRC, as part of a system designed to provide an early opportunity to resolve disputes without the need for a tribunal. Reviews are carried out by HMRC staff independent of the teams who worked on the case, who will reconsider the original decision and provide an explanation.

According to the figures, HMRC's original decision was varied or cancelled by reviewers in 57% of these cases in the year to 31 March 2016. Amends were made in 31% of non-penalty reviews, 65% of VAT penalty reviews and 52% of all other penalty reviews. The figures are broadly similar to those from last year, where amends were made in 33%, 65% and 39% of cases respectively, according to Pinsent Masons.

The number of decisions formally appealed to an independent tax tribunal by taxpayers rose last year, with 5,161 such appeals filed with the tribunal in 2015/16. Over the course of the year, 3,917 appeals were settled either by way of a formal hearing or by agreement before the hearing, up from 3,468 the previous tax year, according to the figures.

The percentage of those cases in which the tribunal ruled in the taxpayer's favour increased over the course of the year, from 13% in 2014/15 to 18% in 2015/16, according to the figures.

Earlier this month, tax expert Andrew Scott of Pinsent Masons warned that the number of appeals against HMRC's interpretation of tax laws set by the EU to the European courts was likely to increase in the short term, as taxpayers sought to protect their claims ahead of the UK's exit from the EU.

The average number of new tax cases sent to the Court of Justice of the EU (CJEU) has risen by a fifth since the credit crunch, up from an average of 50 per year between 2005 and 2010 to an average of 61 per year between 2011 and 2015, according to figures obtained by Pinsent Masons.

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