Where taxpayers and the taxman cannot resolve a dispute by negotiation, a less formal and cheaper alternative to going to the independent Tax Tribunal (or a handy additional route of appeal) is HMRC’s Internal Review process, (properly known as a Statutory Review). Taxpayers have a statutory right to an Internal Review if they want one, but they are not compulsory. A Statutory Review is available when HMRC issues an appealable notice of assessment or a Decision.
Direct tax appeals
Appeals in direct tax cases are made first to HMRC rather than the Tax Tribunal. A Statutory Review can only be triggered when an appeal has been made against an appealable decision made by HMRC and when:
- the Tribunal the has not yet been notified of the appeal;
- HMRC can offer the taxpayer a Review.
Only the taxpayer can notify the Tribunal of an appeal, HMRC cannot. So offering a Statutory Review is the only way HMRC can progress matters when negotiations are at stalemate.
Where the taxpayer asks for a Statutory Review the taxman has to issue a Decision Letter within 30 days of the request. The Decision Letter must set out HMRC’s views, and state the tax they want. That letter triggers the start of the formal Statutory Review period.
Where the taxman offers the Review, the taxpayer has 30 days to either:
- accept the offer of Statutory Review; or
- appeal against the Decision to HMRC and then notify the Tax Tribunal of the appeal;
- If the taxpayer does nothing then the matter is treated as finally settled on the basis set out by HMRC, unless the taxman accepts a late application.
The normal timescale for a Statutory Review is set at 45 days, but a different timeframe can be agreed between HMRC and the taxpayer.
Once HMRC has told the taxpayer its Review conclusion, the taxpayer can:
- accept the conclusion;
- or appeal to the Tax Tribunal within 30 days of the Review Conclusion Letter;
- After 30 days an un-appealed Statutory Review Decision is treated as being agreed, unless the Tribunal accepts a late appeal;
- Where HMRC do not complete the Statutory Review within the agreed period, then the HMRC’s Decision Letter is automatically upheld. HMRC must notify the taxpayer of this as soon as possible. The taxpayer then has 30 days to appeal to the Tribunal;
- The taxpayer can also notify an appeal directly to the Tax Tribunal: at any time between the original appeal and accepting the offer of a Review; or at any time between appealing and receiving HMRC’s latest view where a Review was requested; or within 30 days of either the Review Conclusion Letter, or the letter notifying that the Review has not been completed within the Review period.
For indirect taxes the Review must be offered at the same time as the Appealable Decision is notified to the taxpayer. The taxpayer can then accept the offer of the Review or make an appeal directly to the Tax Tribunal, within 30 days of the notification letter. If the taxpayer is not satisfied with the outcome of the Statutory Review an appeal can then be made, again directly, to the Tribunal.
How Reviews are conducted
Usually the Review Officer will be outside the direct line management chain of the original case worker or Decision-maker. The Review Officer’s role is to check if the Decision is in line with the law and HMRC’s technical guidance, policies, and custom and practice. The Review officer has also to consider whether the case is one which HMRC would want to take to the Tax Tribunal (e.g. an important point of principle). The taxpayer can submit extra information to the Review Officer, although if that is substantial the Review Officer is likely to refer it back to the case worker or Decision-maker whilst asking the taxpayer to agree to an extended Review period.
If you are undergoing a tax investigation or a compliance check then specialist help from Lynam Tax Enquiry Experts could save your blushes and your business. Plus, our massive experience will almost certainly save you tax and penalties as well.
*For a free, confidential chat about your tax affairs, don’t delay, call Paul Lynam now on 0845 643 9997
or Andrew Nutbrown: 07718 778710