Tax Appeals against decisions made by HMRC - technical document

3rd June 2008

HMRC have published a technical document that introduces the draft “The Transfer of Tribunal Functions and Revenue and Customs Appeals Order”. It contains some detailed comments on the Order and the consequential amendments that are made on, amongst others, the Taxes Management Act 1970.

The Introduction to the document is as follows:

1.1 The administration of appeals against HM Revenue and Customs (HMRC) decisions reflects developments over time, differences in the structures of the taxes concerned and the different approaches of the two former departments, the Inland Revenue and HM Customs and Excise. Since the merger of these departments, HMRC has been working to align and modernise the administration of appeals where it is sensible to do so. This is linked to the work on taxpayer safeguards that has been carried out by the Review of Powers, Deterrents and Safeguards.

1.2 This work on the way appeals are handled by HMRC is also being considered in the context of the reform of the tribunal system which is being taken forward by the Ministry of Justice (MoJ).

1.3 The Tribunals Courts and Enforcement Act 2007 (TCEA) provides for a single two-tier tribunal structure. The new tribunal will be sub-divided into Chambers, one of which will be the Taxation Chamber. It is expected that tax appeals will transfer to the Taxation Chamber in April 2009.

1.4 Against this background, HMRC published a consultation document “HM Revenue and Customs and the Taxpayer: Tax Appeals against decisions made by HMRC” on 9 October 2007.

1.5 The consultation sought views on implementing a more consistent approach to internal review across HMRC, possible alignments of administrative matters and transitional arrangements. The consultation responses overwhelmingly supported the introduction of an optional statutory review process which enabled taxpayers to choose whether or not to have an internal review of disputes.

1.6 HMRC published its response document “HM Revenue and Customs and the Taxpayer: Tax Appeals against decisions made by HMRC: Summary of Responses and Future Direction” on 12 March 2008.

1.7 In the response document the Government announced that it would introduce a statutory entitlement to review of appealable decisions which would fall within the jurisdiction of the Taxation Chamber of the new tribunal. The new optional process will apply to those matters that currently have a mandatory review (except for disputed restoration decisions under the Customs and Excise Management Act 1979 where the current mandatory review process will remain).

1.8 The document also announced that the Government would streamline appeals handling and proceed with other proposals set out in the consultation document.

1.9 The new provisions will apply from the time that the functions of the existing tribunals are transferred to the Taxation Chamber. Most matters are expected to transfer in April 2009.

1.10 The MoJ consultation “Transforming Tribunals”, published on 28 November 2007 considered how the new two-tier tribunal and the Taxation Chamber within it should operate. MoJ published its response document on 19 May 2008.

1.11 HMRC is working closely with the MoJ to ensure the implementation of the new tribunal structure and HMRC administrative changes fit together, to develop proportionate tribunal rules and procedures and to ensure a safe transition to the new tribunal.

1.12 Clause 119 of Finance Bill 2008 enables the implementation of this review and other changes to be made in a Statutory Instrument which will also contain changes made under powers in the TCEA.

1.13 This document introduces the draft “The Transfer of Tribunal Functions and Revenue and Customs Appeals Order” and should be read with it. Chapter 2 gives an introduction to the Order and an overview of what it contains. Chapter 3 provides explanatory material and comments on the provisions in the draft Order in more detail.

1.14 The draft Order enables readers to see the proposed changes to tax appeals provisions in one place and allows plenty of time for comment before the Order is laid before Parliament in the autumn.

1.15 HMRC would be pleased to receive comments and observations on the draft Order and, where desired, to meet with interested parties to discuss the proposed provisions. Please send any comments or observations on the draft Order to reform.appeals@hmrc.gsi.gov.uk or contact Helen Latham on 0207 147 2315 by 25 July.

Social Entitlement Chamber matters

1.16 The changes necessary to transfer tax credits, child benefit and Child Trust Fund (non-tax) appeals to the proposed Social Entitlement Chamber will be made separately by the Ministry of Justice, in an Order covering all those matters which will transfer to that Chamber.

1.17 These matters are expected to transfer on 3 November 2008.

1.18 The intention is that tax credit appeals will, in due course, transfer to the Taxation Chamber of the new tribunal. Provision will be made at the time of transfer to ensure that the internal review provisions operating in respect of matters heard by the Taxation Chamber will also apply to tax credits.