{"id":2197,"date":"2024-12-18T20:38:32","date_gmt":"2024-12-18T20:38:32","guid":{"rendered":"https:\/\/taxinvestigation.co\/new\/?p=2197"},"modified":"2024-12-18T20:38:33","modified_gmt":"2024-12-18T20:38:33","slug":"hows-your-luck-by-andrew-park","status":"publish","type":"post","link":"https:\/\/taxinvestigation.co\/new\/hows-your-luck-by-andrew-park\/","title":{"rendered":"How\u2019s your luck? by Andrew Park"},"content":{"rendered":"\n

Data shows a huge variation in success rates in challenging decisions across HMRC departments, writes Andrew Park<\/em><\/p>\n\n\n\n

Decisions taken against taxpayers by HMRC vary considerably from things like closure notices, tax and penalty determinations and information notices issued by the HMRC investigative departments forming part of HMRC\u2019s Customer Compliance Group (CCG) though to minor automatic late payment and late filing penalties issued by HMRC\u2019s Customer Service Group (CSG).<\/p>\n\n\n\n

Regardless of type, most decisions are appealable in the first instance to HMRC\u2019s Independent Reviewer, but there has previously been limited information about the comparative success rates taxpayers have enjoyed.<\/p>\n\n\n\n

A myth has developed in some quarters that it is near pointless making an appeal to the Independent Reviewer because they almost never overturn or vary decisions made by HMRC officers. This is not and was never true, but successful appeals on more technical matters have always depended upon having something new to introduce for the Reviewer\u2019s consideration \u2013 be that new relevant facts or further legal arguments. Anything that has already involved advice from HMRC\u2019s technical specialists will inevitably involve the Reviewer reading and following that same advice without something new thrown into the mix. Inevitably, that\u2019s often harder than showing that an automatic penalty was invalidly issued.<\/p>\n\n\n\n

Now, for the first time, data we have obtained at the Contentious Tax Group (CTG) shows a comprehensive breakdown of success against HMRC\u2019s various departments over the four years to 2023\/24.<\/p>\n\n\n\n

Dramatically varying degrees of success against HMRC\u2019s investigative departments<\/strong><\/h2>\n\n\n\n

HMRC\u2019s investigators are organised into five departments within HMRC Customer Compliance Group (CCG) and comprise:<\/p>\n\n\n\n

    \n
  • Counter-Avoidance \u2013 dealing with investigating failed marketed tax avoidance schemes.<\/li>\n\n\n\n
  • Fraud Investigation Service (FIS) \u2013 conducting fraud investigations as well as complex non-fraud related investigations with large amounts of tax at stake (the data here only relates to FIS\u2019s civil investigations).<\/li>\n\n\n\n
  • Individuals and Small Business Compliance.<\/li>\n\n\n\n
  • Large Business.<\/li>\n\n\n\n
  • Wealthy and Midsized Compliance.<\/li>\n<\/ul>\n\n\n\n

    Additionally, during the three years to 2023\/24, CCG also included the now-disbanded Covid Taxpayer Protection Taskforce, with its figures showing as \u2018Compliance Operations Directorate\u2019.<\/p>\n\n\n

    \n
    \"\"<\/figure>\n<\/div>\n\n
    \n
    \"\"<\/figure>\n<\/div>\n\n\n

    In generality, over 70% of decisions by HMRC\u2019s CCG departments were upheld by the Independent Reviewer in full across all four years. However, there was a marginal overall increase during the period in taxpayers\u2019 success in getting decisions varied.<\/p>\n\n\n\n

    Taxpayers have enjoyed least success in appealing decisions made by HMRC Counter-Avoidance. Only a tiny and diminishing proportion of appeals against Counter-Avoidance decisions were successful in cancelling often very substantial assessments \u2013 down to 1% by 2022\/23 and 2023\/24 from only 4% in 2020\/21. That\u2019s surely not surprising, given HMRC\u2019s success in targeting and shutting down marketed schemes that it has challenged in the courts and the inflexible and consistent way in which taxpayer settlements are dictated as a matter of official policy. <\/p>\n\n\n\n

    A bit more surprising, though, is the increasing \u2013 now 18% \u2013 proportion of Counter-Avoidance decisions now varied. That suggests that although Counter-Avoidance have clarity on which schemes don\u2019t work, in an increasing number of cases they\u2019re not getting the detail and the consistency of the liabilities right.<\/p>\n\n\n\n

    Meanwhile, the number of Fraud Investigation Service tax assessments and penalty determinations successfully challenged is at a four-year high \u2013 22% were varied by the Independent Reviewer in 2023\/24 and 11% were cancelled altogether. A greater proportion of FIS decisions were cancelled or varied than decisions made in generally less serious cases by their counterparts dealing with individuals or businesses of all size \u2013 perhaps reflecting the greater complexity and subjectivity of many FIS cases.<\/p>\n\n\n\n

    Notwithstanding the disappointing success rate of taxpayers challenging HMRC Covid support-related decisions in the tax courts \u2013 where the courts have applied the Covid legislation rigidly and often with conspicuously unfair outcomes \u2013 the taxpayer has been far more successful in preventing appeals reaching that stage by successfully appealing to the Independent Reviewer. Some 58% of Covid Taskforce appeals were at least partly successful in 2023\/24 \u2013 of which 21% of assessments and determinations were cancelled altogether. That\u2019s was approximately double the initial success rate in 2021\/22, suggesting that the quality of HMRC\u2019s initial decision making has sharply deteriorated or that the Independent Reviewers are giving taxpayers more latitude (perhaps out of expediency to finally \u2018clear the decks\u2019 of Covid cases) \u2013 or maybe both.<\/p>\n\n\n\n

    High levels of success against automatic penalties<\/strong><\/strong><\/h2>\n\n\n
    \n
    \"\"<\/figure>\n<\/div>\n\n\n

    HMRC\u2019s routine automatic penalties \u2013 such as late filing penalties \u2013 are dealt with by HMRC Customer Service Group.<\/p>\n\n\n\n

    Unlike appeals against decisions made by HMRC\u2019s investigative departments, taxpayers brought tens of thousands of successful appeals against HMRC CSG for automatic penalties such as the \u00a3100 penalty charged to people for being a day late filing their Self-Assessment tax returns. Typically, such appeals are made on grounds of \u2018reasonable excuse\u2019 \u2013 some exceptional reason beyond the taxpayer\u2019s control for the failure to meet their obligations on time \u2013 or because penalties were not validly issued.<\/p>\n\n\n\n

    Implicitly, HMRC\u2019s Independent Reviewer was broadly accepting of the reasons and arguments offered and granted errant taxpayers significant latitude. Although taxpayer success rates in appealing automatic penalties were at their highest during Covid and peaked at a 78% cancellation rate in 2020\/21, that was a reflection of the exceptional excuses Covid provided and a general intent on the part of HMRC and their political masters to grant taxpayers more leeway at a difficult time.<\/p>\n\n\n\n

    The recent increase in 2023\/24 to 70% cancellations from 58% cancellations in 2022\/23 appears to reflect the current and ongoing decline in HMRC customer service standards and the ever-greater difficulties experienced by taxpayers in trying get telephone assistance from HMRC to help them meet their obligations. Growing deficiencies in HMRC service standards appear to have led to HMRC having to cancel more of its own penalties but not before putting the taxpayers involved to considerable further nuisance.<\/p>\n\n\n\n

    The future?<\/strong><\/strong><\/h2>\n\n\n\n

    High levels of HMRC staff turnover and the replacement of experienced, competent people with large numbers of new recruits let loose on the public with minimal training does not bode well for the general quality of HMRC decision making. <\/p>\n\n\n\n

    At the same time, and apparently with that concern in mind, HMRC seems to be trying to \u2018dumb down\u2019 many aspects of the compliance system in order to make it more operable by less capable staff \u2013 for instance, the pro-forma penalty questionnaires now routinely issued at the conclusion of investigations in place of a more rounded dialogue and nuanced consideration of the circumstances. But such \u2018tick-box\u2019 attempts to simplify the process do not simplify the law itself and seem set only to increase the number of poor decisions.<\/p>\n\n\n\n

    Recent HMRC consultations suggest that the tax authority would dearly like to trade taxpayer protections in various areas for greater efficiency and more limited scope to appeal, but this must be fiercely resisted. Indeed, if anything, hasty legislation may lead to further areas of appeal being required \u2013 for instance, the new shift to late payment interest being charged at overtly punitive rates of interest surely means that the application of any such punishment must be subject an appeals process or HMRC will face a raft of human rights litigation.<\/p>\n\n\n\n

    On the bright side, the 2023\/24 lifting of the threshold for the automatic requirement for individual taxpayers to file Self-Assessment returns from \u00a3100,000 to \u00a3150,000 should greatly reduce the number of people falling foul of late filing penalties where they never had any more tax to declare anyway.<\/p>\n\n\n\n

    HMRC\u2019s routine automatic penalties \u2013 such as late filing penalties \u2013 are dealt with by HMRC Customer Service Group.<\/p>\n\n\n\n

    Unlike appeals against decisions made by HMRC\u2019s investigative departments, taxpayers brought tens of thousands of successful appeals against HMRC CSG for automatic penalties such as the \u00a3100 penalty charged to people for being a day late filing their Self-Assessment tax returns. Typically, such appeals are made on grounds of \u2018reasonable excuse\u2019 \u2013 some exceptional reason beyond the taxpayer\u2019s control for the failure to meet their obligations on time \u2013 or because penalties were not validly issued.<\/p>\n\n\n\n

    Implicitly, HMRC\u2019s Independent Reviewer was broadly accepting of the reasons and arguments offered and granted errant taxpayers significant latitude. Although taxpayer success rates in appealing automatic penalties were at their highest during Covid and peaked at a 78% cancellation rate in 2020\/21, that was a reflection of the exceptional excuses Covid provided and a general intent on the part of HMRC and their political masters to grant taxpayers more leeway at a difficult time.<\/p>\n\n\n\n

    The recent increase in 2023\/24 to 70% cancellations from 58% cancellations in 2022\/23 appears to reflect the current and ongoing decline in HMRC customer service standards and the ever-greater difficulties experienced by taxpayers in trying get telephone assistance from HMRC to help them meet their obligations. Growing deficiencies in HMRC service standards appear to have led to HMRC having to cancel more of its own penalties but not before putting the taxpayers involved to considerable further nuisance.<\/p>\n\n\n\n

    The future?<\/strong><\/strong><\/h2>\n\n\n\n

    High levels of HMRC staff turnover and the replacement of experienced, competent people with large numbers of new recruits let loose on the public with minimal training does not bode well for the general quality of HMRC decision making. <\/p>\n\n\n\n

    At the same time, and apparently with that concern in mind, HMRC seems to be trying to \u2018dumb down\u2019 many aspects of the compliance system in order to make it more operable by less capable staff \u2013 for instance, the pro-forma penalty questionnaires now routinely issued at the conclusion of investigations in place of a more rounded dialogue and nuanced consideration of the circumstances. But such \u2018tick-box\u2019 attempts to simplify the process do not simplify the law itself and seem set only to increase the number of poor decisions.<\/p>\n\n\n\n

    Recent HMRC consultations suggest that the tax authority would dearly like to trade taxpayer protections in various areas for greater efficiency and more limited scope to appeal, but this must be fiercely resisted. Indeed, if anything, hasty legislation may lead to further areas of appeal being required \u2013 for instance, the new shift to late payment interest being charged at overtly punitive rates of interest surely means that the application of any such punishment must be subject an appeals process or HMRC will face a raft of human rights litigation.<\/p>\n\n\n\n

    On the bright side, the 2023\/24 lifting of the threshold for the automatic requirement for individual taxpayers to file Self-Assessment returns from \u00a3100,000 to \u00a3150,000 should greatly reduce the number of people falling foul of late filing penalties where they never had any more tax to declare anyway.<\/p>\n\n\n\n

    \u2022 Andrew Park is a tax investigations partner at Price Bailey. Email Andrew.Park@pricebailey.co.uk<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

    Data shows a huge variation in success rates in challenging decisions across HMRC departments, writes Andrew Park Decisions taken against taxpayers by HMRC vary considerably from things like closure notices, tax and penalty determinations and information notices issued by the HMRC investigative departments forming part of HMRC\u2019s Customer Compliance Group (CCG) though to minor automatic […]<\/p>\n","protected":false},"author":1,"featured_media":2201,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[64],"tags":[],"class_list":{"0":"post-2197","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-december-january-2025-issue"},"_links":{"self":[{"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/posts\/2197","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/comments?post=2197"}],"version-history":[{"count":1,"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/posts\/2197\/revisions"}],"predecessor-version":[{"id":2202,"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/posts\/2197\/revisions\/2202"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/media\/2201"}],"wp:attachment":[{"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/media?parent=2197"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/categories?post=2197"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/tags?post=2197"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}