See how a tax dispute could occur and what the options are for resolving it
A tax dispute arises where there is a difference of opinion between HMRC and a taxpayer. This may relate to one or more entries on a tax return. Tax disputes can arise in respect of facts, the law, or a combination of both.
Resolving tax disputes
Your options for resolving tax disputes vary depending on the nature of your dispute, the amount of tax at stake and your current situation with HMRC.
Most tax disputes are settled by reaching an agreement with HMRC. If no agreement is made, you have the right to ask HMRC to carry out an independent review of its decision. This is known as an HMRC review and it is undertaken by an HMRC officer who has not previously been involved in the case. The HMRC review can result in the original decision being upheld, varied or set aside. If the decision is set aside, that is the end of the matter. If it is upheld or varied, you will either need to pay the amount of tax due or pursue further action.
Alternative Dispute Resolution (ADR) mediation
ADR mediation is a process for resolving tax disputes with HMRC without going to court.
ADR can be applied for or offered by HMRC. Where a case is accepted for ADR, a mediator is appointed to manage what is normally a one-day mediation session between you and HMRC. The mediator is normally a trained HMRC officer who will not have been previously involved in the case. In some instances, it may be possible for a specialist third-party mediator to be appointed, the cost of which can be shared with HMRC.
ADR is in most cases more cost effective than litigation and completed far more quickly. Around 80% of ADR cases are successfully settled through the mediation process rather than proceeding to litigation*.
Which type of tax disputes are suitable for ADR?
ADR is most effective in cases where there is a genuine dispute with HMRC, which has not been resolved through routine correspondence and has probably stalled. It is particularly suited to situations where there might be a range of possible outcomes to the disputed tax issue.
ADR can also be used to narrow down the areas of the dispute.
When can I apply for ADR?
You can apply for ADR at any point during an HMRC enquiry, even where Tax Tribunal proceedings have already begun.
What happens after ADR?
If an agreement is reached, the mediator will ask you and HMRC to sign a document detailing the outcome. HMRC will then take the necessary steps to formalise the agreement.
Alternatively, if no agreement is reached, you and HMRC will discuss whether to continue correspondence or move the case forward to the Tax Tribunal.
In some cases, it is not possible to settle a tax dispute by agreement with HMRC. In these instances, you have the right to have your appeal considered by the Tax Tribunals and Courts.
The Tax Tribunal is independent of HMRC and has a number of different options available to hear each appeal. More complex cases will involve an in-person (or remote) hearing in front of a Tribunal Judge, who will review the full case history, hear witnesses and assess all evidence before making a decision. Cases are typically first heard before the First-tier Tax Tribunal, but can be appealed to the Upper Tribunal, the Court of Appeal and the Supreme Court, depending on the circumstances of the case.
How Evelyn Partners can help to resolve your tax dispute
Our team of experts can help you at all stages of your dispute to ensure that is it resolved as quickly and seamlessly as possible.
We can assist in resolving your tax dispute through ADR. In the first instance, we will review your dispute to consider its suitability for ADR. If it is, then we will handle all aspects of the ADR process with HMRC, from the initial application stage, through to any formal agreement.
If ADR is not suitable or unsuccessful, our team has extensive experience of preparing cases for Tribunal, including liaising with the Tax Counsel on your behalf, preparing the case evidence, including document bundles and potential witnesses, and guiding you through the full litigation process.
Before and during the litigation stages, our team regularly provides tax-expert witness services and can deliver court compliant reports for either claimants, defendants or on a joint instruction basis. Our experts have experience of giving evidence in court and participating in mediation and arbitration proceedings.
Examples of disputes where our experts have provided services include:
- Professional negligence cases (particularly in respect of failed tax schemes)
- Tax Tribunal proceedings
- Commercial disputes involving tax
- Divorce and matrimonial
- HMRC disputes
For more information on how we can help you to resolve your tax dispute, contact us now.
*Source: HMRC Annual Report and Accounts 2021 to 2022
Frequently asked questions about tax disputes
What should I do if I disagree with HMRC?
You need to write to HMRC, stating that you wish to appeal their decision and the reasons why. This appeal should be made within 30 days from the date of HMRC’s decision letter. Within the decision letter, HMRC should outline your rights if you disagree with a decision which could include making an appeal.
Should I pay the disputed tax automatically?
This will depend on your circumstances.
If a dispute relates to a tax avoidance scheme, HMRC can issue an accelerated payment notice (APN) that requires you to pay the disputed tax amount within 90 days.
If you have not received an APN, there is still an option to pay the disputed tax to HMRC upfront. Payment of the tax will stop additional late payment interest accruing. Given that some tax disputes can be lengthy, this can be an attractive option as HMRC is obliged to return undisputed payments. If a tax dispute can be resolved quickly, some people and businesses prefer to make the payment once an agreement has been achieved.
If you are concerned about when to pay the disputed tax amount, you may wish to speak to a tax expert for further guidance.
Can I raise a complaint against HMRC?
You can make a complaint to HMRC if you are unhappy with their service. The complaint process is entirely different to the one taken if you disagree with a tax decision.
You can make a complaint online, by phone or by post.
What is the HMRC code of governance for resolving tax disputes?
This document includes details of how HMRC handles disputes involving multiple taxpayers as well as specialist areas, such as international tax and large corporate groups who have multiple disputes. The code of governance also sets out the remit of HMRC’s internal Tax Dispute Resolution Board (TDRB).