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The merger of Revenue and Customs has left the merged
department with separate procedures for the resolution of tax disputes:
those which apply to taxes dealt with by the VAT and duties tribunal and
those dealt with by the Special and General Commissioners in the case of
direct tax. The purpose of this consultation is to look streamlining
procedures. In addition, there is a separate Government initiative to
rationalise all tribunals. This initiative will also affect tax appeals.
Legislation has been enacted (Tribunals, Courts and Enforcement Act 2007)
and it is expected that the changes proposed in this legislation will be
operational from 2009. The details of this legislation and the changes that
it makes are not part of the consultation.
Views are sought on the following issues by 31 December 2007.
- Internal
review of decisions: It is the case in VAT that before a formal appeal
to the tribunal is begun, the taxpayer can choose to request a
departmental review of the disputed decision. This right is not
available in the case of direct tax. It is proposed that this right
might be extended to direct tax. The document outlines various ways in
which this may work.
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Administration of appeals: The document seeks views on administration of
appeals made, alignment of time limits for appeals and procedures for
dealing with late appeals.
- Deferral
of payment of tax: Where there is a dispute, the procedures for dealing
with payment of the disputed tax differ in the case of direct tax and
VAT. VAT has to be paid before an appeal can proceed (subject to a
taxpayer succeeding in making a hardship application); payment of direct
tax can be postponed (in practice, at the discretion of HMRC). The
document seeks views on these matters.
- Interest:
The statutory rules on interest due on tax and VAT differ. In
particular, the VAT and duties tribunal has a discretion to award
interest at any rate that it considers to be appropriate. It is proposed
that rules should be aligned and in particular, the VAT tribunal’s
discretion should be removed.
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Administrative decisions: It is currently the case that some
administrative decisions in relation to VAT (such as exercises of
discretion) can be subject to appeal to the VAT and duties tribunal. In
the case of direct tax such exercises of discretion by HMRC can only be
challenged by way of Judicial Review. It is proposed the rules here
could be aligned.
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Transitional arrangements: Views are sought on the process for the
change-over between the old and the new tribunals.
| Our view Alignment is plainly sensible and to be welcomed. The
possibility of internal review of direct tax matters is potentially
helpful but it will be important, if it to be effective, that this is an
independent review. Interest rules are a particularly contentious area
at the moment following the decision of the House of Lords in Sempra
Metals (that compound interest was payable by HMRC) so the stated
intention to remove a discretion from the VAT tribunal has to be
reviewed in the light of this decision.
It is currently the case that the VAT tribunal does,
in principle, have a power to award interest including on a compound
basis. There are some issues that are conspicuous by their absence: for
example, the VAT tribunal has a general discretion to award costs to a
successful taxpayer; in direct tax, costs can only be awarded if the one
party has behaved ‘wholly unreasonably’ in relation to the appeal. This
distinction would seem very hard to justify in a unified tribunal.
Taxpayers should use the opportunity provided by the consultation to
make their views known. |
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