MT Expert - Legal: Stand up to HMRC

Every business comes up against HM Revenue & Customs at some point - Matheu Smith explains how to fight back.

by Matheu Smith
Last Updated: 09 Oct 2013
The 2005 merger of the Inland Revenue and HM Customs & Excise to create HMRC put it under pressure to make savings even during the boom years of Government spending. And in these austere times, more deep cuts have been imposed.  As a result, small businesses are faced with an increasingly centralised, policy-driven HMRC and its capricious IT systems, which is less able to take account of their individual circumstances. In contrast, HMRC’s Large Business Service continues to provide the sort of coordinated and cooperative approach to taxation that SMEs can only dream about.

That it was necessary to include a reminder in the Taxpayers’ Charter that HMRC should treat them as honest provides an insight in to the shortcomings of its bedside manner.  Nevertheless, cooperating with HMRC (however uncooperative it may be) is usually the best way to resolve any difficulties and HMRC seems to be trying to find new ways to avoid disputes with SME’s ending up in the Tax Tribunal.

If HMRC decides you’ve done something wrong but you disagree, you can make use of its appeal and review procedures. When HMRC notifies you that it’s made a decision that can be appealed or reviewed, it should tell you exactly how to do that.  It’s important to act quickly: usually the time limit for asking for an appeal or review is 30 days. Miss that opportunity, and you may have lost your only chance to challenge HMRC’s decision. The good news, though, is that anecdotal evidence suggests its new review procedures are working well, with HMRC much more willing to accept that it has made a mistake than it used to be.

Another promising development is a current move by HMRC to embrace something called ‘Alternative Dispute Resolution’ when dealing with small businesses. Under the ADR process an HMRC ‘facilitator’ has the task of working with the taxpayer and the HMRC caseworker that made the disputed decision to try to reach an agreement and resolve the dispute to avoid it ending up in the Tax Tribunal. ADR is still at pilot scheme stage, and is operating in certain parts of the country - although based on its initial success, it looks like it’ll eventually be rolled out across the UK. While it’s easy to be sceptical about the independence of an HMRC facilitator, it’s hoped that ADR will provide SMEs with access to the sort of co-operative approach to resolving tax problems that currently seems to be the preserve of large businesses.  

- Matheu Smith is a consultant tax solicitor of Keystone Law

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