Challenging HMRC and What To Do
If you disagree with a tax penalty notice or decision made by HM Revenue and Customs (HMRC), then you have the right to challenge this.
The following are a list of HMRC decisions that you have the right to challenge:
- a corporation tax, income tax or VAT bill received
- a penalty (including late filing fees or late payments or corporation tax) received
- decisions made about a tax claim/ relief
- decisions regarding an information request or a check of business records
Depending on the matter, you may be able to delay a HMRC tax decision or penalty until the issue has been resolved.
Disagreeing with the Decision
On the "decision" letter that you wish to appeal, for example the tax bill or penalty notice, HMRC will include a section on how to proceed if you disagree with their decision. Typically HMRC will give 30 days from the date on the letter to appeal or to accept a tax decision.
There are circumstances where you can appeal after the 30 day deadline, however you will need to provide a 'reasonable excuse' along with any applicable evidence that complies with HMRC.
For example, some reasonable excuses for missing the deadline include: a close relative dying shortly before the corporation tax return or payment deadline, you had a serious or life threatening illness or an unexpected stay in a hospital preventing you from filing or paying tax.
Indirect vs Direct Tax
How to appeal a decision depends on whether it deals with direct or indirect tax.
- Direct Tax - this refers to tax that is paid straight to HMRC and cannot be shifted like corporation tax, income tax and National Insurance contributions.
- Indirect Tax - this refers to tax that is collected from HMRC (imposed onto company) and can be passed on consumers for example Value Added Tax (VAT), excise duty and customs duty tax.
Disagreeing with Direct Tax Decision:
The "decision" letter will explain how to make an appeal the tax decision or tax penalty and the deadline.
Typically, you will either be able to appeal using the appeal form provided (attached to the letter) or you can write to HMRC by sending a response via post to HMRC's address.
Things that will need to be included on the appeal:
- What you disagree with and the reason.
- Your name and/or company name.
- Company Unique Taxpayer reference (UTR) number.
- Any additional information supporting the challenge.
- What you think are the correct figures and the supporting calculations (for tax bills and penalties).
After Sending the Appeal
Once the appeal is received, the case worker who issued the tax penalty will review the case again and consider your response. Once looked over the case worker will reach an agreement with you (how most disputes are settled) and will write back to you to confirm their decision.
Disagreeing with Penalties
HMRC Penalties are typically incurred by companies for any of the following reasons:
- late corporation tax return filed (or self assessment)
- late payment of corporation tax (or income tax)
- filing an inaccurate return - this is typically if HMRC investigate your returns
- failure to keep adequate records
If you disagree with a penalty then this can be challenged; this is typically where the requirement for a "reasonable excuse" comes in, as mentioned earlier.
When responding to HMRC with the appeal letter, as well as the standard information mentioned for appealing tax (name, company, UTR...), you will need also need to provide the dates that the return/payment was originally due and include the explanation for the late payment.
Technical issues - if the reason that the submission (filing or payment) was due to computer problems then you will need include both the date you tried to submit and the details of the computer/system error message.
Review Process
Typically it will take 45 days for HMRC to process the challenge. The review officer (different from the case worker) will contact you if is going to take longer. The review officer is someone working for HMRC who is from a different team and not involved in the case.
Once the review has been completed, you will receive a letter to confirm the outcome of appeal. It typically results in one of the three following outcomes:
- upholding decision - original tax penalty or decision is unchanged
- varying decision - original tax penalty or decision has changed
- cancellation of tax penalty or decision
If the tax penalty or decisions is not cancelled (upheld or varied) you will need to pay whatever you now/did owe. - If HMRC cancels the decision you will not need to do anything.
Tax Tribunal
If you disagree with the result of HMRC's review - this can still be appealed, where you will need to raise this to the tax tribunal. This must be done within 30 days of the review letter.
Things to Note
The key takeaways for appealing HMRC tax decisions and penalties include:
- If you disagree with any HMRC decisions or penalty notice, then you have the right to challenge.
- You will need to have a valid reason for appealing (for example why a return was filed late) and sometimes you will need to provide evidence.
- You will need to challenge the decision within HMRC's timeframe (typically 30 days).
- Once submitted HMRC will review your response and will conclude whether the decision is upheld, varied or cancelled.
If you think that you may be eligible to make an appeal having received a penalty notice for a tax penalty or tax decision, but are unsure how it qualifies, it would be best to contact a tax professional on how to go about this.
