VAT Disputes with HMRC: Appealing to the Tribunal

VAT disputes with HMRC can be a significant challenge for businesses, particularly when the amounts at stake are substantial or when outcomes may impact future operations.

Disputes can arise for various reasons; this could be because a large tax amount is involved or if the decision affects future business transactions. Businesses should always try to resolve these disputes without a tribunal hearing, taking advantage of statutory reviews and alternative dispute resolution wherever possible. But, if an agreement cannot be reached and the impact is significant, be prepared to defend your position.

How to proceed

Most VAT appeals must be submitted within 30 days of an assessment. Alternatively, if you’ve requested a statutory review, within 30 days at the end of the review period. Missing these deadlines can compromise your case, so act promptly. In most VAT appeals there is a requirement to pay the disputed tax upfront before the appeal can proceed. This rule prevents misuse of the appeals process as a delaying tactic. If you cannot afford to pay, you may will need to seek a waiver of payment on the grounds of “hardship”. This requires demonstrating an insufficiency of funds.

After the appeal has been accepted by the Court Service, the tribunal will set specific deadlines for document submissions, hearing dates, and the preparation of skeleton arguments. Follow all of these directions as this ensures a smooth process and reflects well on your case.

Remote hearings

Since COVID, most hearings are done remotely. This works well but remember to treat these virtual hearings with the same respect and seriousness as an in-person court session, including dressing appropriately and maintaining a respectful tone. There will be an experienced judge and often a lay member of the panel who assists the judge with considering the case.

Don’t represent yourself!

HMRC is a tough opponent, and the VAT tribunal process is complex. Engaging an experienced representative familiar with tribunal procedures is essential, especially if your case involves intricate legal issues or witness evidence. In England, a tax counsel is usually required; in Scotland, an Advocate with expertise in Scottish law is necessary.

Expectations

Be prepared for a lengthy process. Following an enquiry, you might have spent a long time in discussions with HMRC. Statutory reviews add another few months to this timeline, and once the appeal is lodged, it can take at least a year to secure a hearing. The decision of the FtT hearing may take anywhere from three to 12 months.

This however may not be the end of the matter. HMRC may appeal, potentially extending the case to the Upper Tribunal and, in very complex disputes to the Court of Appeal or even to the Supreme Court.

Cost considerations

When deciding to pursue an appeal it is vital to carry out a dispassionate analysis of whether an appeal makes economic sense. There is no disguising the fact that professional fees are costly. For most FtT cases, each side covers its own costs, meaning that even if you win, you will bear the costs of representation and, potentially, tax counsel. In some situations, the best approach may be to pay the disputed tax and move on.

If the case progresses to the Upper Tribunal or higher, the winning party is typically awarded costs. While this is great if you win, it’s doubly painful if you lose, as you may be responsible for both your own costs and those of HMRC.

How we can help

Disputing VAT with HMRC can impact your business significantly. Reach out to a VAT Dispute specialist early to understand your options, assess your chances of success, minimise risk, and increase your chances of a favourable outcome.