‘Don’t assume the taxman is always right’, Baker Tilly tells Scots firms

When a business disagrees on legal grounds with a decision by HMRC – such as the tax liability on a transaction or payment received, an accompanying payment demand for underpaid tax, or a penalty charge – it can seek a local independent review of that decision.

If not satisfied when the review is complete, the taxpayer can then refer the matter in question to the First Tier Tax Tribunal. In certain circumstances, the taxpayer can also access HMRC’s Litigation and Settlement strategy to try and bring the dispute to a conclusion.

Jim Burberry, Head of VAT for Baker Tilly in Scotland said: “In its recent Reviews and appeals report: 2013/14,HMRC claims to have a strong track record when it comes to winning arguments when challenged by the taxpayer in reviews and appeals. However, is that a fair reflection of the accuracy of its work?

‘The fact that HMRC doesn’t have a 100 per cent or indeed a 75 per cent combined record of success in such reviews and appeals means that its decisions are variable, open to interpretation and challenge and often judged to be wrong when scrutinised either internally by its own officers or externally through the Courts.

‘There are many instances recently where taxpayers in Scotland have successfully challenged HMRC’s decisions either via independent review or the First Tier Tribunal.

“While not every decision taken by HMRC is incorrect and open to challenge, taxpayers should look at all the options available to ensure they are satisfied with that decision, its validity and its accuracy. While disputing HMRC’s decisions may seem a daunting task, there is sometimes merit in doing so, and on occasion a significant likelihood of success.”