Wednesday, April 01, 2015


BLOG 161


Last Autumn HMRC published some independent research on the “Statutory Review Process”, carried out by Opinion Leader Research.  I was fascinated by this report.

The Statutory Review process is an intermediate step between appealing an HMRC assessment and taking the appeal to the Independent Appeals Tribunal.  The taxpayer is entitled to ask for the case to be looked at by a fresh pair of eyes within HMRC.  Normally the Reviewer is part of a specialist review team.  He or she is not in the same line management as the original decision-maker, which ought to mean that the Reviewer is not concerned about upsetting the decision-maker.

At about the same time as HMRC published the research, they also published some statistics on reviews.  These show

                                                                                                2012/13                       2013/14

Non-penalty reviews
decided in taxpayer’s favour                                      26%                             26%
partly decided in taxpayer’s favour                            6%                               7%
VAT penalty reviews
decided in taxpayer’s favour                                      48%                             49%
partly decided in taxpayer’s favour                            9%                               11%
Other penalty appeals
            decided in taxpayer’s favour                                      33%                             39%
            partly decided in taxpayer’s favour                            3%                               2%.

With a 1 in 3 chance of at least partial success, it is hard to see why anyone would not ask for a review but only around 38,000 requests are made each year which is a fairly small proportion of the total reviewable decisions made by HMRC in a year.

Opinion Leader Research interviewed (on the telephone) 580 taxpayers, 375 of which had had a review, 25 of which had declined the offer (albeit that Opinion Leader Research felt that too low a number for robust analysis) and 180 of which had an unsuccessful review and then pursued their appeal to the Tribunal.  They prefaced the results with the warning that, “In this survey the subject matter is emotive and respondents may have particularly strong opinions given the survey was looking at the process to deal with disputes about HMRC decisions, including decisions to charge financial penalties”.

The research found that 51% of those who had had a review and 35% of those who had lost and subsequently gone to the Tribunal found the appeal process either very useful or moderately useful.  However that is made up of 69% of those who won and only 32% of those who lost.  44% thought the review impartial with another 18% thinking it probably was (although the 44% figure broke down to 51% of those who had only had a review and 29% of those who had then pursued their appeal to the Tribunal).

However the most telling figures are probably that 81% of people who had a review and 65% of those who both had a review and then took their appeal to the Tribunal would ask for a review again if they have another dispute with HMRC.  This is heartening, but curious.  Only 51% felt the review even moderately useful, but 81% would opt for a repeat performance.  Why would 30% of taxpayers want to adopt what they regard as a pointless procedure?

What I hope is less heartening for HMRC is the top reasons taxpayers gave for going to the Tribunal following an unsuccessful review, namely

-          The taxpayer thought that HMRC were treating him harshly for a minor infraction (25%)
-          The taxpayer believed he had a good case (20%)
-          HMRC ignored the taxpayer’s questions (17%)
-          Poor communication (9%)
-          HMRC being too bureaucratic (9%).

Opinion Leader Research think these reasons could point to there being a lack of understanding of (or faith in) the review process in general.  Bearing in mind that around one-third of the review cases went to appeal, but that in around 50% of penalty appeals and 33% of other appeals the review found in favour of the taxpayer, that points to a high proportion of those who lose on review opting to go to the Tribunal.  That does not suggest a lack of understanding of (or faith in) the review process.  Rather it suggests that the review process is successful in correcting cases where HMRC got the decision wrong, but that where the decision is upheld, taxpayers see the review as simply a step that may obviate needing to go to the Tribunal.

When the process was introduced, it was thought that a lot of taxpayers who lost on review, would be satisfied that their concerns had been taken seriously within HMRC and would abandon their appeal, feeling that they had then been treated fairly.  This does not seem to be happening.  Sadly Opinion Leader Research do not appear to have felt this a question worth asking.

“Harsh treatment for a minor infraction”, must relate to penalty appeals.  Bearing in mind that 60% of VAT penalty appeals and 40% of other penalty appeals go wholly or partly in favour of the taxpayer, the 22% figure suggests that 22% of the unsuccessful 40% or 60% (as the case may be) still think they have been harshly treated.  That suggests that neither the decision-maker or the reviewer was able to explain to the taxpayer why they believed the penalty level fair.

What I found particularly worrying is that 56% of the 25 people who spurned a review did not know about reviews and were not offered one.  This is worrying because HMRC’s internal procedures require a review to be offered.  This means that either that is not being done or that the wording of the offer is such that these taxpayers did not understand it.

What everyone ought to find worrying is that of those who lost at review stage and abandoned their appeal, 14% did so because they thought they would have no chance against HMRC at the Tribunal, 16% because the cost of going to the Tribunal was perceived as prohibitive and 14% because it was perceived as too time-consuming.  In the majority of Tribunal cases, a taxpayer can simply turn up in person and present his case, so in reality cost and time ought not to be issues at all.



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