Half of HMRC’s tax penalty cases overturned

Over half of those who have asked HM Revenue & Customs for a review of a disputed tax decision in the last nine months have had their penalty either withdrawn or reduced.

HMRC’s analysis of its new internal review process, introduced on 1 April 2009, shows that between April and December last year 20,778 people asked for a re-assessment.

Most (81%) were unrepresented taxpayers, often disputing a penalty for filing their tax return late. In just over half the cases (53%) HMRC either withdrew the penalty or reduced it because taxpayers provided evidence that they had a reasonable excuse for late filing.

In one example, a default surcharge for late submission and payment of a VAT return relating to a family business run by a husband and wife was withdrawn on the grounds of ‘reasonable excuse’. The couple had informed HMRC of the sudden death of one of their children, and had been in contact with debt management teams.

HMRC’s analysis shows that taxpayers were less successful in challenging non-penalty decisions such as assessments or liability rulings. These account for around 20% per cent of reviews completed to date, and HMRC decisions were cancelled or varied in a quarter of cases.

HMRC’s new internal review process offers taxpayers the opportunity to have disputed tax decisions considered by a person who is independent of the original decision maker, with a view to resolving the case without the need to go to a tribunal.