Tax Appeals: A Complete UK Guide

If you disagree with an HMRC decision, assessment, or penalty, you have the right to challenge it through the tax appeals system. The process involves several stages, from an internal HMRC review to the First-tier Tribunal and potentially higher courts. Understanding the process and the time limits involved is essential for protecting your rights.

HMRC Review vs Tribunal

Before appealing to the tribunal, you can ask HMRC to conduct an internal review of its decision. The review is carried out by a different HMRC officer who was not involved in the original decision and must be completed within 45 days. The review officer can uphold, vary, or cancel the decision. If you are unsatisfied with the review, you can then appeal to the tribunal.

Alternatively, you can by-pass the internal review and appeal directly to the tribunal. This is often advisable where the case involves a point of law or where HMRC has already made its position clear. However, direct appeal means you lose the opportunity to resolve the matter informally through the review process.

First-tier Tribunal (Tax Chamber)

The First-tier Tribunal (Tax Chamber) is the first judicial level of appeal. It is independent of HMRC and operates under the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The tribunal considers appeals against HMRC decisions on a range of tax matters, including assessments, penalties, information notices, and closure notices.

Cases are heard by a tribunal judge sitting alone or with a lay member with specialist expertise. The procedure can be paper-based (the tribunal decides based on written submissions), basic (a short hearing), or standard (a full hearing with evidence and cross-examination). The appropriate track depends on the complexity and value of the case.

Time Limits

Strict time limits apply at every stage. An appeal against an HMRC decision must normally be made within 30 days of the decision being notified to you. The same 30-day limit applies to requesting an HMRC review. If you miss the 30-day window, you can apply for a late appeal, but the tribunal will only grant this if it is just and fair — and the longer the delay, the harder it is to persuade the tribunal.

Once the tribunal issues its decision, you have 28 days to request permission to appeal to the Upper Tribunal. The Upper Tribunal application must be made within a further 30 days. These time limits are strictly enforced.

Without Prejudice Discussions

Throughout the appeals process, you can have without prejudice discussions with HMRC to try to settle the case. These discussions are confidential and cannot be referred to in tribunal proceedings if they do not result in a settlement. Without prejudice negotiations are common in tax disputes and can save significant time and cost.

HMRC has a formal alternative dispute resolution (ADR) process that can be used alongside or instead of the tribunal process. ADR involves a neutral facilitator who helps both parties reach a settlement. It is available for most types of tax disputes and is particularly useful for cases involving complex facts or long-standing disagreements.

Costs

The tribunal operates on a no-costs basis for most cases in the basic and standard tracks. This means each party bears its own legal costs regardless of the outcome. However, the tribunal has discretion to award costs in certain circumstances, such as where a party has acted unreasonably or where the case was allocated to the complex track.

If the tribunal decides in your favour, HMRC is not normally required to pay your legal costs. This makes the tribunal accessible for individuals and small businesses, but it also means you need to carefully consider whether the potential tax saving justifies the cost of professional representation.

Upper Tribunal and Beyond

If you or HMRC are dissatisfied with the First-tier Tribunal's decision on a point of law, you can appeal to the Upper Tribunal (Tax and Chancery Chamber). Permission is required from either the First-tier Tribunal or the Upper Tribunal itself. From the Upper Tribunal, a further appeal on a point of law lies to the Court of Appeal and ultimately to the Supreme Court.

Judicial review of HMRC decisions is a separate process available in the High Court. It is used to challenge the lawfulness of HMRC's actions or decisions, rather than the underlying tax assessment. Judicial review is a remedy of last resort and is subject to strict time limits (3 months from the decision).

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