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2024 HMRC Trends – Success can cost less

24 April 2024
Having an outstanding or disputed tax liability puts a strain on any business. Government statistics show that HMRC's success rate at appeal is high, and rising. Reaching a well-advised early settlement with HMRC before a dispute reaches litigation saves businesses costs, and management time can be spent on continuing with the business' trading activities and plans for growth instead of negotiating with HMRC. 

HMRC has been increasingly successful in winning cases in the First-tier Tax Tribunal. Recently published figures show that in 2023 a total of 7,081 appeals were settled either by formal hearings or by agreement before the hearing. HMRC's success rate in 2023 for all decided appeals across all tribunals was 91.8% (88% in 2021-22). In addition, HMRC's success rate was 73% in the Upper Tribunal; 100% in the High Court; 92% on the Court of Appeal; and 100% in the Supreme Court.

This clearly suggests that a taxpayers' chances of success in litigation is limited and that early negotiation must be the best approach. Once at litigation stage, preparedness is critical. Our approach is to ensure that all clients are carefully and thoroughly prepared well ahead of any hearings and that cases are carefully and fully managed. This has resulted in us having considerable success in representing our clients at all litigation stages, regardless of the overall HMRC success rates.

Despite HMRC's success at litigation, there have been numerous reports that HMRC's customer service levels have fallen significantly, with former HMRC staff speaking to the press, highlighting the decline in HMRC standards, blaming it on a wave of untrained recruits, time spent on unnecessary non-tax training and new failing electronic systems. Ahead of the recent 31 January self-assessment tax return deadline, online forums were full of individuals struggling to speak to anyone at HMRC to assist with their tax returns following HMRC's decision to reduce the telephone helpline service.

It is therefore becoming increasingly apparent that taxpayers can benefit from professional assistance to ensure that they are not caught up in HMRC's problems and forced into litigation where they have reduced chances of success. Early advice before litigation has helped many businesses avoid costly outcomes.

Engaging a law firm to advise on a tax disputes rather than engaging a business's accountant also brings the benefit of legal privilege. Legal privilege protects certain confidential documents from being disclosed to a third party, including HMRC, where these are prepared for the purpose of receiving legal advice or in the course of litigation. The same principle does not apply to the same extent in relation to advice from other professionals.

Early professional assistance from us means that we are able to suggest and negotiate the most efficient way forward in dealing with HMRC and avoid costly and lengthy litigation.

If you would like to discuss an outstanding tax liability or a tax dispute, please contact one of our experts or speak to your usual DWF contact. 

Further Reading