The importance of adhering to time limits when appealing HMRC decisions

As rights of appeal are set out in law, it is not possible to appeal against every decision made by HMRC. An appeal can only be made if there is a formal right to appeal against the decision – therefore, where a right of appeal does apply, it is important to ensure that such appeal is made within the relevant time limits.

Failure to adhere to these time scales can leave a taxpayer unable to challenge the position or liability any further, especially if the appeal is made too late.

In general terms, appeals against HMRC decisions follow the same processes, although there are some differences depending on whether the appeal relates to direct taxes (such as income tax or corporation tax), or indirect taxes (such as VAT). Direct tax cases can add an additional stage to the process, which is a further review of the decision.

Looking particularly at direct tax cases, where there is disagreement with an HMRC decision and a right of appeal exists, the appeal must usually be made in writing to HMRC within 30 days from the date the formal decision was issued – this is the date of the decision letter/notice and not the date the decision is received. Therefore, the countdown has already begun even before the notification is received.

Where an appeal is made within the time limit, the HMRC officer who made the decision will review the case again, which may include further discussions with the taxpayer or consideration of any additional details or information provided, with a view to resolving the appeal.

Once HMRC have reviewed the appeal they will either agree with the taxpayer and amend their decision or confirm their original decision. Where the original decision is confirmed, HMRC will write to the taxpayer by way of a ‘review of the matter’ letter, setting out their view. This letter should include an offer of a further review of the decision to be undertaken by an HMRC officer who has not been involved with case, whose role it is to take a fresh and impartial review of the case.

The taxpayer has two options following the receipt of a review of the matter letter; to accept the offer of the review or, alternatively, to notify the appeal to the tribunal if they still wish to dispute the decision. Whatever option the taxpayer decides to follow, they have 30 days from the date of the letter to either accept the review request or notify the appeal to the tribunal.

If the taxpayer does not take any action within the 30-day period, HMRC will treat the appeal as settled by agreement.

Where a further review is accepted, the new reviewing officer will examine the papers and evaluate the details. Once their check is completed, they will issue a review conclusion letter setting out their findings and reasonings. If the taxpayer does not agree with the conclusions, they will have 30 days from the date of the conclusion letter to notify their appeal to the tribunal. The taxpayer can also consider the alternative dispute resolution (ADR) process but must first have appealed to the tribunal before requesting this approach.

If the taxpayer does not appeal to the tribunal within the 30-day period, HMRC will treat the appeal as determined.

Where a taxpayer misses the 30-day time limit for appealing, HMRC can use its discretion when considering a late appeal but generally the taxpayer would need a very good reason for missing the deadline. If HMRC will not accept the late appeal, the taxpayer will have to apply to the tribunal to allow a late appeal.

This is by no means a straightforward issue and there is no certainty that a late appeal will be allowed. To consider granting permission for a late appeal, the tribunal look to the three-fold test set out by William Martland v HMRC, which establishes the length of the delay, the reasons for the delay and assesses all the circumstances of the case.

Surely is it better that an appeal is submitted on time to enable the taxpayer to present and argue their position based on the facts of the case, rather than having to go through the process of justifying the reasons for a late appeal, which may or may not be accepted.

If a late appeal is not accepted, it will not matter how strong the tax position was or what the outcome may have been had the case been heard before the tribunal. Therefore, it is imperative to ensure that where a right of appeal applies, and those rights wish to be exercised, the relevant time limits are followed.