Backlog of tax disputes reaches record high

HMRC’s high profile clamp-down on suspected tax avoidance has pushed the backlog of tax disputes waiting to be heard to a new record high of 27,246, with a particular surge in the number of high value cases lodged with the Upper Tax Tribunal, law firm Pinsent Masons has said.

The total includes a surge in the number of high value disputes joining the queue to be heard by the Upper Tax Tribunals; 267 new Upper Tribunal cases have been lodged in the last year, an increase of 32% on the previous year, and almost four as many as five years ago, when 70 new cases were lodged with the Upper Tribunal.

In an effort to ensure that tax cases are heard faster, the Judicial Appointments Commission is currently recruiting up to four salaried judges and up to 35 fee-paid judges and deputy judges for the First Tier Tax Tribunals.

Pinsent Masons has warned that HMRC’s aggressive litigation strategy means that despite these efforts to expand the system’s capacity it could still be some years before a ruling is reached on more complex cases.

The Public Accounts Committee recently published a report criticising HMRC for its slow pace in dealing with the backlog of tax avoidance cases.

“The tax tribunals have been getting through cases quicker but the backlog is still going up. The time taken for cases to completed needs to come down substantially so that taxpayers are not left in financial limbo for what can be years,” said James Bullock, head of litigation and compliance at Pinsent Masons.

“To achieve a more reasonable time frame for tax cases, HMRC needs to start negotiating deals – for example, with the 65,000 avoidance cases that HMRC has identified.”

The increased number of cases at the Upper Tax Tribunal will be a particular concern for taxpayers that HMRC has issued with an Accelerated Payment Notice, forcing them to pay the disputed tax up front, the firm said.

“A long wait for a tribunal case to be heard is not as much of an issue for HMRC as it is for a taxpayer that has already had to pay the tax that is in dispute,” said Bullock.

“A slow-moving system plays in HMRC’s favour – it adds to the risk for taxpayers.”

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