New appeal system

April 1^st saw the demise of the General and Special Commissioners, and the introduction of a unified appeals process under the control of the newly created Tax Chamber. The Tax Chamber comprises first tier and second tier tribunals, which are broadly equivalent in function to the County Court and the High Court. The vast majority of tax appeals will be heard initially in the first tier of the new chamber, with further appeals being heard by the second tier and, thereafter, the Court of Appeal.

It will, of course, be a year, or two, before the effectiveness of the Chamber can be assessed but commentators are optimistic that it will prove to be an efficient and consistent source of judicial decisions. The judges sitting on both tiers will be specialists, and include the outgoing Special Commissioners together with existing High Court justices and some new appointees.

Of more immediate interest, however, is the introduction of a brand new facility; the Internal Review.

This facility affords the disgruntled taxpayer the opportunity to seek an internal review of any appealable decision made by the Revenue. The theory provides that the Revenue will hold an internal review of their decision, which will be conducted by a Revenue officer who has not previously been involved in the particular taxpayer’s case and is “independent”. The internal review is to be completed within 45 days, or such longer time as may be agreed upon, after which the Revenue will either re-assert their previous view or notify the taxpayer, or their agent, that the Revenue have changed their mind, in whole or in part, concerning their previous decision.

The Revenue will apparently bring this right of internal review to the notice of taxpayers whenever the Revenue make relevant decisions, but it is difficult to envisage the Revenue showing any enthusiasm for this on the ground. As with plenty of other areas, it would be surprising if unrepresented taxpayers will come to understand fully their rights in this regard.

In the simplest of instances, the review process should prove useful as a way of knocking into shape the over enthusiastic Revenue officer who, having already wasted a significant amount of the taxpayer’s time and money in undertaking a fruitless enquiry, then holds out for a nuisance settlement. The Revenue will deny most forcibly that any officer has to be paid to go away, but we all know this happens. Here, the threat alone of seeking an internal review may prove to be all that is needed.

With the more complicated or technically oriented disputes, we are presently undecided whether the new facility will prove to be as benign as it appears or, indeed, the Revenue would like us to think. The general flavour is one of the internal review facility offering a low cost resolution route of which the taxpayer can, at their own choice, choose to avail themselves. But, we are unsure over whether the facility might, before too long, take on a more significant role in the dispute resolution process.

To this end, the Civil Procedure Rules governing County Court and High Court civil litigation will have been with us for ten years, as of next week. Our guess is that the largely successful principles found in the CPR will, before long, also find their way into the tax appeals process. The CPR are very much focused on avoiding unnecessary litigation, and encouraging alternative means of dispute resolution. Such means can take many different forms but, with government agencies and similar, they usually entail the provision of an Ombudsman facility, which has to used before litigation in the courts is considered. Those litigants who fail to observe the general principles, and pre-action protocols, found in the CPR stand to be penalised by the courts, and especially when it comes to costs orders.

It is speculation at this early stage, but we wonder whether the Tax Chamber may tend towards seeing the internal review as being analogous to an ombudsman facility. If so, their expectation, or hope, will be that taxpayers not only use the facility but, moreover, use it properly, with a view to attempting genuinely to resolve the source of the dispute as opposed merely to using the facility as a blunt tool when complaining about the Revenue.

Until the new system settles down, the prudent approach must be to approach the internal review facility with caution.