Taxpayers are waiting longer to have tax enquiries closed, with a 24% rise in the time taken last year, which is putting taxpayers under greater stress and forcing them to rack up higher legal fees according to City law firm RPC
RPC says that taxpayers under enquiry by HMRC’s charities, savings and international (CSI) and by HMRC’s pensions units waited an average of 303 days for their enquiries to close, compared to the previous year when taxpayers waited an average of 243 days.
The firm claims the number of enquiry cases still open at the end of 2015/16 also seems to have risen sharply with 4,011 enquiries conducted by HMRC’s CSI and pensions units remaining open in the last year, which is up from 494 open enquiries in 2014/15.
RPC argues that the advent of advanced payment notices (APNs) has reduced the incentive for HMRC to bring an enquiry to a close. The firm says that once HMRC has issued an APN and the taxpayer has paid the disputed tax, there is little incentive for HMRC to progress the enquiry expeditiously as this would allow any subsequent appeal to be decided by the tax tribunal and, should HMRC lose, it would have to return to the taxpayer any money paid to it under the APN.
Adam Craggs, partner at RPC, said: ‘HMRC has been accused of tactically wearing taxpayers down so as to avoid heading to the tax tribunal. The substantial increase in the number of open cases in the last year is arguably evidence of such a strategy, especially when considered together with HMRC's increased use of “nudge” letters which are intended to persuade taxpayers to concede their dispute.
‘By keeping cases open for long periods of time HMRC is placing financial pressure on taxpayers and generating increased stress for those taxpayers who find themselves caught up in a lengthy HMRC enquiry.’
Taxpayers can seek to force HMRC to close an enquiry by applying to the tax tribunal for a direction compelling HMRC to close an enquiry. RPC predicts this option is likely to become more popular once the proposals contained in the Finance Bill 2017, which will permit partial closure notices to be issued, become law. Under the proposed legislation, a partial closure notice can be issued enabling any discrete issue to be resolved although other issues may remain under enquiry.
