Improving tax tribunals for the next ten years

The Institute of Fiscal Studies (IFS) has published 'The tax tribunals: the next ten years'. A review the past ten years of operations of the First Tier Tribunal (FTT) reveals that there is still a backlog of cases which is caused by staff shortages and a lack of judge's time.

The Tax Law Review Committee (TLRC) found that users of the FTT system had serious concerns about its operations but overall the tribunal system had proven strengths and was an improvement on what had preceded it. The report reviewed documentary evidence and surveyed FTT users (mainly barristers and solicitors) in December 2020 and used follow-up interviews in February 2021.

The TLRC outlined a number of benefits of the introduction of the First Tier Tribunal in 2009.

• The FTT dealt with matters in a more consistent and professional fashion than the previous General Commissioners.
• FTT judges generally assisted litigants in person by conducting hearings in an inquisitorial manner often to an individual's benefit.
  • The report noted that this could be improved by better access to clear information on the FTT website.
  • The TLRC also suggested that, given the assistance that litigants in person receive from tribunal judges at hearings, access to justice could further be improved by a shift from paper cases to remote hearings. This was something the FTT was already experimenting with prior to COVID.
  • The TLRC queried if there might be potential to operate a pro bono advocacy scheme, organised on a duty basis (i.e. with an advocate always on call), to assist litigants in person.

Problems

The TLRC also identified areas of concern about FTT operations and a major cause of dissatisfaction among tribunal users was the delay in cases and that this existed before the COVID-19 pandemic. 

• Respondents attributed delays to the FTT judiciary: both through a lack of robust case management and because of delays in writing up decisions, which can sometimes be over one year.
• Many research participants also expressed concerns about a lack of communication with the FTT administration.
  • It was not easily contactable and did not communicate with them.
  • There were errors being made by the FTT administration.

The TLRC noted that there is a high turnover of staff within the FTT administration, with many staff regularly leaving to join other government departments on more favourable terms. This often results in the tribunal administration being understaffed, due to delays in recruitment.

• Some tribunal users also reported a lack of engagement by some judges during the hearing, which they attribute either to a lack of judicial preparation for the hearing or to the judge not having the necessary knowledge or skills to hear that particular case.
• Some interviewees also attribute the delay in judgment writing to similar reasons.

The TLRC said it believed that any lack of preparation may stem from the lack of judicial resources in the FTT that has been identified to exist in several of the recent annual reports of the President of the FTT. 

• Costs were also seen by many respondents as a major concern. Due to the technically complex nature of tax law, many respondents thought that it was very difficult for taxpayers to access the FTT and effectively present their case without engaging professional advisors and representatives. 

Recommendations

• To increase the overall number of sitting days.
• To ensure that all judges (both salaried and fee-paid) have sufficient paid writing and preparation days.
• The FTT should develop a plan for reducing the backlog of unwritten decisions, something the TLRC was pleased to note has already been initiated.
• Case management should be more robust and the Judicial College provides training on case management specifically tailored for judges in the FTT.
• In some cases, four levels of appeal are unnecessary. It both delays a final decision and causes unnecessary expense.
  • To potentially reduce the time it takes for a final decision in the most complex tax cases, the TLRC consider that it would be desirable for rule 28 of the FTT Rules, which allows the transfer of a case from the FTT to the UT, to be amended so that the consent of both parties is not required. Rather, the parties should be able to make an application to the FTT.
• FTT publishes a policy on the allocation of judges to cases. The TLRC noted that different levels of technical ability and technical knowledge are required to hear cases that turn on the application of well-understood tests to factual situations, such as penalty appeals, and those cases that concern complex or novel matters of statutory interpretation.
• The TLRC recommend that any appointment of judges to the FTT should, unless the judges are only to be ticketed to hear routine matters such as penalty appeals, be in a tax-specific appointments exercise (rather than a general exercise that recruits for all chambers of the FTT).
• To lower staff turnover at the FTT, the terms and conditions of employment of administrative staff should be reviewed to ensure they are competitive with similar positions in the Civil Service.
• FTT website can be improved to assist litigants in person. Changes might include the provision of a simple guide on processes involved in making an appeal, about what to expect on the day of a hearing and on what sort of evidence the FTT expects taxpayers to produce in the most common types of cases.
• The FTT may wish to consider whether taxpayers could be given an option of short video hearings instead of paper hearings, which might allow taxpayers to present their cases more effectively.

Annexed to the report are the results of a survey and interviews of tribunal users (mostly solicitors and barristers) which, together with the experiences of members of the TLRC, informed the report.

Useful guides in this topic

How to appeal a tax penalty (subscriber version)
What are the steps in making an appeal? What should your appeal cover? What does recent case law say on this topic?

Appeals: Grounds for Appeal Toolkit
What grounds are there to appeal a tax penalty? How can you word a tax appeal? Can you appeal HMRC errors? What is a reasonable excuse? 

Appeals
How to appeal a penalty for late filing of a tax return or late payment of tax. This section covers appeals in relation to tax returns and payments for income tax Self Assessment, Corporation Tax, PAYE, Non-residents CGT, VAT, ATED, SDLT and IHT.

Compliance
This section covers HMRC powers, anti-avoidance measures, overpayments and special regimes.

Appeals: VAT
The process of making a VAT appeal largely follows that of direct taxes, however, there are some differences.

CPD: Appeals: How to Appeal a Tax Penalty

External link

Tax Law Review Committee: The tax tribunals: the next ten years