The Taxes Management Act requires HMRC to offer taxpayers the opportunity to have tax investigation decisions reviewed by an officer not previously connected with the case. Latest government data shows that over 10,000 people challenged demands for money issued by HMRC in the last financial year. Of those, 5,881 had the decision completely overturned while a further 670 had it partially overturned.
That is a shocking 65.5% failure rate by HMRC!
The proportion of taxpayers having decisions overturned is up markedly on the year before when about half were upheld. Only one in four reviews upheld the investigators’ conclusions and decision on whether there was tax owed.
Notably, in the last quarter of 2020-21, 76% of the decisions were overturned or cancelled, suggesting recent activity has resulted in poor decisions – perhaps in the hope of easy wins.
Incentives drive behaviour, and we are wondering whether HMRC staff receive “performance bonuses” indexed on tax collected? If they do then this could explain the recent increase in errors.
In any case, the appalling track record shows that whilst HMRC’s conclusions of investigations state the amount owing, it is not necessary correct. Businesses and individuals receiving such decisions would be wise to use the statutory review procedure to check whether the tax assessed is in fact due.
Surely it is now time for some focus on HMRC’s performance and holding them genuinely to account?
