Appealing against an HMRC indirect tax decision

07 April 2009

From 1 April 2009 and as part of a wider programme of tribunal reform, the Tribunals, Court and Enforcement Act 2007 created a new tribunal system to replace some 70 tribunals across government. Appealing against an HMRC Customs duty decision has been significantly affected by these reforms. New procedures have been developed and enacted and this article aims to make you aware of these changes.


What has changed?

The VAT & Duties Tribunal has been replaced by the Tax Chamber of the new tribunal system. This new Chamber consists of two-tiers, the First-tier Tribunal and the Upper Tribunal. Customs duty is classed as an “indirect tax” and the appeals procedure below is that for an appeal against an HMRC indirect tax decision (an appeal against a direct tax decision is slightly different).

The Original Decision

For most tax decisions that will result in an assessment, the decision maker should write to the customer giving their views before formally sending the customer their decision (a pre-decision letter). When the customer receives a pre-decision letter, the customer may provide further information or explanation and ask for further discussions on the matter, following which the decision maker may be able to close the case without formally notifying the customer of their decision.

Once HMRC have made a decision, you will be informed whether you have a right of appeal. If so, you have two options available to you. Firstly, there is a 30-day window to reply in writing to the address specified in the decision letter where you may request an internal review by the HMRC. Secondly, should you wish to do so, you may appeal directly to the Tribunal as it is no longer mandatory to proceed to internal review for indirect law decisions.

The Review Stage

If you decide to request an internal review by HMRC, an officer not previously associated with the case will be appointed by HMRC to conduct a review of the original decision. In most cases a review will be carried out within 45 days although in some rare instances it may take longer. In this scenario, HMRC may seek to agree with you an extension period. If you refuse to agree to an extension then HMRC will write to you advising that the review is concluding and they will uphold the original decision.

When the review has been completed, the review officer will write to you to inform you of the decision. If HMRC does not write to you telling you the outcome of the review within the specified limit then you can appeal to the Tribunal.

It is important to reply to this letter if you do not agree with the decision as no response will be assumed to signify that you agree with the decision. HMRC will then amend the decision in line with the outcome of the review and where relevant will amend the amount of tax or penalty you or your business has to pay.

If you disagree with the decision of the review then you will then have 30 days to appeal to the Tribunal if you wish to do so. However, as stated above, under the new provisions the review stage is no longer mandatory for indirect tax decisions (except restoration decisions) and customers will now be able to appeal directly to the Tribunal from the point of original decision.

The Tribunal

The Tribunal is an independent legal body which makes decisions on appeal. Under the new legislation, the Tax Chamber of the Tribunal will replace the VAT & Duties Tribunals. It is now a two-tier system consisting of the First-tier Tribunal and the Upper-tier Tribunal. Independently appointed expert tax judges and/or panel members sit on the Tribunal. The First-tier Tribunal will hear most appeals in the first instance and a decision is usually made at or after a hearing after both sides have presented their cases. In straightforward cases the Tribunal may make its decision based on the written cases of both sides. There is provision for a small number of exceptional appeals to be heard at Upper-tier level at first instance on the agreement of the parties involved and with the consent of the Chamber President.

If you do choose to appeal to the Tribunal, it is important to note that your appeal will not normally be heard unless the tax due as a result of the decision you are appealing against has been paid. However, if paying the amount due will cause you hardship then you can ask HMRC not to collect until after the appeal has been considered by the Tribunal. HMRC will then write to you telling you whether they agree or not with you postponing the payment.

The Tribunal will either write to you with its decision or will tell you its decision at the hearing.

What Then?

If the Tribunal decides against you, you may be granted leave to appeal in some circumstances against its decision to the Upper- tier Tribunal. Similarly, if the Tribunal decides in your favour then HMRC may seek leave to appeal to the upper Tribunal.

Where there is no right of appeal it is possible to use the complaints procedure or alternatively apply for Judicial Review (although this is expensive and time consuming).


Each person will generally pay their own costs when appealing (although there is no fee to make an appeal to either tier of the Tribunal). Costs will still be available in limited circumstances (predominantly at Upper-tier level) where the Tribunal may make an order for wasted costs or may levy costs against a party that has acted unreasonably during the proceedings. There are also special rules for costs in complex cases. This is a significant departure from the previous system where successful appellants could expect to recover costs incurred from when the tribunal application was submitted.

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