HMRC to collect taxes pre-appeal if the judgement goes against the appellant

08 April 2010

The Pre-Budget Report in 2009 stated that HM Revenue and Customs (HMRC) should apply a more consistent approach to the collection of “debts” in litigation. HMRC must repay overpaid tax where there is a judgement in favour of the taxpayer (even though the judgement is subject to an appeal) however where HMRC have a judgement in their favour they only inconsistently collect the tax before the appeal is heard.

Therefore HMRC has decided to collect all “owed” taxes even if the judgement is subject to appeal. This change will take effect in relation to all decisions made by the Tribunals or Courts from 1 April 2010. HMRC however, will not enforce payment in cases where an agreement not to do so has been made with the appellant before 9 December 2009 or in cases where to enforce payment would be likely to drive the taxpayer into liquidation or bankruptcy (though the appellant will need to apply to HMRC to have the collection of the tax held over until the appeal).

Please note that when there is a judgement in favour of a taxpayer, HMRC must repay the overpaid tax even if that judgement is subject to appeal.

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