Both the First Tier Tribunal (FTT) and the Upper Tribunal (UT) which both hear VAT cases, report an increase in the number of cases waiting to be heard.  In the case of the FTT the increase is 507 last year which means 28,521 cases are outstanding. The increase of UT cases outstanding is around 40%.

These are not all VAT cases and it is likely that the backlog is predominantly caused by

• HMRC’s increased willingness to attack what they see as tax avoidance and evasion (see here)
• More businesses being prepared to go to court
• HMRC’s determination to “win on every point” rather than, perhaps, seeking a negotiated settlement, and
• The increasing complexity of cases heard.

This backlog works in HMRCs favour as in the majority of cases the disputed tax must be paid before a hearing can take place. Delays may also cause anxiety and the burden of devoting resources to appeals which may cause the applicant to withdraw.  It is not usually an inexpensive process to go to court and some cases can take a number of years to resolve.

In the current climate, it is more important than ever to challenge HMRC’s decisions. We have found that in the majority of cases we have been able to reduce HMRC assessments, in many cases, to zero. We always work on the basis that it is very important to try to resolve matters with HMRC before going to Tribunal. This is an increasingly difficult task given the political pressure on HMRC to reduce the tax gap (the difference between the amount of tax that should, in theory, be collected by HMRC, against what is actually collected) and the seemingly common tactic of HMRC becoming “entrenched” and being unprepared to shift their position.

Please contact us if you have a dispute with HMRC or are being challenged on any technical points. It is better to deal with these as soon as possible to avoid going to court.