The number of outstanding appeals by taxpayers to the first-tier tribunal increased by 8.5% in a year to reach 29,566 by the end of tax year 2014/15; a figure almost triple the 10,061 cases awaiting hearing five years ago. There were 310 appeals waiting to be heard by the upper tax tribunal at the end of tax year 2014/15, up from 222 the previous year.
Tax expert Jason Collins of Pinsent Masons, the law firm behind Out-Law.com, said that the number of appeals was likely to increase when cases involving the new power of HM Revenue and Customs (HMRC) to issue accelerated payment notices (APNs) and demand payment of disputed tax up front began to filter through.
"The mountain is growing because [HMRC] is finding it harder and harder to reach compromises," he told the Financial Times. "It has created a rod for its back."
Since July 2014, HMRC has been able to demand the payment of disputed tax associated with a tax avoidance scheme up front, before a tribunal or court has ruled on whether or not a scheme is effective. It can issue an APN, or a partner payment notice (PPN) to a member of a partnership or an LLP, where the scheme demonstrates certain 'avoidance hallmarks'. These include whether the scheme is subject to disclosure requirements under the Disclosure of Tax Avoidance Schemes (DOTAS) rules.
HMRC told the Financial Times that almost 70% of the current case queue related to a small number of 'lead' cases that needed to be decided by the Upper Tribunal or the higher courts. Although this backlog will begin to clear once these cases are resolved, HMRC also told the newspaper that the cases associated with APNs had not yet begun to filter through.
Nearly 2,000 of the cases awaiting hearing by the first-tier tribunal relate to appeals by golf clubs seeking repayment of VAT charged on green fees following a December 2013 judgment by the Court of Justice of the European Union (CJEU), according to the Financial Times. Many more cases relate to whether HMRC should have to repay simple interest or compound interest on overpaid tax, the newspaper said.
In May 2015, the Court of Appeal ruled that UK catalogue company Littlewoods was entitled to compound interest on a £204 million VAT overpayment refund paid to it by HMRC. HMRC is now seeking leave to appeal the decision to the Supreme Court. If the UK's highest court finds in favour of the taxpayer, HMRC could have to pay it a further £1.2 billion.