The Chancellor announced in his Pre-Budget Report 2009 that HM Revenue & Customs (HMRC) is to apply a more consistent approach to the collection of debts in litigation. For more information follow the link below to the Pre-Budget Report.
At the present time HMRC currently has an inconsistent approach to the collection of tax in cases where a tribunal or court has found against the customer but there is a further appeal.
HMRC must repay overpaid tax where there is a judgment in favour of a taxpayer, even though that judgment is subject to appeal. However where HMRC have a judgment in their favour they do not consistently collect the tax before the appeal is heard.
Therefore HMRC has decided to move to a more consistent approach, under which payment of tax will normally be required in all such cases. This change will take effect in relation to all decisions made by the Tribunals or Courts on or after 1 April 2010.
A party to litigation is legally bound to accept the judgment of a tribunal or court, even though they may be appealing against it.
HMRC will not enforce payment in cases where an agreement not to do so had been made with the appellant before 9 December 2009 (the date of the Pre-Budget Report)
HMRC will not enforce payment in cases where to do so would be likely to drive the taxpayer into liquidation or bankruptcy.
This applies to appeals related to VAT, Excise, environmental taxes and other indirect taxes.
Find out which taxes are classed as indirect taxes
If you appeal against a decision of the tribunal but you think you will suffer hardship if you have to pay before the higher tribunal or court has decided your appeal, you should apply to HMRC to have collection of the tax held over, even where you made a hardship application before the previous tribunal.
Where there is a judgment in favour of a taxpayer, HMRC must repay overpaid tax, even if that judgment is subject to appeal.
This announcement does not change any decisions HMRC has already made about payment of tax following the outcome of a tribunal or court hearing.
If you have appealed to the tribunal against an assessment and have been told that you will not have to pay the tax until the appeal is decided you will not have to. But if you lose at the tribunal you will have to pay the tax.
If you have appealed against a decision of the tribunal and you have been told you do not have to pay the tax before the appeal is decided you will not have to.
