Covid-19: Implications for tax investigations and disputes

15 April 2020

The headline “HMRC suspends some tax investigations due to pandemic” in this morning’s Financial Times might suggest that HMRC has decided not to pursue some tax cases as a result of the Covid-19 outbreak. But on a closer reading, it is apparent that this does not mean that HMRC is giving up on the enforcement of tax debts. 

HMRC is – as the article confirms – pedalling lightly on some aspects of tax investigations in the course of the current Covid-19 pandemic. In some cases, HMRC is not requesting further information or documents from taxpayers during the lock-down or not enforcing requests for information they have already made; in others, HMRC is temporarily suspending enquiries. This makes a lot of sense. HMRC has a lot of extra work to do implementing the Government’s furlough scheme. Enquiries into historic liabilities can wait – unless, of course, there is a deadline approaching. But it does not mean that potential liabilities have been forgotten.

The tax tribunals are adapting in other ways.

As an immediate reaction, a general stay was issued by the First-tier Tribunal on 24 March 2020 which stays all current proceedings by 28 days and extends any time limits in those proceedings by 28 days.

Changes have also been made to the tribunal rules. But these are focused on allowing the tribunals to continue to operate during the Covid-19 crisis. 

The Tribunal Procedure (Coronavirus) (Amendment) Rules 2020 were laid before parliament last week. The main changes to the rules applicable to the First-tier Tax Tribunal are:

  • to extend the circumstances in which the tribunal can make a decision without a hearing;
  • to extend the circumstances in which the tribunal can direct that a hearing be held in private. (This change will enable tribunals to conduct video or telephone hearings, which would otherwise be regarded as private hearings, in many more cases); and
  • to require a recording to be made of any video or telephone hearing.

Before the lock-down only a restricted category of cases, “default paper cases”, were decided on the papers. These rule changes together with administrative changes at the tribunal will mean that many more cases in the First–tier Tribunal will be decided on the papers and without a hearing. Where a hearing does take place, it will be by video or telephone using electronic bundles of documents, where possible.   There will be no physical hearings.

Similar changes have been made to the rules applicable to proceedings in the Upper Tribunal. The default position will, however, be that hearings are conducted remotely by video. The parties will be able to apply for the hearing to be adjourned to a date when it is possible to hold a physical hearing, or for the hearing to be held by telephone (without video), or for a physical hearing to take place. 

These changes are aimed at keeping cases moving during the lockdown. Early experience in the High Court suggests that applications to adjourn hearings simply because of the Covid-19 outbreak are likely to be given short shrift by judges. So it seems that parties as well as the tribunals will have to adapt quickly to remote justice. 

“If tax is due, it is still going to be due when we come out of this,”