Previous posts in our series on tax disputes in the UK considered how an HMRC enquiry is likely to proceed and be concluded. In this and the next two posts, we will look at what happens next, focussing on corporation tax appeals, as opposed to indirect taxes such as VAT (although much of the process is very similar). 

First, a glimpse of the future 

In fact, the government has proposed (among other things) to harmonise the direct and indirect appeal routes as part of the consultation on Improving HMRC’s approach to dispute resolution.

Under the proposed new model, which would remove the requirement for the initial appeal to HMRC that we discuss below, HMRC would issue a “pre-decision letter” before issuing a formal decision (such as a closure notice or assessment). That “pre-decision letter” would require HMRC to set out their position prior to issuing a formal decision. This is something which, in practice, often happens in large direct tax cases already. The formal decision would then include an offer of a statutory review (or the option to appeal directly to the First-tier Tribunal (FTT)). We discuss the statutory review process below.

Slaughter and May has submitted a response to this consultation. Please get in touch if you would like to discuss the proposal. 

For now, we consider what are currently the first steps in challenging a direct tax assessment. 

When does the appeals process begin?

Our starting point depends on whether there is an ongoing enquiry or not. In case of an ongoing enquiry, we start when this is brought to a close by HMRC issuing a closure notice. In other cases, HMRC may instead simply issue a discovery assessment (as previously discussed, “discovery” is not a high threshold in this context). 

Then, unless you appeal the closure notice or discovery assessment within 30 days, HMRC’s decision will typically become final (although late appeals are possible if there is a reasonable excuse). 

So, if you disagree with HMRC’s decision, you must appeal to HMRC within 30 days of the date of the closure notice or assessment. The 30-day period does not start from the (generally later) date when the notice or assessment is actually received.

How do you submit an appeal to HMRC?

The notice of appeal to HMRC must be in writing. This typically takes the form of a relatively short letter which:

• references HMRC’s decision,
• sets out the grounds of appeal, and
• (if desired) requests postponement of the tax due.

The last point is essential: unless you expressly request (and are granted) postponement, any underpayment of tax stated in HMRC’s closure notice or assessment is treated as due and payable immediately, even if you are challenging that tax. 

Postponement of the tax is typically granted by HMRC where there is a more than “fanciful” belief that the tax has been overcharged, unless, for example, HMRC have reason to believe that they will not be able to recover the tax in the future if you lose the appeal. 

Where postponement is granted, you will not have to pay the tax until after the FTT has decided the appeal, although interest will accrue from the date of the closure notice/assessment until the date of payment. Since 6 April 2025, the rate for such interest has been set at Bank of England base rate plus 4 percentage points (previously, it was plus 2.5 percentage points).

If HMRC refuse an application for postponement, the taxpayer can refer the application to the FTT within 30 days of HMRC’s refusal.

What happens next?

After notifying HMRC of the appeal, HMRC will typically offer an internal review of their decision. This is conducted by an independent senior officer within HMRC – typically in the HMRC Legal Group (formerly known as HMRC Solicitor’s Office and Legal Services).

HMRC have 45 days within which to conduct the review, although this can take longer. The review process is optional – the taxpayer can, instead, choose to appeal directly to the FTT. In practice, HMRC statistics for 2024-25 suggest that around 70% of non-penalty decisions are upheld on review. 

However, unless there are pressing time constraints, it is generally advisable to take up the offer of a review as there is little to lose from doing so. Indeed, the relative flexibility of the review process in terms of timing can give HMRC and the taxpayer more opportunity to reach a settlement (before going into the costly litigation process).

When does the case go to the FTT?

Assuming the HMRC review is not successful, or you do not want to take up the offer of a review, the next step is to appeal to the FTT. The deadline for such an appeal is typically 30 days from the offer by HMRC of the review (where you are not taking up the review) or 30 days from the conclusion of that review. 

The next post in our series will consider what happens once you have appealed to the FTT. 

How we can help…

Please get in touch with any of us or another member of Slaughter and May’s market-leading tax disputes team if you have any questions on the topics discussed in this blog or another tax disputes query. 

We have extensive experience in advising at every stage of a wide range of from questions of UK corporation tax, partnership taxation and VAT grouping to treaty interpretation and transfer pricing. Whether you are looking for strategic advice in respect of an ongoing issue or proactive risk management through the creation of defence files or an audit of existing processes, we can help.