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In 2009 a new tribunal structure was set up within HM Courts and Tribunal Service comprising the First-Tier Tribunal and the Upper Tribunal. The First-Tier Tribunal comprises six chambers one of which is the Tax Chamber. The Upper Tribunal comprises four chambers which include the Tax & Chancery Chamber and, in England & Wales, the Lands Chamber. This new tribunal structure replaces the General and Special Commissioners.
The Upper Tribunal (Lands Chamber) (UTLC) is the successor to the Lands Tribunal in England & Wales. New UTLC rules and practice directions were issued in 2010.
Appeals on questions of the value of land or interests in land arising in tax proceedings (amongst other valuation appeals) are allocated to the UTLC in England & Wales or to the Lands Tribunal for Scotland (LT Scotland), either under statute (e.g. Taxes Management Act 1970), or by the First-Tier Tribunal. Other tax appeals which don’t involve the value of land such as CGT Private Residence Relief permitted area cases are allocated to the Tax Chamber of the First-Tier Tribunal.
The UTLC operates under its Rules and Practice Directions which provide for a number of different procedures including standard, simplified, special and written representations. These are important from a costs perspective. This and other procedural matters applicable to the Upper Tribunal (Lands Chamber) are expanded on in Appendix 40 of this manual. The LT Scotland has its own Rules and regulates its own procedures. For most purposes, the procedure to be adopted by a caseworker in preparing for a hearing is similar. Where a different approach is required, this is indicated.
If a taxpayer disagrees with a direct tax decision by HMRC they have 30 days from the date of the decision to appeal to HMRC against the decision. Once they have sent an appeal to HMRC the taxpayer may:
- seek further discussion to try to resolve the matter,
- request a formal ‘review’ by an HMRC officer who has not previously been involved with the decision they are appealing against or,
- notify the appeal to the Tribunal at any time other than during a formal review.
After an appeal has been made, HMRC may offer the taxpayer a formal review. In this circumstance, the taxpayer has 30 days to accept the offer or to notify the appeal to the Tribunal. If the customer does neither the appeal is treated as settled by agreement.
Once requested, HMRC must carry out the review within 45 days unless a different period is agreed. During this period of time the taxpayer may not notify the appeal to the Tribunal although they can do so after expiry where the review has not concluded in time.
If the review officer makes any request to the VOA for information or assistance, this must be complied with expeditiously because of the 45 day review period timescale.
It is outside the remit of a review to decide questions of the value of land or interests in land.
Following a review, if the taxpayer does not agree with the review officer’s findings the taxpayer will have 30 days to notify the appeal to the Tribunal. If the taxpayer does nothing then the reviewer’s decision is final.
HMRC cannot make a referral to the Tribunal themselves. If HMRC wishes to see the dispute referred to the Tribunal they must offer the taxpayer a review which will then start the process.
Following formal submission of a ‘defendable on appeal’ (DOA) report the VOA caseworker should maintain contact with the HMRC caseworker to ensure awareness of the formal appeal stage reached within the process outlined above. The taxpayer can notify the appeal to the Tribunal at any stage following a formal HMRC decision. If the taxpayer has requested a review, this will start the clock ticking towards a potential referral to the Tribunal. Once a case has been referred to the Tribunal it is usual for the Tribunal to request submission of expert witness reports from the parties within a 2 month period. It is therefore helpful for the caseworker to be prepared for this possibility.
Prior to submission of a DOA report the valuation and supporting evidence should have been thoroughly considered. Nevertheless, where the appeal is at imminent risk of referral to the Tribunal the caseworker should seek the necessary documentation needed to prove comparable transaction evidence at a Tribunal. Similarly the caseworker should ensure that they have sufficient planning documentation if relevant to their valuation and analysis of the comparables.
When HMRC’s CGT Technical Group considers the DOA report they may decide that the case is suitable to proceed to litigation if required. They may instruct their HMRC caseworker to make an appealable decision or if that stage has already been reached, in consultation with SVT Policy & Professional, offer a review. This will in effect start the clock ticking towards a possible tribunal reference. In some circumstances, where litigation appears highly likely, SVT Policy & Professional may ask the VOA caseworker to commence preparation of their expert witness statement and exhibits in advance of any formal notification to the tribunal. This will give the caseworker more time to prepare their case.
It is only the taxpayer who can refer appeals to the Tribunal whether the First-Tier Tribunal UTLC or LT Scotland and the taxpayer will therefore be the appellant, not HMRC. If the principle dispute between the parties is the value of a piece of land, the Tribunal will allocate the dispute to the UTLC or the LT Scotland
If the caseworker hears directly from HMRC or the taxpayer that a reference to the Tribunal has been made SVT Policy & Professional should be informed immediately.
On being advised of a referral to the Tribunal, SVT Policy & Professional will liaise with the caseworker and sector leader. They may call for the file.
It is necessary for SVT Policy & Professional to formally give a caseworker authority to act as expert witness at a contentious hearing prior to the valuer preparing their case. Whilst it is usual for the caseworker who brought the case to DOA stage to continue with it to Tribunal it is not always appropriate.
SVT Policy & Professional will request the expert witness to commence preparation of the case for a hearing and they may arrange a preliminary case conference to clarify matters to be included in the report.
It is also necessary for HMRC, after consultation with SVT Policy & Professional to formally request the caseworker to prepare their case for a hearing; setting out their instructions of what they are asking of the expert witness. This letter of instruction may be included as an exhibit at the hearing. Guidance on the action required before receipt of formal instructions and the response to HMRC’s instruction letter is set out in paragraphs 6.95 - 6.97.
On receipt of the request from SVT Policy & Professional to commence preparation of the case the expert witness should:
Seek formal instructions from the HMRC client and respond to these – see para. 6.97 below.
Commence preparation of draft expert witness report and exhibits – see para. 6.100 below and Appendix 42.
Obtain any source documentation to
Begin to keep a diary of the time spent and any costs incurred in preparing the case – see para. 6.101 below.
Commence preparation of a draft Statement of Facts for agreement - see para 6.102 below.
Within 6 weeks forward a copy of the draft expert witness report and the draft Statement of Facts to SVT Policy & Professional.
The RICS has a Practice Statement and Guidance Note ‘Surveyors acting as expert witnesses (3rd edition)’ supplemented by ‘Surveyors acting as expert witnesses - briefing and addendum 2009’, available on the RICS website. Compliance with a Practice Statement is compulsory for RICS members and caseworkers should familiarise themselves with these documents.
On being approached to act as expert witness, it is necessary for the VOA caseworker to:
ask HMRC if they will put their instructions for you to act as expert witness in writing;
send the HMRC caseworker a ‘client copy’ of the RICS Practice Statement;
advise that the RICS Practice Statement and, where appropriate, the Civil Procedure Rules (in E & W), or other rules (such as LT Scotland), will apply;
advise that the primary duty of the expert witness in giving evidence is to the Tribunal;
ask the HMRC caseworker if they will confirm in writing the matters on which expert evidence is required.
Once the caseworker has received HMRC’s written confirmation of instructions, the VOA caseworker should write back as per the Practice Statement to:
confirm acceptance of HMRC’s instructions;
set out your understanding of the matters on which expert evidence is required;
confirm that no part of this assignment is likely to be carried out by any other person than yourself;
confirm that you are satisfied no conflict of interest arises [state any previous involvement in the matter by you and/or the VOA and any other matters relevant to the property];
state that all other matters regarding terms of engagement, fees, etc are set out in the service level agreement between HMRC and the VOA.
SVT Policy & Professional can provide a typical letter if required.
The caseworker must ensure that all documents relevant to the instructions are kept as a proper record of their instructions.
Guidance on UTLC and LT Scotland procedures is contained in Appendix 40.
Guidance on procedures before the First-Tier Tribunal is contained in Appendix 37
HMRC will decide in conjunction with their Solicitor whether the Solicitor’s Office will represent HMRC or whether the case is suitable for representation by an officer from HMRC’s Appeal Unit. Where the UTLC’s standard procedure is adopted it is expected that HMRC will be represented by either their Solicitor, or Counsel. In referrals to the First-Tier Tribunal, HMRC will usually be represented by an officer from their Appeal Unit.
If the case concerns land in Scotland, and is to be heard in the LT Scotland, the case will be referred by HMRC to the HMRC division of the Office of the Advocate General (OAG) for Scotland which represents HMRC in Scottish cases. One of its lawyers will have conduct of the case, instructing Counsel as appropriate.
The VOA provides the expert witness who will be a professionally qualified caseworker authorised by SVT Policy & Professional to act. Although the responsibility for the valuation rests with the caseworker, SVT Policy & Professional will assume responsibility for the management of the case and will act as co-ordinator.
SVT Policy & Professional will ask the caseworker to commence preparation of their case for a Tribunal hearing in accordance with the procedures in this Part as soon as they become aware of the reference to Tribunal or at an earlier stage in the appeal process if it is thought prudent to do so.
At a very early stage it is important to consider whether the case might be suitable to be heard by the Tribunal’s simplified procedure or written representations. If so this should be discussed with SVT Policy & Professional so that they can make recommendations to HMRC’s Solicitor and HMRC’s CG Technical Group.
It is essential that the expert witness keeps the HMRC Solicitor or OAG Solicitor or the Appeal Unit officer informed of all relevant matters throughout the preparation of the case. Normally this should be done via SVT Policy & Professional but the expert witness and Solicitor may contact one another directly, providing SVT Policy & Professional is kept in the picture. The Solicitor will offer guidance, as necessary, on any contact with the other parties and, particularly, their legal advisers.
The expert witness report (formerly known, in E & W, as a Proof of Evidence) and exhibit bundle is the cornerstone of the case and it is essential that it is carefully considered and thoroughly prepared. Guidance on the preparation of an expert witness report and exhibits is contained in Appendices 41 & 42 but advice may be obtained from SVT Policy & Professional at any stage.
On receipt of advice that a reference has been made to the Tribunal or, if earlier, that HMRC’s Solicitor has been instructed, the expert witness must start recording a diary of all time spent by all staff on the preparation of the case and any other costs incurred - see para 6.95. This is additional to the normal time recording procedure.
In most cases being referred to the First-Tier Tribunal a diary of time is not normally required. The only exception is when there is likely to be an argument that a party or their representative has acted unreasonably in bringing, defending or conducting the proceedings.
The UTLC’s Practice Direction states:
“Where more than one party is intending to call expert evidence in the same field, the experts must take steps before preparing or exchanging their reports to agree all matters of fact relevant to their reports, including the facts relating to any comparable transaction on which they propose to rely, any differences of fact, and any plans, documents or photographs on which they intend to rely in their reports.”
It goes on to say:
“After the exchange of the experts’ reports, and again if rebuttal reports are exchanged, the experts of like discipline should usually meet and, where the Tribunal so directs must meet, in order to reach further agreement as to facts; to agree any relevant plans, photographs, etc; to identify the issues in the proceedings; and where possible, to reach agreement on an issue. The Tribunal may specify the issues which the experts must discuss. The Tribunal may also direct that following a discussion between the experts the parties must prepare a statement for the Tribunal showing those facts and issues on which the experts agree and those facts and issues on which they disagree and a summary of their reasons for disagreeing. The Tribunal will usually regard failure to co-operate in reaching agreement as to the facts and issues as incompatible with the expert’s duty to the Tribunal and may reflect this in any order on costs that it may make.
The contents of the discussions between the experts are not to be referred to at the hearing unless the parties agree. Where experts reach agreement on an issue during their discussions, the agreement will not bind the parties unless the parties expressly agree to be bound by the agreement”
The LT Scotland is likely to make similar orders or directions in its cases.
Preparation of a statement of the relevant facts will be the responsibility of the expert witness but no Statement of Agreed Facts should be put to the other parties without first obtaining the concurrence of HMRC’s Solicitor or the HMRC advocate, through SVT Policy & Professional. Similarly any proposed amendments suggested by the other parties must be discussed with HMRC’s Solicitor before they are accepted.
The expert witness may approach the taxpayer or agent to discuss agreement of facts, but this should not be allowed to delay preparation of the draft expert report. If the taxpayer or agent wishes to discuss the valuation further and it seems that a settlement may be possible then this should be conducted with care and ‘without prejudice’. This should not be allowed to delay preparation of the draft expert report being mindful of any date set by the Tribunal for filing and exchange of reports. If any further negotiations are taking place SVT Policy & Professional should be kept informed of the position.
SVT Policy & Professional will review the draft documents and may suggest amendments, further action or research. If initially or on further review, the report is suitable the caseworker will be asked to forward a copy of the report and exhibits to HMRC’s Solicitor who in turn may also make suggestions for improvement or may request a case conference. This may or may not include Counsel at this stage.
An amended report and set of exhibits should be sent to SVT Policy & Professional. Once finally approved by SVT Policy & Professional the expert witness should forward sufficient copies of the final signed documents to HMRC’s Solicitor by the agreed date. The expert witness should clarify with the solicitor the number of copies required.
At an early stage following referral to the Tribunal, the Tribunal’s Registrar will normally require that both parties file and serve their expert witness reports within typically a 2 month period. This action is done by HMRC’s Solicitor but the expert must ensure sufficient signed copies of their report and exhibit bundle are with the Solicitor in good time for compliance with the time limit. It is considered undesirable that HMRC Solicitor should seek extensions of time. Close liaison with the Solicitor should be maintained.
When the taxpayer’s expert witness report (if any) is received from the Tribunal’s Registrar, HMRC’s Solicitor will forward copies to the expert witness and SVT Policy & Professional.
Following receipt of the documents the expert witness should inspect (at least externally) all the properties which are quoted as comparables and make every effort to verify any factual information contained in the documents. If there are any discrepancies of a factual nature the expert witness should seek to resolve these with the parties by way of some reference in the statement of agreed facts.
Analysis of the taxpayer’s expert’s report and exhibits will be crucial to the identification of the strengths and weaknesses of the taxpayer’s case and detailed notes should be prepared for the benefit of HMRC’s Solicitor.
If new evidence or opinion of which the VOA expert is unaware is included in the other party’s expert witness report then it may be necessary to respond to this by producing additional evidence and opinion to distinguish. This is called rebuttal evidence. Whether this action is appropriate should be considered in liaison with SVT Policy & Professional and HMRC’s Solicitor.
Another procedure that may be appropriate is to put written questions about the report of an expert instructed by another party. Normally such questions should be put once only; should be put within 1 month of service of the expert’s report; and should be only for the purposes of clarification of the report.
If the VOA expert wishes to put questions to the taxpayer’s expert this should be done via HMRC’s Solicitor and in liaison with SVT Policy & Professional. Similarly, if question(s) are asked of the VOA expert they should direct replies through HMRC’s Solicitor and in liaison with SVT Policy & Professional. Replies should be answered within 3 weeks unless the Tribunal order otherwise.
Following receipt of the taxpayer’s expert’s report and documentation the VOA expert witness should prepare ‘Notes for Guidance of Advocate’ (see Appendix 42) to assist HMRC’s Solicitor in presenting the case before the Tribunal and forward this to SVT Policy & Professional for review and discussion. Once approved, SVT Policy & Professional will forward a copy to HMRC’s Solicitor.
Guidance on what should be included in the Notes is contained in Appendix 42.
In order to explore the possibility of disposing of the case prior to the hearing and to protect HMRC against costs, it may be considered that the making of a formal "without prejudice save as to costs" offer (sometimes known as a "Calderbank" offer in E & W) would be appropriate. Any such offer will always be made by HMRC’s Solicitor who will reserve the right, in the event of the offer not being accepted, to bring it to the notice of Tribunal on the issue of costs. HMRC’s Solicitor will always consult with HMRC Technical Group, SVT Policy & Professional and the expert witness before making any such offer. No reference to such an offer should be made at the hearing.
Should such an offer, or counter-offer, be made to the expert witness by the parties, this should be made known immediately to HMRC’s Solicitor and SVT Policy & Professional together with the views of the expert witness thereon. Pending instructions the parties should merely be advised that the matter is receiving consideration.
On the application of any party to proceedings or on its own initiative the Tribunal may order any preliminary issue in the proceedings to be disposed of at a preliminary hearing. HMRC’s Solicitor may request the expert witness to attend. The expert witness will not be required to give expert evidence at this stage, but may be asked to advise the Solicitor during the hearing.
The Tribunal will ask HMRC’s Solicitor for details of dates on which the expert witness will not be available for a hearing. It is important that this information is supplied promptly on request and that the Solicitor (with copy to SVT Policy & Professional), are advised of any changes in availability.
An account of procedure before the UTLC is provided in Appendix 40. Procedure before the First-Tier Tribunal is included at Appendix 37.
Whilst the LT Scotland has its own rules, the hearing will follow a format similar to that in England and Wales – Appellant presenting their evidence first, followed by HMRC.
When on oath, the expert witness must only testify as to facts which are either agreed, within personal knowledge or proven by documents before the Tribunal or by other admissible evidence.
In UTLC cases costs will be requested where appropriate by HMRC Solicitor when the decision is made known, but to allow HMRC Solicitor sufficient time to consider costs, the case diary (kept in accordance with para 6.101) should be forwarded to SVT Policy & Professional as soon as possible after the hearing. Similar considerations apply to expenses in the LT Scotland.
The decision will usually be forwarded to HMRC’s Solicitor with a request for written submissions on costs or expenses. Copies will be forwarded to the caseworker and SVT Policy & Professional.
The decision of the UTLC is final as to matters of fact or value. An appeal lies on a point of law only, direct to the Court of Appeal and then to the Supreme Court. The decision as to whether or not to pursue an appeal in respect of any case will be made by HMRC Technical Group in consultation with HMRC Solicitor and SVT Policy & Professional.
Applications may be made to the First-Tier Tribunal for their permission to appeal their decision to the Upper Tribunal.
As indicated, the general principles and procedures set out above will apply to appeal casework in Scotland but there are differences in detail arising out of Scottish law and practice.
The statutory mechanism for appeal against an HMRC decision is the same in Scotland. However, disputes involving the valuation of land and property are referred to the Lands Tribunal for Scotland which is an independent civil court.
In Scotland an expert witness report may sometimes be referred to as a Precognition.
Costs are called "expenses".
Exhibits are referred to as ‘productions’.
The Lands Tribunal in Scotland has a wide discretion to regulate its procedure as it thinks fit. Normally after the parties have lodged their pleadings and a period of adjustment has been allowed, the Tribunal will issue an order "closing the Record" (i.e. declaring the pleadings to be in their final form), appointing the date for the hearing and ordering that documents be lodged. The practice is to send to the other side a copy of the list of comparables and a copy set of productions at the same time as these are lodged with the Tribunal rather than for the Tribunal to pass them on to the other party.
The Tribunal will usually ask for a list of comparable properties to be submitted before the hearing (28 days was used in a recent case). The documents and productions are usually required to be exchanged shortly before the hearing (14 days was used in a recent case). Precognitions are normally exchanged prior to the hearing although it may exceptionally be done by prior agreement between the parties, however, there is no certainty of this.
The Tribunal are likely to request that as many facts as possible are agreed between the parties beforehand and embodied in a Joint Minute of Admissions. In particular where both parties’ lists of comparables include some identical properties but reveal factual differences they will expect these to be resolved prior to the hearing.
With regard to facts or legal issues, the Tribunal encourage production of an agreed statement setting out matters that have been agreed.
If necessary a Joint Minute of Admissions may be entered into by the parties but this would be done only a short time before the hearing via the Office of the Advocate General and in consultation with SVT Policy & Professional.
The expert witness should commence preparation of a precognition and productions as well as a diary of time spent and expenses incurred in preparing the case.
An appeal in Scotland is to the Inner House of the Court of Session and from there to the Supreme Court. Appeals are on points of law only.