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What Is An HMRC Tax Hardship Appeal?

An HMRC tax hardship appeal can arise when a taxpayer appeals an HMRC liability which would give rise to the suffering of hardship.

A taxpayer may in certain instances appeal a liability on the grounds of hardship and this is provided for in tax legislation.

HMRC Tax Hardship Appeal

HMRC Tax Hardship Principles

The HMRC hardship principles have been summarised in the case of Revenue and Customs v Elbrook (Cash & Carry) Limited [2017] UKUT 181 (TCC) (“Elbrook”):

  1. The purpose of the right to claim hardship is to balance the risk of abuse of the appeals system to delay payment against the right of appeal. 
  2. It is not intended as a right of appeal itself.
  3. It is an all or nothing test on the sum involved.
  4. It is to be considered as to the position at the date of the Tax Tribunal hearing and for there not to be speculation as to the future position of the taxpayer.
  5. The ready availability of cash in the hands of the taxpayer may not necessarily determine matters, particularly if hardship would result from using such sums to pay tax.
  6. Available borrowing resources may be considered, but generally only from existing sources, e.g. unused facilities or new facilities immediately available with minimal formality.
  7. Potentially available borrowing from new sources, for example if the appellant owns property capable as acting as security for a new loan, will only exceptionally be considered as ‘immediately or readily available’, for example where arrangements for borrowing are at an advanced stage.
  8. The potential sale, outside the ordinary course of business, of assets properly purchased for the purposes of the appellant’s business, might cause hardship even if the assets are not currently being used in the business.
  9. There is no rule that closely connected parties (eg. connected companies) where there is common control cannot be considered as part of the hardship application.
  10. Events leading up to the Tax Tribunal hearing might be considered such as reckless behaviour by the taxpayer having caused the position where hardship might arise or delaying a hearing which might knowingly affect its timing and therefore view of the financial position. 
  11. The financial position of the taxpayer should be considered based on the most up to date information. The burden is on the taxpayer to show hardship and provide the necessary evidence for this suggestion with verbal assertions alone potentially carrying limited (if any) weight.
  12. The Tax Tribunal undertakes a value judgment based on the evidence available and presented to it.

Conclusion On HMRC Tax Hardship Principles

In the Elbrook case, the Tax Tribunal noted the following additional key points on consideration of an HMRC hardship appeal:

In the same passage in ToTel 1, Simon J also approved two further principles derived from a decision of the VAT and Duties Tribunal, Seymour Limousines Limited v Revenue and Customs Commissioners [2009] UKVAT V20966. He said:



ii) The test is one of capacity to pay without financial hardship, and must be applied in a way which complies with the principle of proportionality in order to comply with Community law, see Seymour Limousines Ltd (above) at [57]. 

iii) The hardship enquiry should be directed to the ability of an appellant to pay from resources which are immediately or readily available. It should not involve a lengthy investigation of assets and liabilities, and an ability to pay in the future, see Seymour Limousines Ltd (above) at [58]. This is a reflection of the broader principle that the issue of hardship ought to be capable of prompt resolution on readily available material.’

Whether resources are immediately or readily available to pay the tax without hardship is a value judgment. The test is not simply of capacity to pay, but capacity to pay without financial hardship. Thus, the mere existence of cash or other readily realisable resources will not necessarily suffice, if the employment of those resources in paying the disputed cash would have consequences that would cause financial hardship. The requirement that the resources be immediately or readily available is a reflection of the structure of s 84(3B), which looks to the existing financial position of the appellant, and does not require enquiry as to possible future action or any potential resources that might become available in the future (see Buyco Limited and Sellco Limited v Revenue and Customs Commissioners [2006] UKVAT V19752, at [8].”


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Author: Elliot Green
Last Updated: April 13, 2024

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