An assessment will normally be issued at the end of the tax disputes process if the IRD does not accept your position. If you disagree with it, you must challenge the assessment within a limited time or lose your dispute rights. A tax challenge is formal civil litigation in the Taxation Review Authority or the High Court. It requires a winning strategy and tactical sense.
Even if you are unsuccessful in persuading the IRD’s adjudicators of your position, all is not lost. The disputes process takes place before any assessment of tax usually occurs. When an assessment is made the taxpayer has rights to challenge the assessment, which are quite separate from the disputes process.
A tax challenge must be commenced within 2 months of an assessment being made. In some limited cases an extension of time can be applied for. The challenge is commenced by filing proceedings in the Taxation Review Authority or in the High Court.
The proceedings follow the form for ordinary civil litigation with some slight changes in the TRA. They require a statement or notice of claim which sets out the allegations on which the taxpayer relies. Those allegations must be consistent with any SOP that applies in the case or may be struck out.
Tax challenges are subject to case management in both the TRA and the Court. The case will be timetabled through the initial stages, including discovery of documents, interlocutory applications, the exchange of witness briefs or statements and the provision of opening statements and synopses of argument. A good deal of material has to be submitted to the TRA or the Court in written form and planning for tax litigation, like any other case, requires serious attention to deadlines. Last minute preparation for a tax challenge is a recipe for failure.
Like all litigation, a tax challenge requires your counsel to have a keen instinct for the position and approach likely to be taken by your opponent, the IRD. It requires timely preparation of the evidence and briefing of witnesses. It requires that the written elements of the case be prepared and presented in the most persuasive form possible. Finally it requires an advocate who has the experience and ability to convince the Tribunal or Court of your case.
Whichever way a case may go it can be appealed. Appellate argument is different from the tax challenge itself because in most cases it is not possible to introduce new facts on appeal. The trial record forms the framework for the appeal. The focus is much more on the law. The appellate advocate (especially if that is not the lawyer who acted in the challenge itself) must be able quickly and efficiently to get on top of the arguments and evidence that was presented at first instance and to present a succinct and compelling argument for the appellate Court. Our Court of Appeal and Supreme Court often deal with tax appeals very much on first principles and appellate counsel has to be able to argue those matters confidently with the Judges.
Geoff Clews is a highly experienced tax litigator, having appeared before the TRA and courts at all levels in tax cases over almost 30 years.
For answers to frequently asked questions about tax challenges and appeals, click here
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