Tax not included in first phase of Welsh tribunal system unification

Launched last year, the consultation sought views on proposals to change Wales’ devolved tribunals system into a single tribunal system comprising two new tribunals: a tribunal of first instance, known as the First-tier Tribunal, and an appeal tribunal under the judicial leadership of the President of Welsh Tribunals, known as the Appeal Tribunal for Wales.

Currently, the land transaction tax and the landfill disposals tax – both of which are administered by the Welsh Revenue Authority (WRA) rather than HM Revenue & Customs (HMRC) – are the only taxes completely devolved to Wales. The landfill disposals tax is the replacement for the UK’s landfill tax and applies to any material disposed of as waste in Wales by way of landfill. Similarly, the land transaction tax is the replacement for the UK’s stamp duty land tax and applies to transactions in land in Wales. Both taxes were devolved to Wales from April 2018.

Appeals against WRA decisions on landfill disposals tax and land transaction tax are currently heard by the First-tier Tax Tribunal, which covers the whole of the UK other than for appeals against Revenue Scotland decisions on devolved Scottish taxes.

The original consultation proposed that disputes deriving from Welsh law should, as a general rule, be heard in a Welsh judicial institution. While the responses to the consultation (66-page / 1.21MB PDF) showed that 94% of respondents agreed with this principle, the consultation also noted that, given how few disputes arise relating to devolved taxes, tax would not, initially, be one of the chambers that would be unified into the Welsh tribunal system. There were no responses to the consultation that objected to this proposal.

Steven Porter, a tax expert at Pinsent Masons, said: “While the Welsh government has not yet set out its position on the next steps for the Welsh tribunal proposal, it seems likely that tax disputes will not, for now, be included in the first phase of unification.”

Research recently conducted by Pinsent Masons found that the number of disputes on landfill disposals tax and land transaction tax that have ultimately reached a tribunal decision are indeed low, with only four appeals on land transaction tax since the introduction of both taxes.

In addition, there has only been one hearing regarding landfill disposals tax, which was a preliminary matter, and an application for a stay for another appeal that is scheduled to be heard in July. Both of these appeals are against both the UK’s landfill tax and the Welsh landfill disposals tax, because they cover a period straddling the introduction of the new Welsh tax.

“The low number of appeals, coupled with the fact that the Upper Tribunal last year confirmed that the existing UK-wide tribunals are treated as having judicial knowledge of the laws of Scotland, England and Wales and Northern Ireland, make the unlikelihood of tax being included in the first phase of unification a pragmatic and sensible conclusion,” Porter said.

“In the context of landfill disposals tax, this is made even more stark by the fact that, even six years on from its introduction, the only appeals against the Welsh tax actually relate to a straddle period and therefore encompass appeals against both the WRA and HMRC.”

Following the publication of the government’s summary of responses, the unification of some elements of the Welsh tribunal system do look likely to go ahead, though Welsh taxes will not be one of them.