Can the tribunal increase the tax you owe on appeal

Yes. On many tax appeals the tribunal decides the right amount, not just whether HMRC’s figure is too high, so it can increase an assessment or a penalty as well as reduce it. Section 50(7) of the Taxes Management Act 1970 requires an assessment to be increased if the tribunal finds you undercharged, and penalty rules such as Schedule 24 to the Finance Act 2007 let it substitute any penalty HMRC could have charged. That risk should be weighed before an appeal reaches a hearing.

Where does the power to increase come from?

For direct taxes the rule is in section 50 TMA 1970. Section 50(6) says that if the tribunal decides you are overcharged by a self assessment or another assessment, it is reduced accordingly, but otherwise it stands good. Section 50(7) is the other side: if the tribunal decides you are undercharged by a self assessment or another assessment, or that amounts in a partnership statement are insufficient, the assessment or amounts “shall be increased accordingly”. Section 50(8) adds that where an assessment charges tax on an amount assessed, the tribunal normally adjusts that amount and the tax follows.

Section 50(7A) deals with claims and elections decided in a closure notice. The tribunal can allow or disallow them to whatever extent it decides is right, which can also go against you.

For VAT, section 84(5) of the Value Added Tax Act 1994 applies to appeals against assessments under section 83(1)(p) and (rb). If the tribunal finds the amount assessed is less than it ought to have been and directs the correct amount, the assessment takes effect for that amount and it is treated as notified to you.

Can the tribunal increase a penalty?

For the main modern penalty regimes, yes, if your appeal is about the amount.

• Inaccuracy penalties. Paragraph 15 of Schedule 24 FA 2007 separates an appeal against a decision that a penalty is payable from an appeal against its amount. On the first, paragraph 17(1) lets the tribunal only affirm or cancel. On an amount appeal, paragraph 17(2) lets it affirm or substitute “another decision that HMRC had power to make”.
• Late filing penalties. Paragraphs 20 and 22 of Schedule 55 FA 2009 follow the same pattern: affirm or cancel on whether a penalty is payable, affirm or substitute on the amount.

Substitution can mean a higher figure. Paragraph 4 of Schedule 24 sets penalties for a category 1 inaccuracy at 30% of potential lost revenue for careless behaviour, 70% for deliberate but not concealed and 100% for deliberate and concealed. If HMRC argues at the hearing that behaviour was deliberate rather than careless and the tribunal agrees, the substituted penalty can exceed the one under appeal. Paragraph 17(3) also limits how far the tribunal will revisit reductions for disclosure: it applies the same reduction as HMRC, possibly to a different starting point, unless it thinks HMRC’s decision on reductions was flawed in the judicial review sense.

Older VAT penalties are different. Section 84(6) VATA says that for penalties, interest and surcharge appealed under section 83(1)(q), the tribunal’s power to vary is limited to reducing the amount to what is appropriate under sections 60 to 70.

Why would the tribunal find more tax due than HMRC assessed?

An appeal puts the whole liability before the tribunal, and the tribunal decides on the evidence it hears. Common routes to an increase include:

• evidence produced for the appeal, such as bank statements or witness evidence, revealing income or gains HMRC had not included;
• HMRC arguing for a higher figure where its original assessment was cautious, for example a best judgement estimate of takings;
• cross examination undermining your account of the facts, which can also affect penalty behaviour; and
• a claim or relief being disallowed to a greater extent than in the closure notice.

Who has to prove what affects how likely this is. See our page on the burden of proof in tax appeals.

Can I avoid the risk by withdrawing my appeal?

Withdrawal is possible but not always on your terms. Rule 17 of the tribunal’s tax chamber procedure rules lets a party withdraw its case in writing or orally at a hearing, and gives 28 days to apply for reinstatement. ARTG8460 says withdrawal takes effect as if the tribunal had decided against the withdrawing party.

Before an appeal reaches the tribunal, section 54(4) TMA and section 85(4) VATA treat a notice that you do not wish to proceed as an agreement to uphold the decision unchanged, unless HMRC objects in writing within 30 days. ARTG2740 says HMRC may object to withdrawal of a direct tax appeal where, for example, the assessment may be inadequate, although it expects such cases to be rare. ARTG3430 gives a similar right to object for indirect taxes. The mechanics are covered in withdrawing a tax appeal.

The cleaner way to fix a figure is a written agreement under section 54(1) TMA or section 85(1) VATA, which has the same effect as a tribunal decision. You have 30 days to resile from it. See settling an appeal by agreement.

What happens to payment if the tribunal increases the figure?

ARTG8930 says amounts payable under the tribunal’s decision must be paid even if there is a further appeal. Where the amount payable is more than has been paid so far, the extra is due 30 days after HMRC sends a notice of the total. Any postponement for direct taxes or hardship suspension for indirect taxes stops having effect. Interest on any extra tax is explained in our page on HMRC late payment interest.

How does the risk work in a real decision?

Illustration only. A consultant is charged a careless inaccuracy penalty of 30% of £10,000 potential lost revenue, so £3,000 before any disclosure reduction, and appeals against both the penalty and its amount, arguing that he took reasonable care and, in the alternative, that the penalty is too high. At the hearing his records show he knew about the income and left it off his return. The tribunal finds the inaccuracy deliberate but not concealed. Under paragraph 17(2) it can substitute a 70% penalty, £7,000 before reductions, applying HMRC’s disclosure reduction to the new starting point. If his appeal had been only against the decision that a penalty was payable, paragraph 17(1) would have limited the tribunal to affirming or cancelling the original penalty.

That shows why the grounds of appeal and the evidence need testing early. Our page on writing grounds of appeal covers the drafting.

How should the risk affect whether to pursue a case?

• Review your own evidence as HMRC and the tribunal would see it, including documents you will have to disclose.
• Consider whether your penalty appeal is about liability or amount, because that controls what the tribunal can do.
• Do not assume that the worst outcome is the figure in HMRC’s letter. In an all or nothing dispute it often is, but where the figures are estimated, the range can run both ways.
• Take a negotiated settlement seriously where your case is weak on the facts. Statutory review and mediation give chances to test the position before a hearing.
• Remember costs. The First tier Tribunal can award costs only in limited cases, such as unreasonable conduct or Complex cases where you have not opted out, under rule 10 of the tax chamber rules.

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Related Accountapedia entries

• Tax tribunal appeal categories explained
• HMRC’s statement of case in a tribunal appeal
• Writing grounds of appeal for the tax tribunal
• Lodging a notice of appeal at the tax tribunal
• Making a late appeal to HMRC or the tribunal

Sources

• legislation.gov.uk: Act 1970 c. 9, section 50
• legislation.gov.uk: Act 1994 c. 23, section 84
• legislation.gov.uk: Act 2007 c. 11, schedule 24
• legislation.gov.uk: Act 2007 c. 11, schedule 24
• legislation.gov.uk: Act 2007 c. 11, schedule 24
• legislation.gov.uk: Act 2009 c. 10, schedule 55
• legislation.gov.uk: Act 2009 c. 10, schedule 55
• legislation.gov.uk: SI 2009/273, article 17
• GOV.UK: Manual page ARTG8460
• GOV.UK: Manual page ARTG2740

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.