A Review of Contentious Tax in 2025

As the dust settles on another active year in the contentious tax arena, we take a moment to survey the tax landscape of 2025 and reflect on the issues that defined 2025 – and those likely to shape the year ahead.

This blog is based on an article written by Adam Craggs and Liam McKay that was published in Tax Journal on 10 December 2025.

Introduction 

As anticipated, the significant injection of funding for HMRC in Budget 2024 has translated into a marked increase in compliance activity in 2025. Both practitioners and taxpayers alike have noted a more assertive HMRC, keen to make full use of its expanded powers and resources. While the effect of the Chancellor’s announcements in Budget 2025 are still being considered, the trajectory is clear: Finance Bill 2025/26 is set to confer yet further powers and operational capacity on HMRC, helping to shape an even more active and contested tax landscape in 2026.

As for how busy the past year has been, the published quarterly figures provide a useful indication. Although full-year statistics are still awaited, the First-tier Tribunal (FTT) received 1,732 appeals in the first three months of 2025, around 1.5% fewer than in the same period in 2024. This slight decline might be due to greater use of alternative dispute resolution (ADR). Disposals, however, fell more sharply: the FTT concluded 1,704 cases in the first quarter of 2025, a drop of roughly 25% year-on-year. As at 31 March 2025, the FTT’s open caseload remained substantial at 48,818 cases, representing a decrease of about 4.6% (2,371 cases) compared with the previous year. Given that appeal volumes have been trending upwards for over a decade, these clearance rates are unlikely to make a meaningful dent in the backlog any time soon. Taxpayers should therefore expect FTT timelines to remain prolonged for the foreseeable future. 

Case volumes in the Upper Tribunal (UT) are, understandably, far smaller, but the available figures are nonetheless noteworthy. In the first three months of 2025, the UT received 400 appeals – an increase of almost 22% compared with the same period in 2024. Disposals, by contrast, remained static: the UT concluded 37 cases in the first quarter of both 2024 and 2025. As at 31 March 2025, the UT’s open caseload had risen to 171, representing a 12.5% increase year-on-year.

Data on tax-related litigation in the superior courts remains difficult to ascertain. Nevertheless, the publicly available figures indicate that 31 applications for judicial review were lodged against HMRC in the first and second quarters of 2025. Although the full-year statistics will be needed before a definitive assessment can be carried out, this compares with 181 applications for the whole of 2024 and points towards a material decline in judicial review activity in 2025. Whilst judicial review continues to play a crucial role in scrutinising HMRC decision-making, it has become an increasingly challenging route for taxpayers to pursue – something that may well be reflected in the relatively low number of applications reported in 2025.

Against this backdrop, we highlight below some notable developments during 2025 that are likely to be of interest to taxpayers and their advisers. 

Case developments

While many of the judgments and decisions issued by the courts and tax tribunals during 2025 were routine, several stand-out decisions address core procedural and evidential issues with the potential to shape the conduct of tax litigation in 2026. A number of these rulings merit particular attention.

Late appeals 

Medpro Healthcare Limited & Another v HMRC [2025] UKUT 255 (TCC)

The UT’s decision in Medpro is widely viewed as one of last year’s more significant procedural decisions. In Medpro, the UT held that its earlier decision in Martland v HMRC [2018] UKUT 178 (TCC), had fettered the FTT’s discretion by elevating efficiency, proportionality and compliance, above other relevant factors in the balancing exercise required when considering late appeal applications. As Martland has, for nearly a decade, provided the touchstone for assessing whether a late appeal should be admitted, Medpro was initially welcomed as an important recalibration in the taxpayer's favour.

However, the picture has proven to be more complex. Subsequent decisions of the FTT indicate that the threshold for late appeals remains extremely high, as the FTT seeks to reconcile two competing strands of UT authority. For example, in Lands Luo Ltd v HMRC [2025] UKFTT 1207 (TC), the panel, including the Senior President of Tribunals, Lord Justice Dingemans, applied Martland as being consistent with Court of Appeal authority, though on the facts, the taxpayer was permitted to appeal out of time.

With Martland and Medpro now pulling in different directions, the issue appears destined for clarification by the Court of Appeal. Until then, taxpayers should proceed on the basis that late appeals will continue to be admitted only in exceptional circumstances.

Burden of proof 

Universal Cycles Ltd & Others v HMRC [2025] UKFTT 01208 (TC)

One of the perennial difficulties facing taxpayers when challenging HMRC decisions is that the burden of proof often rests on them. Where enquiries have lasted many years and the underlying events are historic, the evidential disadvantage for taxpayers can be acute, particularly when documentary records are no longer available or incomplete, due to the passage of time.

The FTT’s decision in Universal Cycles offers a helpful reassertion of first principles, albeit in a limited area of direct tax. The FTT held in that case that where HMRC seeks to rely on the commission of a criminal act in order to invoke the extended time limits for issuing a Post Clearance Demand Note, the burden of proof lies with HMRC. HMRC cannot simply default to the general position under section 16(6), Finance Act 1994, that the taxpayer must disprove HMRC’s case. Because HMRC alleged a criminal act, the FTT confirmed that it was required to prove that act, consistent with the basic principle that 'he who alleges, must prove'.

The decision provides a welcome reminder that serious allegations demand cogent evidence, and taxpayers should not be required to disprove unparticularised HMRC suspicions, especially in cases involving long running and/or complex enquiries. 

Lists of documents

Burton Skip Hire Ltd v HMRC [2025] UKFTT 1113 (TC)

The FTT’s decision in Burton, that a party is not entitled to rely on a document omitted from its List of Documents, even if that document is later exhibited to a witness statement, came as a surprise to many practitioners. Because Lists of Documents are prepared and exchanged at a very early stage in an appeal, often long before witness evidence is prepared, it has long been common practice (and seemingly accepted by the FTT) that documents exhibited to witness statements could be relied on whether or not they appeared on the party's original List of Documents. Burton suggests that this is no longer permissible and a party must now apply to the FTT for permission to rely on any document not included in its original List of Documents.

On its face, Burton introduces an unnecessary layer of administration that is only likely to lead to delay and increase costs for the parties and generate avoidable work for a tribunal whose resources are limited and already under considerable strain. Given that evidence is exchanged well in advance of any hearing, it is difficult to see how reliance on a document exhibited to a statement, but not included in the party's List of Documents, would cause any prejudice to the other party. This is an area where further clarification, potentially through a Practice Statement, would be welcome to ensure consistency and avoid unnecessary procedural skirmishes.

HMRC Data Subject Access Requests

Michael Ashley v HMRC [2025] EWHC 134 (KB)

Access to information held by HMRC is often critical to a taxpayer’s ability to understand how decisions about them have been reached and to assess whether those decisions are lawful. Although Article 15 of the UK GDPR gives taxpayers a clear right to obtain such information, HMRC’s processing of Data Subject Access Requests (DSARs) has long been fraught with difficulty – securing even the most basic material from HMRC can often feel like getting blood from a stone.

In Ashley, the High Court considered these practices and the Court found HMRC’s approach to be unduly restrictive and procedurally flawed. The Court provided helpful guidance on the proper application of the exemptions frequently invoked by HMRC in justifying the withholding of information from taxpayers and clarified the proper test for assessing what constitutes “personal data” for DSAR purposes. The judgment serves as an important reminder that DSARs are legitimate and can be a helpful means by which taxpayers can ascertain how decisions about them have been arrived at by HMRC. Ashley also confirms that HMRC is under a duty to engage with them fully and transparently.

Procedural changes

The appointment of a new FTT Chamber President on 1 May 2025, has been accompanied by a number of welcome procedural developments. 

A new Practice Statement has updated the FTT’s approach to ADR in tax appeals,¹ reinforcing the FTT’s duty, under Rule 3(1)(a) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the FTT Rules), to bring to the attention of the parties the availability of any appropriate alternative procedure for the resolution of disputes.

Among other things, the Practice Statement confirms that the FTT will ordinarily grant a stay of 150 days where an appeal has been accepted into ADR. It also places renewed emphasis on the consequences of an unreasonable refusal to engage in ADR noting that, in appropriate cases, such conduct may lead to adverse costs orders or a reduced recovery of costs, and may constitute 'unreasonable conduct', for the purposes of Rule 10(1)(b) of the FTT Rules (order for costs).

ADR remains an important mechanism for avoiding protracted and costly litigation with HMRC. Indeed, the Government is currently exploring ways to modernise and improve HMRC’s dispute resolution processes, including ADR. Against that backdrop, the FTT’s renewed focus on ADR is to be welcomed, particularly given the scale of the FTT’s existing caseload. With litigation timetables continuing to stretch, ADR is likely to play an increasingly prominent role in the resolution of tax disputes, and more taxpayers may be encouraged to take advantage of the process in 2026.

In November, the FTT also published a new Practice Statement on Applications for Extension of Time,² formalising its approach and offering welcome clarity for practitioners and taxpayers. Under the new framework, in-time, agreed applications are granted automatically: one extension of up to 60 days for the filing of HMRC’s Statement of Case, and two extensions of up to 28 days each for compliance with any other directions. In-time applications, without agreement, will be determined by a judge on the papers or listed for a hearing where appropriate.

Out-of-time applications must be made as soon as possible and only at a point when the party is able to comply with the direction. Such applications must include submissions explaining why, in all the circumstances, the non-compliance should be excused, together with the other party’s position on those circumstances.

The new Practice Statement is a pragmatic and sensible development. It provides parties with greater certainty, streamlines case management, and conserves tribunal resources. In any litigation, there may be times when a deadline cannot be met for legitimate reasons, and the revised approach ensures that routine extensions can be dealt with efficiently. Historically, parties have struggled to obtain a judicial determination on extension requests before the new deadline had passed, resulting in de facto extensions being obtained by default. In many respects, the new Practice Statement simply codifies and regularises what was already happening in practice, while improving transparency and certainty for all involved.

Avoidance firmly in the spotlight

Tax avoidance remained a central focus for HMRC during 2025, and all indications – from enforcement activity to new measures announced in Budget 2025 – suggest that this will continue to be a priority for HMRC during 2026. 

HMRC’s latest Annual Report, underlines the scale of its compliance operation. In the period 1 April 2024 to 31 March 2025, HMRC secured a record £48 billion in compliance yield, surpassing its annual target of £45.4 billion and equating to a return of £23 for every £1 invested in its compliance workforce. This heightened activity is underpinned by continuing expansion: HMRC has already recruited an additional 500 compliance officers, with plans to add a further 5,000 by 2029/30, a move expected to generate £6.8 billion of additional revenue over the next five years.

Much of this yield continues to arise from relatively routine behavioural issues: error and failure to take reasonable care, remain the most common reasons for taxpayers not paying the correct amount of tax. In that regard, HMRC’s behavioural interventions have continued a pace, with its 'nudge' and targeted tax-education campaigns reaching more than six million taxpayers last year and resulting in £448 million of additional tax for the Exchequer. Alongside this, HMRC completed 316,000 compliance checks, reflecting the breadth of enquiries opened by HMRC.

Looking ahead to 2026, taxpayers should expect this compliance environment to become even more acute. Budget 2025’s package of measures, from enhanced powers against avoidance facilitators to new sanctions, potential criminal offences, and an expanded debt-recovery framework, points towards a year in which avoidance-related activity will feature prominently in the compliance landscape. As more disputes move from enquiry to appeal, the FTT is likely to see a rise in avoidance-related appeals, including penalty disputes, information notice appeals, and challenges to HMRC’s characterisation of taxpayer behaviour. Against the backdrop of already strained FTT capacity, HMRC's increased activity in this area may well contribute to longer delays and increased pressure on case-management administration processes.

For taxpayers and advisers, the message is clear, HMRC’s scrutiny of avoidance is set to remain vigorous for the foreseeable future. Proactive compliance, careful documentation, and early engagement in dispute resolution (including ADR) will be more important than ever as the contentious tax landscape becomes increasingly congested and more complex during 2026.

Criminal enforcement goes up a gear

Criminal attacks and evasion remain a significant concern for HMRC, together accounting for 23% of the 2023/24 tax gap (9% from criminal attacks and 14% from evasion) of approximately £46.87 billion. Against a difficult fiscal backdrop, the pressure on HMRC to increase its activity in the criminal sphere is only set to grow, particularly given the comparatively modest level of prosecutions achieved in 2025.

The latest enforcement statistics illustrate both the scale of HMRC’s intelligence-led activity and the Government’s expectations for stronger performance in the years ahead. In 2024/25, HMRC received 164,670 reports of alleged fraud through its Fraud Reporting Gateway and paid £852,438 in rewards to individuals providing HMRC with valuable information. HMRC's Fraud Investigation Service (FIS) opened more than 11,000 new civil investigations into suspected fraud and commenced 446 new criminal investigations – a 3.7% increase on the previous year. Those investigations resulted in 557 positive charging decisions, 310 prosecutions, and 281 convictions, with an overall success rate of 91%. HMRC have also increasingly targeted wealthy tax evaders, with 275 individuals currently under investigation.

The financial impact of these activities is significant. HMRC reports that it protected £2.43 billion through civil fraud work and a further £1.5 billion through criminal investigations. In addition, it recovered £191 million from proceeds of crime and COP9 activity. The Autumn Budget 2024 signalled a further escalation, announcing new investment to expand the size and capability of FIS, alongside enhanced counter-fraud technology, including digital analytics and automation, designed to keep pace with increasingly sophisticated criminal operations.

Offshore non-compliance also remains high on HMRC’s agenda. The UK received Common Reporting Standard data relating to more than 10 million financial accounts from 106 jurisdictions, during the 2023 calendar year. HMRC’s analysis of that information resulted in 20,000 letters to taxpayers who had potentially under-declared offshore income in 2024/25 and generated £80.1 million in additional yield through the Worldwide Disclosure Facility.

Budget 2025 reinforces HMRC's current trajectory on the criminal front. The reward scheme for informants is being significantly strengthened, with immediate effect: where recoveries exceed £1.5 million, HMRC will now be able to pay informants up to 30% of the additional tax secured. 

Conclusion

Last year saw significant developments across the contentious tax landscape: tighter procedural frameworks in some areas of FTT practice; a run of decisions clarifying (and at times upending!) important procedural issues; an ever-sharper focus on avoidance; and a markedly more assertive approach to criminal compliance. Budget 2025 adds further momentum, providing HMRC with new powers, resources and technological capability, that will shape the disputes environment in 2026 . As these strands converge, taxpayers and advisers alike, should brace themselves for a more interventionist, data-driven and fast-moving enforcement climate, which means that procedural discipline, proactive compliance and strategic dispute resolution, will be more critical than ever in the year ahead and beyond.

 ¹Practice Statement: Alternative Dispute Resolution In Tax Disputes. 

 ²Practice Statement: Applications for Extension of Time.