United Kingdom
19 July 2011 - HMRC updates its Litigation and Settlements Strategy
HMRC has updated its published ‘Litigation and settlement strategy’, which sets out the framework in which it seeks to resolve tax disputes through civil procedures.
The first noticeable change is that it is written in third person terms, instead of addressing its own staff (in the style of its manuals), as was formerly the case. Consequently it omits some of the former detailed instructions to staff on how to select and handle cases, so the revised version is a much shorter and more open document than the original, which was in the nature of internal guidance.
It is now also now a more general guide to HMRC’s strategy, omitting certain sections such as the former guidance on avoidance cases.
HMRC’s desire to increase the use of collaborative methods of resolving disputes is reflected in several ways:
- The new document states: “HMRC will foster a non-confrontational approach with the customer”. “In certain cases Alternative Dispute Resolution can help support the resolution of disputes either by facilitating agreement between the parties or by helping the parties to prepare for litigation.“ “HMRC will seek to work with the customer to understand fully the relevant facts and law, sharing and testing the strengths and weaknesses of HMRC’s own arguments, and fully understanding and testing the strengths and weaknesses of the customer’s arguments, before reaching a considered view on the strength of its case. “ “In most cases, resolution by agreement is likely to offer the most effective and efficient outcome. However, HMRC will not compromise on its view of the law to secure agreement, and in that context there will be cases where litigation offers the most effective and efficient means of resolving disputes. “
- It is further stated that “HMRC will always consider whether something which initially appears to be an ‘all or nothing’ issue is genuinely all or nothing or is in fact a case where there is a range of possible figures for tax due.” This appears to indicate a slightly less rigid approach than formerly, when the instruction to staff was: “Some disputes have an all-or-nothing character, involving a single point of law that would be decided one way or the other by the courts, with no middle ground. Such disputes should be settled on all-or-nothing terms.”
- The former instruction “Do not undercharge tax, interest or penalties in the interest of quick settlement” is now omitted, but HMRC reiterates that “Where there is a range of possible figures for tax due, HMRC will not settle by an agreement for an amount which is less than it would reasonably expect to obtain from litigation.”
The overall recent message from HMRC is that it does wish to encourage taxpayers to consider collaborative methods of resolving disputes. For more information, please contact Dawn Register.