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HMRC’s new governance arrangements for large tax disputes

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HMRC has announced new governance arrangements for the settlement of significant tax disputes. Under the new arrangements, all cases involving more than £100m will be referred, with recommendations from a panel of senior tax professionals, to three tax expert Commissioners, one of whom will be a new assurance Commissioner responsible for overseeing all large settlements.

The new measures are intended to provide greater transparency, scrutiny and accountability, without undermining taxpayer confidentiality and efficiency of collection.


The announcement follows a recent warning from the Public Accounts Committee (PAC) of  ‘systemic issues’ surrounding HMRC’s handling of tax disputes. The PAC, in its report titled HM Revenue & Customs 2010/11 Accounts: Tax Disputes (December 2011), commented that HMRC's working practices must be seen to be ‘absolutely impartial’ if the public was to have confidence in the relationship management approach adopted for large companies. A proper separation between negotiation of tax settlements and their authorisation was needed, and HMRC ‘must address issues of accountability so that Parliament and the public can be satisfied that the best value is secured’, the committee said.

The new assurance Commissioner

The revised arrangements involve the appointment of a new Commissioner as a second Permanent Secretary who will provide assurance that is entirely separate from HMRC’s day-to-day casework and customer engagement.

David Gauke MP, Exchequer Secretary to the Treasury, said the arrangements ‘will ensure a clearer separation between those who attempt to reach settlements and the Commissioners who consider them’.

The announcement was welcomed by Anthony Thomas, President of the Chartered Institute of Taxation (CIOT). ‘The CIOT has long said that HMRC’s governance needs to improve’, he said. ‘These moves will make a real difference to the transparency around settling major disputes – and increasing transparency will increase trust. Hopefully this will be followed by improvements to HMRC’s communications, which would also contribute markedly to improving understanding and hence trust.’

However, James Bullock, Partner at McGrigors, commented that ‘the elephant in the room is the Litigation and Settlements Strategy (LSS)’.  Whilst he welcomed the principle of greater transparency and more effective governance, it is ‘the inflexibility of the LSS as currently drafted [which] has been one of the significant problems that has undermined the system’, he said. ‘A more flexible LSS combined with much tighter scrutiny and governance on individual settlements would be the best result’.

The new arrangements

The arrangements include:

  • The appointment of a new assurance Commissioner responsible for overseeing all large settlements and protecting the interests of taxpayers at large. This Commissioner will have no role in any taxpayer’s individual affairs.
  • New rules which ensure that all cases above £100m will now be referred, with recommendations from a panel of senior tax professionals, to three tax expert Commissioners, one of whom will be the assurance Commissioner. At present, a Commissioner decision is routinely required for settlements of £250m or more. This change will almost double the number of cases that will be scrutinised by Commissioners.
  • A systematic review programme, overseen by the new assurance Commissioner, of the processes used in settled cases covering all our tax settlement work.
  • An enhanced role for the department’s Audit and Risk Committee in overseeing HMRC’s tax settlement work. This committee is chaired by a Non-Executive Director with relevant experience and includes representation from the National Audit Office.
  • Greater transparency including a new code of governance for all tax disputes and an annual report on HMRC tax settlement work.

Extract from HMRC press release ‘Boosting transparency around tax disputes’, dated 27 February 2012.


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