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Litigation and Settlement Strategy: 45 pages of draft guidance

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Draft guidance for HMRC staff on the department’s updated Litigation and Settlement Strategy (LSS) runs to 45 pages.

The ‘refreshed’ LSS published last month sets out the principles governing HMRC’s handling of disputes in relation to taxes, duties and tax credits.

Dispute resolution experts observed that the updated LSS is more concise, and is an improvement on the original because it is supported by detailed guidance on HMRC’s approach to collaborative working and resolving disputes.

The original LSS ran to more than 2,700 words and referred to ‘avoidance’ 18 times. The revised version has fewer than 1,800 words and mentions avoidance only once, while the draft internal guidance mentions avoidance more than 30 times.

‘If reading the LSS as a stand-alone document taxpayers could assume – wrongly – that avoidance disputes are handled and resolved in the same way as other disputes,’ Kevin Elliott and Julie Hughff of KPMG wrote in Tax Journal on 14 July.

Draft guidance has also been published on the use of Alternative Dispute Resolution in large or complex cases.

HMRC have invited comments, ‘ideally before 31 October’. The draft guidance is available on the HMRC website.

‘Handle and resolve disputes cost effectively’

‘The LSS encourages HMRC staff to:

  • minimize the scope for disputes and seek non-confrontational solutions
  • base case selection and handling on what best closes the tax gap
  • resolve tax disputes consistently with HMRC's considered view of the law
  • subject to that, handle and resolve disputes cost effectively - based on the wider impact or value of cases across the tax system and across HMRC's customer base
  • ensure that the revenue flows potentially involved make any dispute worthwhile
  • (in strong cases) settle for the full amount HMRC believes the Tribunal or Courts would determine, or otherwise litigate
  • (in 'all or nothing' cases) not split the difference
  • (in weak or non-worthwhile cases) concede rather than pursue’

Source: HMRC website