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Litigation and Settlements Strategy update ‘should help generate millions’ for Treasury

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HMRC’s ‘refreshed’ Litigation and Settlements Strategy is an important step towards clearing HMRC’s backlog of ‘over 2,700 historical tax disputes’ with the UK’s largest plcs, and sets out a clear strategy for the future, according to Chris Oates, Head of Ernst & Young’s tax dispute and resolution team.

Chris Oates‘In recent years, litigation appeared to have become HMRC’s default approach to resolving significant tax disputes – particularly where tax avoidance might have been a motive – resulting in a queue of cases waiting to go through the courts,’ Oates (pictured) said.

‘The updated strategy heralds a more pragmatic approach through greater dialogue, negotiation, and potentially mediation. It should also help bring some much needed cash into Treasury coffers.

‘We’re not going to see the backlog cleared overnight, but it undoubtedly provides an opportunity for those companies involved in long running disputes, to re-new their discussions with HMRC in order to try to reach an acceptable basis of settlement.’

The Litigation and Settlements Strategy (LSS), setting out the principles governing HMRC’s handling of disputes concerning taxes, duties and tax credits, was relaunched this morning.

The two key elements of HMRC's approach are ‘supporting customers to get their tax right first time, so preventing a dispute arising in the first place [and] resolving those disputes which do arise in a way which establishes the right tax due at the least cost to HMRC and to its customers, which in most cases will involve working collaboratively’.

Dave Hartnett, Permanent Secretary for Tax, said the ‘refreshed LSS’ builds on previous guidance in order to ‘make sure the position HMRC adopt in a dispute is robust’.

Writing in today’s issue of Tax Journal, Hartnett said this would be done by establishing and understanding the relevant facts as quickly and efficiently as possible, and placing an emphasis on ‘working with the customer in order to make sure both sides fully understand the relevant facts and law’.

Dispute resolution specialists at KPMG said the refreshed LSS does not herald any fundamental changes to HMRC’s strategy. ‘HMRC remain clear there will be no return to “package deals” or splitting the difference in “all or nothing” cases,’ Kevin Elliott and Julie Hughff wrote