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HMRC have relaunched their litigation and settlement strategy (LSS), introduced in 2007. The new approach is essentially unchanged from the original but now incorporates what the department considers to be best practice.
It includes the collaborative working practices – which particularly benefit large businesses that have dedicated customer relationship managers – and the alternative dispute resolution service, in which a third-party facilitator is used and which is currently being piloted.
The chairman of tax at RSM Tenon, Andrew Hubbard, welcomed the updated LSS, saying it ‘encourages an active dialogue between HMRC, taxpayers and their advisers’.
He added that ‘some tax disputes involve points of principle that are not going to be settled without litigation, but these should be the exception and most disputes should be resolved without expensive and time consuming litigation.
‘There was a danger that the way in which the LSS was being implemented in practice by some officers within HMRC was actually hindering the process of resolving issues.’
Mr Hubbard claimed his firm ‘had some good experience of the use of the alternative dispute resolution process’ and encouraged both the Revenue and tax advisers to use that route where appropriate.
‘It is nobody’s interest for tax disputes to drag on for years not getting anywhere. We have all seen too many cases of this. Getting the right framework for settling tax disputes is critical and the revised LSS is a positive step forward,’ he said.
Ernst & Young’s tax dispute and resolution team head, Chris Oates, said the relaunched LSS ‘marks an important step towards clearing HMRC’s backlog of over 2,700 historical tax disputes with the UK’s largest plcs, some of which have been going on for over ten years, and sets out a clear strategy for the future’.
He added that litigation appeared to have become the taxman’s ‘default approach to resolving significant tax disputes’, particularly where tax avoidance was suspected.
Mr Oates concluded that ‘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.’
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