The basic principles of agreeing a settlement of tax enquiries


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In 2007, HMRC published the litigation and settlement strategy (LSS), which was revised in July 2011 following some key cases.

The LSS sets out the principles and standards which HMRC should apply when settling disputes with taxpayers. The general principles include:

  1. Each dispute should be settled on its own merit. There should be no trade-off between unrelated points and no package deals should be offered.
  2. If a dispute arises from an all-or-nothing point, the settlement terms should be on all-or-nothing terms.
  3. Tax, interest and penalties should be not be undercharged in order to reach a quick settlement.

In tax avoidance cases, if HMRC’s position is strong, HMRC should not settle for less than 100% of the tax and interest due.

HMRC is responsible for collecting and managing the public revenue and by adhering to this approach the aim is to act consistently.

If it is possible to reach a settlement then HMRC are open to resolving matters without resorting to litigation.  In many cases this is the best possible outcome, particularly if all relevant factors (such as interest, penalties and consequential tax charges) are taken into consideration at the time.

For assistance with HMRC enquiries, please contact Leanne Hathaway, our in house Chartered Tax Adviser.

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