HMRC’s litigation and settlement strategy (LSS) governs how HMRC conducts civil law disputes in relation to all taxes. ‘Disputes’ in this context is given a wide meaning as explained below. The LSS covers most of HMRC’s compliance activity but does not apply to criminal investigations.
Advisers need to be aware of the LSS because it sets out a series of generic principles that govern how HMRC intends to conduct civil disputes to ensure this is done proportionately and within the law, in a way that minimises the number of ongoing disputes.
The LSS, and its attendant commentary, is drafted in sufficient detail to provide a ready means of holding HMRC to account (eg through its complaints process) if during any dispute HMRC fails to follow these principles.
Special considerations might apply for disputes involving NIC, PAYE or VAT. This is due to the possible implications for an individual’s contribution record in the case of NIC, and the tax treatment of other taxpayers in the case of PAYE and VAT disputes. Therefore, the LSS should always be read in conjunction with the HMRC published operational and policy guidance that applies to the particular dispute in question.
This guidance note:
highlights the main points to consider when deciding whether HMRC is following the LSS in a particular case, and
explains what action can be taken if HMRC fails in any dispute to follow the LSS
The current wording of both the LSS and the accompanying commentary / guidance for HMRC staff can be found on the GOV.UK website.
Key points for advising clients in dispute with HMRC
The LSS, and its accompanying guidance, sets out a holistic approach to HMRC’s compliance work. No one paragraph or sentence should be read in isolation or taken out of context from the overall approach described.
The main points for advisers to take away from the LSS and HMRC guidance are discussed below.
Disputes covered by the LSS
‘Dispute’ in this context extends beyond disagreements which