Arcotia Hatsidimitris - International Tax Dialogue

6. REACHING A DECISION POINT – 51
Box 11. United Kingdom’s Litigation and Settlement Strategy
• The Strategy sets out the principles within which HMRC handles all disputes about any taxes or duties
where those disputes are subject to civil law procedures, and whether disputes are resolved by
agreement with the taxpayer or through litigation. This includes most of HMRC’s compliance activity.
• The two key elements of HMRC’s approach to tax disputes are:
supporting taxpayers 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.
• The LSS encourages HMRC staff to:
minimise 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 cases where HMRC’s position is strong) settle for the full amount HMRC believes the
Tribunal or Courts would determine, or, where that is not possible, litigate;
(in cases where there is no scope for compromise, for example where the facts are agreed and
the question is whether the law applies in a particular way) not split the difference;
(in weak or non-worthwhile cases) concede rather than pursue.
In appropriate cases, Alternative Dispute Resolution (ADR), and more specifically mediation, can help
HMRC and its customers resolve disputes in a cost effective and efficient manner.
In a number of countries there is an internal appeals process that can be invoked before a case
goes to formal litigation in the Courts. These processes can help to achieve agreed settlements in
cases. The appeals systems used in Japan and the US are described below.
Governance of decisions to litigate or settle
To support its Strategy set out in Box 11, HMRC has governance processes for all significant
decisions about settlement and litigation. Those processes have recently been endorsed by the UK’s
National Audit Office. 2
In broad terms, all cases and/or issues with tax at risk in excess of 100 million GBP must be
considered by the High Risk Corporate Programme (HRCP) Board which is chaired by the Director of
the Large Business Service (LBS) and consists of directors of other key parts of the Department.
DEALING EFFECTIVELY WITH THE CHALLENGES OF TRANSFER PRICING © OECD 2012