HMRC are preparing to relaunch their Litigation and Settlement Strategy (LSS) on Friday, a week after the National Audit Office recommended that the relaunch should be done ‘as soon as possible’ to ensure a ‘common understanding within the Department of how to apply the LSS in determining whether to settle or litigate on individual tax issues’.
This week’s edition of Tax Journal will include commentary on the revised LSS by experts from HMRC and KPMG.
‘[The LSS] was introduced in May 2007 with the aim of bringing consistency to the way that the Department resolves disputes, and ending the practice of agreeing settlements for a proportion of the tax under dispute ("compromise deals") or settling several issues for a single sum (“package deals”),' the NAO said last week. It encourages settlement of disputes by agreement and sets out the terms under which settlement may be reached.
‘It requires each issue to be considered on its own merits and resolved in accordance with the law. Where the nature of the issue is such that there is a range of plausible outcomes, settlement must be for not less than the Department would reasonably expect to get from litigation. The LSS states that, in general, cases should be dropped where the Department does not have a strong case, or the evidence is weak.’
The LSS ‘reduces costs for both the Department and the taxpayer, and means issues can be settled more quickly, which is again in the interests of both parties’, the NAO reported.
But a review conducted in December 2009 identified differences in understanding among HMRC staff of the flexibility permitted in settling disputes. In evidence to the Commons Public Accounts Committee, submitted in November last year, HMRC said the LSS was under review ‘but the basic principles will not change’.
The NAO report continued: ‘Some staff did not appreciate the flexibility it offered, or thought it emphasised litigation. This initially led to delays in some cases, and inconsistent application, creating an adversarial relationship with some taxpayers.
‘The Department does not currently intend to revise the substance of its LSS as its core message does not need to change, but is planning to relaunch the LSS to make the messages clearer.’
HMRC are preparing to relaunch their Litigation and Settlement Strategy (LSS) on Friday, a week after the National Audit Office recommended that the relaunch should be done ‘as soon as possible’ to ensure a ‘common understanding within the Department of how to apply the LSS in determining whether to settle or litigate on individual tax issues’.
This week’s edition of Tax Journal will include commentary on the revised LSS by experts from HMRC and KPMG.
‘[The LSS] was introduced in May 2007 with the aim of bringing consistency to the way that the Department resolves disputes, and ending the practice of agreeing settlements for a proportion of the tax under dispute ("compromise deals") or settling several issues for a single sum (“package deals”),' the NAO said last week. It encourages settlement of disputes by agreement and sets out the terms under which settlement may be reached.
‘It requires each issue to be considered on its own merits and resolved in accordance with the law. Where the nature of the issue is such that there is a range of plausible outcomes, settlement must be for not less than the Department would reasonably expect to get from litigation. The LSS states that, in general, cases should be dropped where the Department does not have a strong case, or the evidence is weak.’
The LSS ‘reduces costs for both the Department and the taxpayer, and means issues can be settled more quickly, which is again in the interests of both parties’, the NAO reported.
But a review conducted in December 2009 identified differences in understanding among HMRC staff of the flexibility permitted in settling disputes. In evidence to the Commons Public Accounts Committee, submitted in November last year, HMRC said the LSS was under review ‘but the basic principles will not change’.
The NAO report continued: ‘Some staff did not appreciate the flexibility it offered, or thought it emphasised litigation. This initially led to delays in some cases, and inconsistent application, creating an adversarial relationship with some taxpayers.
‘The Department does not currently intend to revise the substance of its LSS as its core message does not need to change, but is planning to relaunch the LSS to make the messages clearer.’
