In 2007, HM Revenue & Customs (HMRC) published its Litigation & Settlements Strategy (Litigation Strategy) document. It covers all types of disputes concerning a liability to pay taxes or duties (or an entitlement to tax credits), and includes any situation where HMRC disagrees with a taxpayer and the disagreement cannot be readily resolved. The former HM Customs & Excise fought long and hard against taxpayers in the VAT & Duties Tribunals for many years, and this approach is now being extended to all areas of taxation under HMRC.
Under the Litigation Strategy, it is expected that all cases will be handled in a way that prepares for litigation and that ‘package deals’, long favoured by the former Inland Revenue to cover all potential issues that could be argued during the course of a dispute, will become a thing of the past. HMRC will seek to isolate those points on which it feels it has the strongest case and then will try to apply an ‘all or nothing approach’ to resolving them.
Taxpayers and their accountants need to know about the Litigation Strategy and HMRC’s renewed appetite for litigation. Furthermore, they should also be aware of plans by HMRC to instruct leading law firms to conduct tax litigation cases on their behalf. On 7 September 2008, The Sunday Times reported that “HM Revenue & Customs is planning to unleash some of the world’s most expensive lawyers on business and individuals..... to catch evaders…” .
This policy has already begun with HMRC engaging one City law firm to act on its behalf in a cross-border tax case. More cases are expected to follow and the number of tax disputes being litigated will, consequently, increase. Taxpayers and their accountants should be aware that the Litigation Strategy is aimed at all types of dispute and not just at tax enquiries/investigations or counter-evasion work.
HMRC’s guidance to staff is now clear – ‘prepare for litigation’, and taxpayers and their accountants need to follow suit. The Litigation Strategy and the proposed rules for appeals to the new Tax Chamber, due to come into force in April 2009, will make the procedure for settling enquiries and tax disputes considerably more litigious. If a taxpayer hopes to mount a serious challenge against HMRC, expert tax advice will be essential. Our Tax Disputes & Litigation Group can provide a wealth of experience and expertise in tax litigation cases to ensure any such challenge is fully prepared and argued.
For further information, please contact Don Mavin using the online form below.