1 00118601 Emerging themes 2019 A4 AW v31 combined - Page 61

In practical terms, this means that the tax landscape
in 2019 will continue to be characterised by heightened
regulatory obligations for corporates, an increased risk
of HMRC investigation and HMRC adopting a more
sophisticated and forensic approach to the resolution
of disputes, whether by agreement or litigation.
For those taxpayers who are involved in ongoing
disputes with HMRC, some of the key issues to be aware
of are as follows:
1. Delays in decision making
The strict governance processes and the number of
different stakeholders within HMRC who are required
to progress and later approve the resolution of
sensitive, strategically important or high value
disputes, (including the terms of any settlement or
any decision to litigate), means that taxpayers are
frequently met with substantial delays in progressing
enquiries towards resolution. HMRC’s stated target
for turning around disputes with large businesses is 18
months, but very often disputes drag on for much
longer. Given this, at the outset of a dispute it is
important to maintain pressure on HMRC to set out
their technical view of the dispute at the earliest
opportunity. In the later stages of a dispute, it is
critical to involve HMRC officers with the requisite
level of authority. This is with a view to improving
the prospects that any settlement can be approved
on the agreed terms without delay, or to force HMRC
to issue an assessment against which an appeal can
be initiated.
2.Scope for settlement
The Litigation and Settlement Strategy (LSS), which
sets out the overarching framework under which
HMRC resolves tax disputes through civil procedures,
emphasises that HMRC can only resolve disputes
in a way that is consistent with the law and on a basis
that determines the correct amount of tax. It has
been clear since the LSS was first published over
a decade ago that HMRC’s historic practise of
agreeing a package deal to settle multiple disputes,
or agreeing a settlement on terms more akin to that
typically seen in commercial disputes, would not
continue. This message has been strongly reiterated
more recently. Accordingly, taxpayers wishing to
settle a dispute would be well-advised to prepare
a detailed technical analysis to underpin the offer;
HMRC accepts that there may be a range of
outcomes in some (typically fact sensitive) cases
and is permitted to settle on one of the alternative
bases provided that this would be one of the
“likely outcomes” in litigation.
3.Merits of HMRC internal review
Where it is not possible to resolve an HMRC enquiry
through agreement, HMRC will issue an assessment
or decision at the close of the investigation. At this
stage, the taxpayer has the option to request an
internal review of the decision from an independent
officer within HMRC. Recent statistics published in
HMRC’s Annual Report show that in the last tax year,
the independent reviewing officer upheld the original
assessment in 49% of cases. Our experience indicates
that in complex or high value cases, the figure is much
higher than that, with HMRC rarely overturning an
assessment following an independent review. This
leaves litigation as the only option in those cases.
4.Increased litigation
In 2017/18, there was a 12% increase in the number of
appeals against HMRC decisions which were filed at
the Tax Tribunal. Given that HMRC’s primary objective
is to maximise revenues, in the current political climate
it is perhaps not surprising that there has been an
increase in the number of cases which are proceeding
to litigation.
In summary
Prevention is better than cure
In today’s tax environment, where disputes with
HMRC can be prolonged and the outcome uncertain,
taxpayers would be well advised to take all reasonable
steps to minimise the risk of a dispute arising at all.
HMRC’s annual report emphasises that HMRC prefers
to resolve issues through agreement wherever possible;
transparent and collaborative engagement on both
sides will be fundamental to achieving this.
The government has committed an
additional £155 million of investment
to be made available to HMRC for
investigations in 2019 and 2020.
Partner, London


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