If you have a disagreement with HMRC read on because this could affect you
HMRC’s Litigation and Settlement Strategy (LSS) sets out the framework within which HMRC seeks to resolve tax disputes under civil law. It is not just about litigation, but applies equally to an enquiry into a tax return, a PAYE audit and in fact all other areas where someone (or their agent on their behalf) has a disagreement with HMRC.
The LSS was first launched in 2007 and whilst the basic principle still holds that disputes must be resolved in accordance with the law, there are some welcome changes of emphasis in this relaunced version.
Non-confrontational, collaborative and transparent
In the section on ‘handling disputes’ it says “HMRC will seek to handle disputes non-confrontationally and by working collaboratively with the customer wherever possible … A collaborative approach requires all parties to be open, transparent, and focused on resolving the dispute.”
Articulate basis of enquiry
In another part of the ‘handling disputes’ section it says “In any dispute HMRC will seek to establish and understand the relevant facts as quickly and efficiently as possible. A non-confrontational approach is likely to help identify and establish relevant facts. For example, HMRC will aim early on to articulate the basis of its enquiries – in terms of tax risks perceived”.
What does it all mean?
If you have been subject to an HMRC enquiry you might very well have been asked for lots of information without HMRC explaining what it is they are concerned about. This can lead to a lot of unnecessary work digging out the information and worry about what it is that is concerning HMRC.
Given the above changes, in the future it is hoped that an enquiry will begin with HMRC explaining what they think might be wrong. From this point you (or your agent) can discuss with HMRC what evidence they would accept to satisfy their concerns. Alternatively, if it is a difference in the interpretation of the law the disclosure of further facts might persuade HMRC that your interpretation is right.
What can you do if HMRC don’t follow their LSS framework?
It is important that, if you are expecting HMRC to be open and upfront about their concerns, you are also willing to collaborate and agree timings for responses. If not, HMRC will have to go back to their old ways of working, which as mentioned above can lead to unnecessary work.
If you do receive an enquiry letter (or have an open enquiry at the moment) which doesn’t set out HMRCs concerns, but asks for lots of information, it may be worth writing back to them. You can explain that the officer should tell you what is worrying them, agree with you what facts are relevant to their concerns and discuss with you what evidence you can most easily produce to establish those facts.
The relaunched LSS can be found at http://www.hmrc.gov.uk/practitioners/lss.pdf
How we can help
If you are faced with an HMRC enquiry we know it can be unsettling and time consuming. We will aim to resolve matters quickly, achieving the best outcome for you and your business. Over the years we have dealt with every type of intervention, investigation and enquiry. We know how tax inspectors work, and use this knowledge to resolve disputes cost-effectively. In addition we can provide our clients with enquiry insurance, except for open enquiries. Please contact us for further information.