LSS20300 - What is a dispute

HMRC will seek, wherever possible, to handle disputes non-confrontationally and by working collaboratively with the customer. In the majority of cases, this is likely to be the most effective and efficient approach.

A collaborative approach by all parties requires them to be open, transparent, and focused on resolving the dispute. Working non-confrontationally can offer benefits in terms of effective and efficient dispute resolution in all civil cases.

However, there are times when a customer will disagree with us and the term ‘tax dispute’ refers to when HMRC needs more information or disagrees with the tax due or when it is due. The principles of the Litigation and Settlement Strategy (LSS) therefore cover all civil tax disputes over:

  • substantive tax liabilities, including National Insurance, Excise Duty, and VAT
  • interest
  • penalties
  • other duties, levies and fees
  • other matters for which HMRC has supervisory responsibility

For the full text of the Litigation and Settlement Strategy, see HMRC’s Litigation & Settlement Strategy

Dispute is given a wide meaning and covers all situations where:

  • HMRC needs more information to enable it to form a considered opinion on the correct tax treatment of a transaction
  • HMRC and the customer (or their agent) have differing views on what is the ’legally due tax at the right time’
  • Disputes may arise in the context of an enquiry into a return, an audit, pre-return work (whether undertaken on a pre-transaction or post-transaction basis), or a challenge to HMRC’s legal interpretation brought by the customer

In this document, ‘dispute’ refers to a disagreement with a customer on tax liabilities with respect to a particular risk in a return, transaction or arrangement. It does not mean disagreements with a customer over several, unrelated risks, which are treated as separate disputes.

‘Risk’ refers to the possibility that an incorrect tax treatment may be sought or have been applied to a transaction or entry on a return by a customer. Where the same risk applies to a number of separate customers, it is then called an issue.

‘Litigation’ refers to the resolution of a tax dispute through a statutory appeal to an independent body, for example a tribunal or a court. It also includes tax related common law claims to the courts or applications for judicial review. For the purposes of the LSS, it does not cover statutory reviews, litigation to recover debts, or employment or commercial litigation to which HMRC is a party.