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HMRC internal manual

Compliance Handbook

HM Revenue & Customs
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Litigation and settlement strategy: handling a dispute: sharing and testing views

Where you have worked with a person with whom you are in dispute, or their agent, to establish the relevant facts in relation to a potential risk or issue, you should continue to collaborate to understand fully the law that applies and therefore the appropriate treatment.

This can apply in different ways depending on the circumstances.

  • Where a return has been filed, a discussion may start about the tax treatment that has been adopted, which will explore the analysis and relevant law that the person considers supports their view of the tax treatment.
  • Where a tax return has not been submitted (discussion of an issue in real time) an appropriate starting point might be an open discussion about the various technical provisions that could apply.

In either situation, share with the person your preliminary views about the potential analysis and relevant law that you consider might apply to a particular issue or transaction.

In cases where you require specialist advice, it will be helpful if you obtain an understanding of the person’s technical analysis before you request specialist advice. The specialist can then consider that analysis in detail and ask for any clarifications or provide a detailed response.

Before making a decision, you should ensure that, where relevant, you have

  • a full understanding of the person’s view of the relevant facts and appropriate technical analysis
  • clearly articulated, in writing or at a meeting, your preliminary view to the person of the potential alternative technical analyses that might apply
  • actively sought to test the relative strengths and weaknesses of the respective technical analyses that might apply, both with the person and with other HMRC colleagues
  • obtained any specialist advice required
  • made an informed judgement of the strengths and weaknesses of the potential technical analyses that might apply.

In many cases, it can be helpful to have a meeting with the person and any agent in order to discuss respective views and arguments. A meeting can help to avoid protracted exchanges of correspondence and can also help each party get a better understanding of the other’s position. So that any meeting is as productive as possible, agree a detailed agenda well in advance so that both parties are clear on the specific areas or issues to be discussed, can prepare adequately, and can ensure that appropriate individuals attend the meeting.

All HMRC team members and relevant stakeholders have a role to play in evaluating the relative strengths of any technical arguments.

By ensuring that we fully understand the view of the person we are in dispute with and have fully tested our own arguments, we aim not to pursue disputes where we lack strong arguments. Equally, where we decide to pursue a dispute, it helps to focus on the strongest arguments; good technical arguments can be undermined if they are mixed with poor or weaker ones and such an approach can help to avoid this.

Having reached an initial conclusion, tested it and then reached a considered HMRC view, you should

  • either advise the person that HMRC accepts their analysis (that is, the issue is resolved or the dispute is dropped)
  • or set out the basis of our technical arguments or analysis, which we intend to pursue further, together with any explanation required.

However, even after we have reached a considered view (for example, that a particular technical analysis applies or that we have decided to litigate) you should remain open to considering the impact of any new information and/or analysis since, in certain circumstances, this may provide the basis for resolving a dispute.

Where HMRC’s position on a tax dispute depends on the outcome of other disputes turning on the same issue that are the subject of tribunal or other court hearings, you should explain that to the person we are in dispute with.