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HMRC internal manual

Compliance Handbook

Litigation and settlement strategy: resolving a dispute: overview

Disputes must always be resolved in accordance with the law. For example, you cannot charge capital gains tax on a profit that is correctly chargeable to income tax.

Where there is more than one dispute with HMRC, we must consider and resolve each dispute on its own merits, not as part of any overall ‘package deal’.

Where a dispute is genuinely of an ‘all or nothing’ nature

  • if we believe that we would be likely to succeed in litigation, and litigation would be effective and efficient, we will not reach an out of court settlement for less than 100 per cent of the tax, interest and penalties (where appropriate) at stake
  • if we believe that we would be unlikely to succeed in litigation, we will, in most cases, concede the issue.

For example, where there is a range of possible figures for tax due, we will not settle by an agreement for an amount that is less than we would reasonably expect to obtain from litigation.

Where the person we are in dispute with is unwilling to settle on these terms, we will seek to resolve the dispute by litigation as quickly and efficiently as possible.