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HMRC internal manual

Shares and Assets Valuation Manual

Case Selection, Handling and Settlement: Case settlement

All valuations to be settled should observe the Litigation Settlement Strategy:

Litigation and Settlement Strategy (LSS) - Publications - GOV.UK

The central themes of the LSS are

  • to seek non-confrontational solutions where possible,
  • to focus on issues that best serve HMRC’s goal of tax gap reduction,
  • to choose cases for their wider impact, as well as for their own value,
  • where HMRC has a strong case to seek full value from settlement, or take the matter to litigation,
  • to not pursue weak arguments,
  • to team-work cases with colleagues, including those in other parts of HMRC.

If a negotiated settlement is unlikely a decision must be made whether the valuation is suitable for litigation. Factors to be taken into account before any decision to litigate is taken include:

  • The amount of tax involved
  • The precedent value of the matter in dispute
  • The strength of HMRC’s case
  • The risks of litigation
  • The potential benefit of discouraging non- compliant behaviour in that taxpayer or others
  • The costs of litigation

It will not always be possible to reach acceptable settlement terms by agreement and we need to decide which cases should be taken to litigation (in conjunction with the appropriate HMRC partners).

SAV is not looking to litigate as many cases as possible. Litigation involves expense and delay for both HMRC and our customers. Accordingly, agreed terms for settlement should always be sought before going to litigation. However, settlement terms must be consistent with the reasons for undertaking an enquiry in the first place, which are to influence taxpayer behaviour positively and to challenge behaviours that contribute to the tax gap.

Potential litigation cases will need to be prioritised considering all the potential advantages and disadvantages of litigation.

The chance of success must be the over-riding factor. This approach ensures that we commit legal resources to our strongest cases, where we should adopt a no compromise stance in negotiation.

Litigating where our chances of success are less than even would need to be justified by the particular circumstances, such as a very large amount of tax at stake (in the case itself or from immediate precedent value) or a fundamental point of principle at issue.

We should also give priority to cases where taxpayers have set out to undermine the purpose of tax legislation, including the more aggressive avoidance schemes.

Other factors to take into account in determining priorities are:

  • the likely cost of litigation
  • deficient settlement offers and cases that support HMRC’s ability to obtain settlements on suitable terms
  • determined or organised attempts to undermine legislation, particularly where agents are orchestrating non-compliance. It is important to identify these situations early and proceed quickly to litigation if legal advice is favourable
  • the defence of strategically important principles
  • cases where very large sums of money are at stake and
  • delivering Government policy through maintaining tax legislation

Any adverse consequences that may arise should be considered, including the potential to weaken existing legislation. However where we have good arguments we should not retreat from defence of a legal principle for fear of losing it: if there is doubt about the robustness of legislation, it is often preferable to resolve the doubt one way or the other, which will at least clear the way to repair of legislation if that is possible.


  Additional Guidance:SVM150000