HMRC acronyms unscrambled

THERE ARE A LOT of acronyms flying out of HMRC at the moment – what do they all mean, and what should companies with tax disputes do about them?

HMRC’s Litigation and Settlement Strategy, or LSS, is probably the best-known of these terms. Guidance published in 2007 set out the principles which HMRC will follow to bring disputes to a conclusion. However, in our experience, the principles were not always adhered to or even fully understood by case teams within HMRC.

The LSS was refreshed by HMRC last month. It allows HMRC staff more flexibility in deciding whether to litigate and exhorts the parties to ask themselves whether the dispute is genuinely “all or nothing”. It also recognises the potential value of ADR (“Alternative Dispute Resolution”).

Dispute resolution

ADR has been suggested as a panacea. In fact, HMRC’s view is much broader: they see the whole process of resolving disputes as being one of “Collaborative Dispute Resolution”. This is much more about an attitude than specific mechanisms; HMRC wants to ensure that each side has a clear understanding of the other’s technical position, and that the facts are established and agreed.

Sue Walton, Director of HMRC’s Central Policy, recently reported on two ADR pilots (in an article published in the Tax Journal on 15 July). One pilot covered fewer than twenty cases and involved large businesses and tax payers with complex tax affairs. The other pilot was much larger (it covered 150 cases) and involved small and medium-sized enterprises. HMRC’s conclusion was that both pilots had demonstrated that ADR can be an effective cost and time saving tool for the resolution of tax disputes, particularly where the parties seem to have reached an impasse.

The areas where dispute resolution has moved forward significantly are the two programmes within HMRC’s Large Business Service and, more recently, Large & Complex cases. These are known as the “High Risk Corporates Programme” (HRCP) and “Managing Complex Risk” (MCR). In both of these, a range of issues across the tax affairs of a particular taxpayer are dealt with under an accelerated timetable.


The HRCP programme started in 2006. Up to April 2011, 39 cases had been taken up, of which 30 had been settled – according to a Parliamentary Answer given by David Gauke, Exchequer Secretary, HM Treasury on 30 March 2011. The total tax yield has been over £9 billion – according to written evidence submitted by HMRC at a Select Committee session on 11 May 2011.

HRCP has been focused on the largest businesses, with significant amounts of tax at risk. A typical HRCP case would be a FTSE 100 quoted company, with over £100m of tax at stake. Key elements in the programme are the appointment of an Enquiry Co-ordinator, with clear responsibility for progressing the issues to a timetable agreed at a senior level within both HMRC and the corporate. The Enquiry Co-ordinator will generally not be the existing Customer Relationship Manager. All cases are supervised by the HRCP Programme Board, with governance at Director level and above within HMRC.


The success of HRCP has led HMRC to extend the reach down into the next tranche of their customers. Initially, MCR cases focused on taxpayers with a single large issue, but more recently the focus has moved to cases within the Large & Complex case teams, with a range of issues.

A key difference between HRCP and MCR is that MCR cases are more likely to involve both personal and corporate tax issues, reflecting the fact that corporates of this size may well be owned by entrepreneurs rather than being quoted companies.

The governance for MCR mirrors that for HRCP, but is less well-established. Our experience so far is that MCR cases are slower to progress, and that the enquiry teams lack the project management skills which have been built up within the Large Business Team.

In some cases, it may be possible for taxpayers to opt for HRCP rather than MCR, where they have characteristics that could fit into either programme. Understanding the pros and cons of each process is therefore important to getting the best result.

Where next?

Groups with significant disputes should consider whether the use of MCR or HRCP could help accelerate the resolution of issues. However, there are some points to bear in mind:

Both HRCP and MCR require significant resource and commitment from the company, as well as from HMRC

The process requires a “cards on the table” approach, with the company being expected to bring all significant matters to HMRC’s attention – whether or not they would have had to be disclosed at this stage in litigation

Neither HRCP nor MCR guarantees a settlement – at the end of the process, litigation may still be necessary, particularly if there is an important point of principle at stake. Recognising this at the outset is important – and may even mean that litigation is the better route to follow from the start.

Heather Self is director of tax at McGrigors LLP

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