Taxman drops ‘gung-ho’ approach to litigation

The taxman has performed a dramatic u-turn in its never-say-die attitude to
litigation, pledging to pursue cases selectively.

Senior HM Revenue & Customs figures signalled the move in a meeting with
business leaders earlier this year, the minutes of which have just been

The move comes only 18 months after Dave Hartnett, HMRC director general,
promised to aggressively pursue all cases, saying the taxman would never accept
less than 100p in the pound on direct tax avoidance cases in future.

Minutes from the Business Tax Forum, the high-level tax liaison group for big
business, say that the taxman is consulting inspectors and holding internal
workshops on a new strategy that will see the tax authority back down from cases
it feels it has little chance of winning.

‘Where HMRC has a strong case it should litigate and where it has a very poor
case it should concede. The new approach sets out a number of key principles to
guide decision making, such as the behaviour underlying the issue and the amount
at stake,’ the minutes say.

‘HMRC has come full circle and it is to be welcomed. It is one thing to chase
down those who deserve it, but there has been a tendency for HMRC be a bit
gung-ho and go after everybody,’ said Patrick Way of Gray’s Inn Tax Chambers.

Advisers said the move was the latest attempt to woo business in line with
the mood of the Varney review.

‘HMRC was sending out a signal that it was not willing to negotiate, but that
tied up resources in cases that would yield little. This move indicates that
HMRC is going to adopt a more targeted, risk-based approach,’ said Loughlin
Hickey, global head of tax at KPMG.

An HMRC spokesman said: ‘This marks a slight shift. It’s driven by the
ongoing strategy to introduce consistency across all sections of HMRC.’

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