1 HMRC's processes for settling tax
disputes
1. Tax disputes between HM Revenue & Customs
(the Department) and large companies are a consequence of the
complex and international nature of modern business. Disputes
can arise about the facts of a particular case, about the interpretation
and application of tax law, and about the legitimacy of tax avoidance
schemes. At 31 March 2011, the Department was seeking to resolve
over 2,700 issues with the biggest companies, including disputes
over outstanding tax, with potential tax at stake of £25.5
billion.[2]
2. HM Revenue & Customs is a non-ministerial
department. It has this status to ensure that the administration
of the tax system is fair and impartial and that Ministers have
no involvement in individual taxpayers' affairs. The Department's
Commissioners are appointed by the Queen to exercise certain functions
on behalf of the Crown, as set out in the Commissioners for Revenue
and Customs Act 2005. The Commissioners are all senior executives
of the Department. They have ultimate responsibility for collecting
and managing tax revenues, and for providing leadership to the
Department, managing its resources and delivering the objectives
set by the Chancellor of the Exchequer. The Department's Corporate
Governance Report states that the Commissioners are directly accountable
to HM Treasury Ministers and Parliament.[3]
3. When a dispute over the amount of tax due arises,
the Commissioners can either settle the dispute by agreement or
litigate. In 2007 the Department published its Litigation and
Settlement Strategy, which sets out its framework for concluding
tax disputes and guidance on acceptable settlement terms. The
Strategy was introduced to bring greater consistency to the way
the Department resolves disputes. It states that, in cases where
there are a range of feasible outcomes, settlement must be for
an amount not less than the Department would reasonably expect
to get from litigation.[4]
4. The Department launched its High Risk Corporates
Programme (the Programme) in 2006 to improve its relationships
with large businesses and discourage aggressive tax avoidance
behaviour on their part.[5]
The Programme is overseen by a Programme Board chaired by the
Director of the Department's Large Business Service and consisting
of senior departmental staff below Commissioner level.[6]
All cases in which the total tax under consideration exceeds £100
million or which are particularly sensitive have to be approved
by the Programme Board before settlement is agreed with the company
concerned. If the Programme Board cannot reach a consensus, or
if the tax under consideration exceeds £250 million or the
issues involved are exceptionally sensitive, the settlement must
also be signed off by two Commissioners.[7]
2 C&AG's Report, paras 2.1-2.2 Back
3
HM Revenue & Customs, Annual Report and Accounts 2010-11,
HC 981, Session 2010-12, p 59 Back
4
C&AG's Report, paras 2.10-2.11 Back
5
C&AG's Report, para 2.13 Back
6
C&AG's Report, para 2.15 and Figure 7 Back
7
Ev 68; C&AG's Report, paras 2.17-2.19 Back
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