SVM116090 - Case Selection, Handling and Settlement: Key Principles – Litigation Proceedings

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).

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.