Don’t be fooled. HMRC are NOT going soft…

. Where we have a strong case we should seek full value from settlement, or take the matter to litigation. Do not pursue weak arguments. The LSS was introduced in line with the Varney Review (Links with Large Business) principles which commit HMRC ‘to fewer enquiries, focused on material items and concluded more quickly’.

Not surprisingly HMRC are under pressure to reduce costs. They want to reduce the resources they tie up in long-lasting disputes and the number of cases they lose. In the real world of course even if HMRC are advised that they have a more than 50% chance of winning, it’s likely that the taxpayer has been told the opposite (ie: that HMRC have a less than 50% chance of winning). Either side could still lose.

No doubt HMRC also want to speed up the collection of funds due to them from settlements. As the FT reports:

The recent £1.25bn settlement of the five-year dispute with Vodafone was an early indication of the policy change.

All of which points to a more commercial (as distinct from a ‘softer’) approach. Certain elements of the LSS may well be changing and that may be perceived as good news for companies in dispute with HMRC. Everyone’s legal costs may fall as a result. There may also be a return to more ‘horse trading’.

Overall though this only really affects companies involved in large scale disputes with HMRC. It should lead to faster resolution of disputes on realistic terms and less risk of having to go to court to prove your case.

As the FT report, HMRC are ‘softening’ their approach. They are not going soft. Only very naive or mischeivious advisers and commentators would suggest that this change in approach means HMRC walking away and letting more companies get away with ‘abusive’ tax avoidance activities. And as I highlighted above, “The Revenue’s fresh approach is primarily focused on business rather than wealthy individuals.”