New ADR Guidance, Decision On 'Staleness', Approach To 'Warehousing' Claims.

• Law Firm: Osborne Clarke
• Subject Matter: Litigation, Mediation & Arbitration, Tax, Arbitration & Dispute Resolution, Court Procedure, Tax Authorities
• Author: Ian Hyde and Matthew Greene
• Published date: 24 March 2023

Mediation for UK tax disputes: HMRC publishes new ADR guidance

HMRC has published a new manual providing detailed guidance on its approach to alternative dispute resolution (ADR) for tax disputes. The guidance captures existing practice and builds upon the more limited existing guidance covering ADR. It nevertheless provides a welcome degree of transparency regarding HMRC's approach, the process involved, and which sort of cases are suitable for mediation (and which are not).

For more detail see our Insight.

Upper Tribunal extinguishes lingering arguments around 'staleness' and discovery assessements

The Upper Tribunal in Harrison v HMRC (2023) has applied the Supreme Court's obiter dicta in HMRC v Tooth (2021) to confirm that there is no concept of staleness in the direct tax discovery assessment regime.

The Supreme Court in Tooth had rejected the idea that HMRC, upon discovering a loss of tax, needed to act reasonably promptly to raise a discovery assessment to prevent the discovery from becoming stale. Provided HMRC acts within the relevant statutory time limits there is no additional requirement to act within a reasonable period after making a discovery.

Despite the Supreme Court's judgment in Tooth, arguments over staleness have persisted because the Supreme Court's discussion of the concept of staleness was technically obiter and so, some had argued, it was not binding. The Upper Tribunal disagreed, and was comfortable that the Supreme Court's approach to staleness should be followed, noting that obiter dicta can have a status more akin to a ratio decidendi (rationale for the decision) especially where the obiter section was part of a considered judgment on a point that had been fully argued as opposed to a passing remark.

How long can you 'warehouse' a claim before the court will strike it out as an abuse of process?

Most tax disputes are litigated in the First-tier Tax Tribunal, but sometimes due to the limited jurisdiction of the Tax Tribunal, parallel High Court proceedings are necessary, for example if there is a related judicial review, rectification or debt enforcement claim. Often, the taxpayer will need to issue proceedings for time limit or other reasons but will want to leave the High Court claim on hold while the tribunal determines the underlying tax issues, since this might...