SLP principles

Principle 1: RS will endeavour to settle disputes by agreement where possible, including by using alternative dispute resolution approaches such as mediation where it is appropriate to do so

Principle 2:  RS will endeavour to remain open to settling a dispute by agreement at any point, including during litigation

Principle 3:  RS will endeavour to  ensure a reasonable and consistent application of the law in relation to the devolved taxes across all taxpayers

Principle 4:  RS will endeavour to  ensure consistency of treatment for taxpayers in comparable circumstances where there are multiple taxpayers involved in the same or similar arrangements

Principle 5: RS will endeavour to resolve disputes quickly and efficiently, and seek to agree with a taxpayer what is not in dispute

Principle 6: RS will endeavour to  identify as early as possible where specialist or expert advice is needed and to instruct such specialist or expert advice appropriately and timeously

Principle 7: RS will endeavour to achieve the best practicable result for the Exchequer

Principle 8: RS will have regard to Revenue Scotland’s principles and values set out in the ‘Scottish Approach to Tax’ and the ‘Charter of Standards and Values’

Principle 9: RS will not shy away from litigation where it is necessary to represent our view

Principle 10: RS will not resolve a dispute for less than the tax, penalties and interest due where Revenue Scotland considers that a tax dispute is an ‘all or nothing’ issue, but always having regard to the best practicable result for the Exchequer

Principle 11: RS will not trade one area of dispute off against another with a taxpayer

Principle 12:  RS will not split the difference in a dispute

Principle 13:  RS will not compromise on its view of the law to secure agreement 

Why are these principles being introduced?

These Settlement and Litigation Principles (SLPs or ‘principles’) and this accompanying guidance express how we, as a Tax Authority, seek to resolve disputes. Disputes can be complex and time-consuming for us and for taxpayers but they are an integral part of our work. This does not mean that we cannot handle disputes openly and positively.

 It is recognised that there may be cases in practice where it is difficult to weigh apparently competing factors or which suggest some measure of conflict within these principles. This is why these are guidelines and principles, not rules: they need to be used with care and judgement, always bearing in mind the need to reach the best result for the Exchequer.

 A transparency of approach has real advantages for us. We say what we are going to do and we do it. That leaves taxpayers and their agents clear on both where we and they stand.

Having a clear set of principles showing how we resolve disputes will demonstrate to our stakeholders a clear basis for handling disputes, including where necessary how and when we conduct litigation.

The principles and guidance are not intended to constrain our approach, but to set standards regarding the way we will operate and the framework within which we will make decisions. RS’s internal governance structures are designed to help maintain a consistency of approach

How will they be used?

These will be the principles that we adopt to conduct and settle all disputes within Revenue Scotland (RS). They are aligned with the Charter of Standard and Values. By dispute we mean any form of dispute as to how much tax is due, at any stage in its lifecycle, not just when we reach an appealable decision. 

The principles can be used to test whether we should undertake an intervention (e.g. enquiry or assessment) in the first place. However, we may have insufficient information at that stage to fully understand the risks.

We will use the SLPs and this guidance when considering cases in our internal governance 

The SLPs will apply to the devolved taxes and associated interest and penalties.

The SLPs only apply to civil cases, that is disputes about whether a matter is taxable or not, or how much tax is assessable. They do not apply to: 

• disputes about cases where tax properly due is unpaid
• seeking postponement of tax
•  collection action
•  time to pay arrangements
• cases involving fraud or other criminal acts, or
• non-tax disputes with Revenue Scotland

A civil settlement may not be appropriate where there are grounds to consider that evasion or criminal behaviour is involved. However, RS Officers are not appointed officers under Criminal Procedure (Scotland) Act 1995 and RS does not lead on criminal casework.

Guidance on the Principles

 The following guidance applies in interpreting the SLPs.

Status of this Guidance

The objective of this guidance is to provide practical guidance on the application of the SLPs. This guidance is only that - guidance. Neither the principles or this guidance have the force of law, but they could be relevant in a dispute about how we have acted or whether we met RS’s public law duties: for example, to act lawfully, fairly, rationally and reasonably. It will be subject to revision as our experience of the practical impact of the principles grows. It should be read as a whole.
The wording of the SLPs themselves takes precedence over this guidance where there is considered to be a contrary position taken between the two.

What do we mean by ‘dispute’

The SLPs and guidance apply to all forms of tax disagreements with a taxpayer, and do not just mean our actions after an appealable decision has been reached. Quite the opposite – the principles are most applicable before we reach an appealable decision and so a broad interpretation of dispute should be adopted. It covers where RS needs more information to establish the correct tax treatment and where there is a disagreement on how the legislation applies to a particular set of facts. Unrelated points of disagreement should be treated as separate disputes. 

What do we mean by ‘endeavour’

This is what we will strive to do. Whilst not directly legally binding, the principles could be relevant in a dispute about whether we acted lawfully, fairly, rationally or reasonably and in line with our established policies, for example in the context of a judicial review. There may be difficult or nuanced judgements about how to apply them in particular cases. That is what the principles are intended to do - to assist RS staff in formulating and articulating their decisions. Tax disputes may be lengthy: new issues will inevitably emerge, and others resolve. For those reasons, RS will aim to be clear with taxpayers why it makes the decisions it does over the course of the dispute.

Guidance on interpreting the Principles

Principle 1:  RS will endeavour to settle disputes by agreement where possible, including by Alternative Dispute Resolution approaches, including mediation

RS will look to settle outside of formal court or tribunal proceedings wherever possible. Taxpayers can request mediation, often referred to as Alternative Dispute Resolution (ADR), to seek to reach agreement with RS.

RS has committed to agreeing to mediation except where it believes that to do so is not in the public interest, but consideration of this may take in a number of factors. The nature of the dispute will be of relevance. It is most likely to be appropriate where, for example, communications have broken down between RS and the taxpayer, where there is a fundamental misunderstanding in terms of the facts of a case or where there is a lack of clarity regarding how RS has used information. It may not be appropriate in cases where there is simply a difference in technical interpretation between RS and the taxpayer, or where the dispute is one where only binary ‘all or nothing’ outcomes are possible. In addition, the costs of mediation will be shared equally by RS and the taxpayer. Accordingly, the public interest in incurring that cost should be considered and weighed against the options for other routes of dispute resolution.
 
This guidance does not define in full the circumstances in which we would undertake ADR. However, many of the principles that apply to mediation would be applicable to resolving a dispute without the appointment of mediators and RS will endeavour to apply those principles.

The legislation relevant to a dispute may allow for a range of outcomes. RS is not bound to accept the lowest outcome in a range to reach agreement but will look to establish what RS consider it would reasonably expect to obtain from litigation and agree the most appropriate basis for agreement.

Any agreement, whether it involved ADR or not, should be in line with the principles.

Principle 2:  RS will endeavour to remain open to settle a dispute by agreement at any point, including during litigation

Having entered into litigation does not mean that we have to continue with it. If a taxpayer is open to reach a meaningful settlement we will continue to explore this option.

This also means that RS is open to considering the impact of any new information or technical analysis from the taxpayer at any point in the dispute.

In weighing up potentially competing principles within the SLPs RS may have to consider the need for clarification where a dispute is about a point of law which itself is not clear.

Principle 3: RS will endeavour to ensure a reasonable and consistent application of the law in relation to the devolved taxes across all taxpayer

This is important to ensure the even-handed and fair administration of the tax system.

 Where RS has properly exercised its collection and management powers to not pursue an amount of tax then that result is consistent with the law.

The way in which a dispute is resolved has to be in accordance with the law.

Principle 4: RS will endeavour to ensure consistency of treatment for taxpayers in comparable circumstances where there are multiple taxpayers involved in the same or similar arrangements

Where a disputed point arises in multiple cases, individual cases are decided taking account of our agreed view of the matter.

It should be noted that consistent treatment does not mean identical treatment. Each dispute needs to be considered in relation to its own facts and circumstances. It is unlikely that any two taxpayers will be identical or have identical circumstances.

Principle 5: RS will endeavour to resolve disputes quickly, efficiently and non-confrontationally, and seek to agree with a taxpayer what is not in dispute

A non-confrontational approach does not mean that we would be reluctant to use our formal powers or other means to resolve a dispute efficiently and effectively. Ensuring we gather the information required or making assessments to protect our position is not of itself a sign of a non-collaborative approach by RS. Taking a robust position in respect of RS’s view is also not an indication of a confrontational approach.

At the heart of this is a desire on the part of RS to work through disputes collaboratively.

In working through a dispute collaboratively with a taxpayer, RS will take an open and structured approach to the key stages of that dispute. We will aim to clearly articulate our view of the points in dispute and agree timescales for reaching key decisions wherever possible. We will also ensure as far as possible that we fully understand and test the taxpayer’s arguments before reaching our decision. Our approach will not change just because a dispute is likely to proceed to litigation.

Principle 6: RS will endeavour to identify as early as possible where specialist or expert advice is needed and to instruct such specialist or expert advice fully and timeously

Once sufficient facts have been established, expert advice may be important to help resolve a case. However, in terms of working a dispute efficiently and effectively the ownership of the case remains with the RS officers who are working with the taxpayer, notwithstanding that other specialists have been instructed or are involved. Similarly, a dispute cannot be considered as settled or finished until all the legal processes have been completed.

RS will take account of advice in making its decisions, but it is unlikely that a single piece of expert advice will be decisive in deciding whether to enter into litigation.

We will not generally share advice that we have obtained from specialists, but we may make it clear to taxpayers that we have taken such advice and our decision to proceed is based on what we have learned

Principle 7: RS will endeavour to achieve the best practicable result for the Exchequer

Tax disputes are to be resolved in accordance with the law. This includes RS using its collection and management powers where appropriate. RS will not usually persist with a dispute unless it potentially secures the best practicable outcome for the Exchequer. That may also involve a consideration of whether RS believes it would have success in litigation and what the range of possible outcomes could be following litigation.

“The Exchequer” is a broad term and therefore should be interpreted widely. In its simplest sense, this might be interpreted as being what provides the best revenue return for Scottish finances. In reality, determining the best result for the Exchequer is likely to involve consideration of a number of sometimes competing factors, and the balance of those factors may change over the lifetime of a dispute.

The view of the range of net fiscal impacts, the litigation costs and their likelihood can change during the course of a dispute and should be re-assessed as the dispute proceeds.

In considering the best practicable result for the Exchequer, RS may also consider the impact that resolving one dispute has on its ability to deal with other disputes, its own costs, and the deterrent effect on wider taxpayer non-compliance.

There may be occasions where it is appropriate to pursue a dispute where there is a need to influence taxpayer behaviour, or where there is an important point of law involved. Litigation may be appropriate to provide certainty of tax treatment and interpretation in relation to that particular dispute, with the consequential read across to other taxpayers.

RS will have regard to important legal principles in considering the best result for the Exchequer. It will also involve consideration of the prospects of RS succeeding in a tax litigation. No single factor is determinative. Each tax litigation requires consideration of its particular circumstances in the wider tax context.

Principle 8: RS will endeavour to have regard to RS’s principles and values set out in the ‘Scottish Approach to Tax’ and the ‘Charter of Standards and Values

RS’s principles and values apply in all aspects of our work. RS will work disputes consistently to a professional standard and nothing within the SLPs changes this.

Principle 9:  RS will not shy away from litigation where it is necessary to represent our views

Litigation can be slow, expensive and unpredictable. However, that doesn’t mean we won’t litigate where it is appropriate to do so.

In general, RS does not instigate litigation - taxpayers are free to do this by appealing a decision we issue. It is therefore incumbent upon us to ensure that decisions are correct. We must make case by case decisions about which to defend in Tribunal and on which grounds. But that case by case selection should not be allowed to be used as a bargaining chip against RS.

Principle 10: RS will not settle a dispute for less than the tax, penalties and interest due where RS considers that a tax dispute is an ‘all or nothing’ issue

A decision may genuinely be a binary one – all or no tax - but in many instances a range of outcomes may be possible through litigation. Where a decision is genuinely all or nothing then we will not reach a settlement for less than the amount we consider likely to be achieved in litigation. However, this will take account of all the factors and costs involved to ensure we achieve the best practical result for the Exchequer.

In a genuinely binary outcome, RS will usually not persist in responding to an appeal if our analysis is that we have a low prospect of success, but this may not be applicable in all instances. It may be appropriate to pursue where RS’s view is that the prospects of success are materially uncertain and where the issues in the particular dispute are significant, where it is important that the law be clarified, where there may be an adverse impact on other areas of legislation through conceding, where the taxpayer is challenging established practice which could impact a wide number of taxpayers or where the Exchequer impact is such that RS cannot concede in the absence of a Tribunal decision .

Principle 11: RS will not trade one area of dispute off against another with a taxpayer

We may have a number of different points of disagreement with a taxpayer. Each separate dispute will be considered on its own merits. In securing the best practicable result for the Exchequer, we may take into account the impact that pursuing one point of dispute will have on other points of dispute. 

Similarly, where there is a possible multi-year dispute or multiple disputes, then the best value for the Exchequer may be achieved by the taxpayer adopting revised approaches to tax compliance for later or future years.

Principle 12: RS will not split the difference in a dispute

If RS considers that we are more likely than not to win in litigation then we should not compromise our view on that to achieve settlement.

 More likely than not to win’ means RS’s own view of its prospects of success in litigation. That view will be informed, but not necessarily constrained, by any advice obtained. An assessment of success will take into account the strengths of the arguments and the risks in taking a dispute through the litigation process.

Principle 13:  RS will not compromise on its view of the law to secure agreement 
Any agreement must be in accordance with the law.