ARTG2720 - Reviews and appeals for direct taxes: Settlement of appeals: By agreement

Appeals may be settled by agreement before, during or after review and at any time before any decision is made by the tribunal.

HMRC and the customer may agree that the decision or assessment should either be upheld, varied in a particular manner, or cancelled (s54(1) TMA1970).

Agreement can be reached through an exchange of correspondence between the parties, or verbally.

The decision maker or, if appropriate, the review officer must always confirm the terms of any verbal agreement with the customer in writing (s54(3) TMA 1970). This will usually be done by writing to the customer, or the customer may write to HMRC to confirm the verbal agreement.

Settlement agreements cannot be imposed unilaterally by HMRC and the following is required for an agreement to be binding:

  • A process in which both parties participate
  • A mutual consensus reached through offer and acceptance
  • HMRC and the taxpayer to not only be of the same mind, but for those minds to have met

A notice of appeal, on its own, would not typically be regarded as an offer to settle. Where HMRC accepts the taxpayer’s grounds of appeal then the process of offer and acceptance leading to mutual agreement still needs to be followed.

If the customer changes their mind, they have 30 days from the date of the agreement (or written confirmation of the verbal agreement) to notify HMRC in writing that they no longer agree (s54(2) TMA 1970). Otherwise, the settlement agreement will be binding.

Settlement of appeals by agreement under s54 TMA 1970 is a legal process and the same consequences follow as would have followed had the tribunal decided the matter.

Standard template wording for settling an appeal by agreement can be found in ARTG15000. Written agreements require careful wording and any limitations to the agreement need to be made clear. The decision maker should consider taking legal or specialist advice to ensure the agreement does not affect tax treatment in later years.

An agreement to settle an appeal is subject to any applicable authorisation or governance procedures within the relevant business area, and agreements must comply with HMRC's Litigation and Settlement Strategy, see ARTG1020.    

Where the appeal is settled following review, see ARTG4830 and ARTG4840.

Where the appeal is settled after the customer has notified the appeal to the tribunal, see ARTG8420.