Revenue Scotland’s Settlement and Litigation Principles for Tax Dispute Resolution Guidance

Revenue Scotland’s approach to settling or fighting tax disputes

Revenue Scotland’s Settlement and Litigation Principles explain how it aims to handle civil disputes about devolved taxes, penalties and interest. The guidance is not law, but it shows that Revenue Scotland will try to resolve disputes by agreement where possible while refusing to bargain away tax it believes is legally due.

• The principles apply to civil tax disputes, including some disagreements that arise before a formal appeal, but not to fraud, criminal cases, debt collection or time to pay arrangements.
• Revenue Scotland says it will stay open to settlement at any stage and may use alternative dispute resolution, such as mediation, where that is suitable.
• It will not usually split the difference, trade one disputed issue against another, or accept less than the full amount due if it sees the issue as legally all or nothing.
• When deciding whether to settle or litigate, it may consider wider factors such as cost, consistency, deterrence and the effect on other taxpayers, not just the tax in the individual case.
• In practice, it is important to identify each separate issue, work out whether the dispute is factual or legal, and consider whether there is a genuine range of possible outcomes.
• Although the principles do not change appeal rights or tax law, they may still matter if there is a challenge about whether Revenue Scotland acted fairly, reasonably or consistently with its published approach.

Scroll down for the full analysis.

Revenue Scotland’s Settlement and Litigation Principles: what they mean for tax disputes

This page explains how Revenue Scotland says it will handle civil tax disputes about devolved taxes, including whether to settle, when to litigate, and what it will and will not agree to. These principles matter because they show the approach Revenue Scotland intends to take before, during, and after a dispute develops. They are not the law themselves, but they can still matter in practice.

What this rule is about

The source material is Revenue Scotland’s guidance on its Settlement and Litigation Principles, often called the SLPs. These principles are about process and decision-making. They do not change the underlying tax legislation. Instead, they explain how Revenue Scotland aims to resolve disagreements about the amount of tax, penalties, or interest due under the devolved taxes.

The guidance applies to civil disputes. In broad terms, that means disagreements about tax treatment or tax amounts. It is not limited to formal appeals. Revenue Scotland says a dispute can exist much earlier, for example where it needs more information to decide the correct tax treatment, or where it disagrees with a taxpayer about how legislation applies to the facts.

The guidance does not apply to everything. It does not cover collection action, postponement applications, time to pay arrangements, cases involving fraud or criminal behaviour, or non-tax disputes.

What the official source says

Revenue Scotland sets out 13 principles. Read together, they describe a system that is meant to be open to agreement, but only within the limits of what Revenue Scotland considers lawful and justified.

The main points are these:

• Revenue Scotland will try to settle disputes by agreement where possible, including by alternative dispute resolution such as mediation where appropriate.
• It says it will remain open to settlement at any stage, even once litigation has started.
• It aims to apply the law reasonably and consistently across taxpayers, while recognising that similar cases are not always identical.
• It wants disputes resolved quickly and efficiently, and says it will try to identify what is and is not actually disputed.
• It may obtain specialist or expert input, but the case remains owned by Revenue Scotland officers and expert advice will not necessarily be decisive on its own.
• It says it will seek the best practicable result for the Exchequer, taking into account not just the immediate tax at stake but also wider factors such as litigation costs, deterrence, and the effect on other cases.
• It will litigate where needed to defend its view.
• It says it will not settle for less than the tax, penalties and interest due where it sees the issue as truly “all or nothing”.
• It will not trade one disputed issue off against another, split the difference, or compromise its view of the law just to reach agreement.

The guidance also makes two important status points. First, the principles and guidance do not have the force of law. Second, they may still be relevant if there is a public law challenge about whether Revenue Scotland acted lawfully, fairly, rationally, or reasonably. The guidance also says the wording of the principles themselves takes precedence over the explanatory guidance if there is any inconsistency.

What this means in practice

For taxpayers and advisers, the practical message is mixed but fairly clear.

On one hand, Revenue Scotland presents itself as willing to engage constructively. It says disputes should be approached in a non-confrontational way, that mediation may be available, and that it will stay open to settlement throughout the life of a case. It also says it will explain its position and test the taxpayer’s arguments before deciding.

On the other hand, this is not a general policy of compromise. Revenue Scotland is explicit that it will not simply meet in the middle. If it considers a point to be legally binary, it says it will not accept less than the full amount it believes is due, subject always to its view of the best practicable result for the Exchequer. It also says it will not bargain across separate issues. So a taxpayer cannot assume that conceding one point will lead to a discount on another.

The guidance is also important because it shows that Revenue Scotland’s decision-making is not based only on whether it could theoretically win or lose a single case. It may consider wider consequences, such as whether a tribunal decision would clarify the law, whether a concession would affect many other taxpayers, and whether pursuing the case would encourage better compliance more generally.

That matters particularly in devolved tax disputes where a point may affect multiple transactions or a wider market practice. A taxpayer may think a case is too small or too uncertain to justify litigation, but Revenue Scotland may still defend it if it sees a broader legal or administrative importance.

How to analyse it

If you are trying to understand how these principles may affect a particular dispute, these are the main questions to ask.

1. Is this within the scope of the SLPs?

The principles apply to civil disputes about devolved taxes, interest and penalties. They do not apply to criminal matters or to pure debt collection or payment arrangements.

2. What exactly is the dispute?

Revenue Scotland says unrelated disagreements should be treated as separate disputes. That matters because it says it will not trade one issue against another. So you should identify each distinct legal or factual issue separately.

3. Is the disagreement mainly factual, mainly legal, or both?

Mediation and collaborative resolution may be more suitable where there has been a breakdown in communication, a misunderstanding of facts, or uncertainty about how information has been used. The guidance suggests ADR may be less suitable where the dispute is simply a technical disagreement on legal interpretation, or where only a binary outcome is realistically possible.

4. Is there a genuine range of lawful outcomes?

The guidance recognises that some disputes allow a range of possible outcomes in litigation, while others are truly all or nothing. This distinction is important. If there is a range, settlement may be possible on a basis Revenue Scotland thinks reflects what it would reasonably expect from litigation. If the point is genuinely binary, Revenue Scotland says it will not settle for less than what it considers due, though it may still decide not to continue if its prospects are low.

5. What is Revenue Scotland likely to see as the wider significance?

The guidance makes clear that Revenue Scotland may pursue a case for reasons beyond the immediate tax amount. It may want legal clarification, consistency across multiple taxpayers, or a deterrent effect. If a case raises a recurring issue or challenges an established practice, settlement may be harder.

6. Has the dispute been narrowed properly?

Revenue Scotland says it will try to agree what is not in dispute. In practice, this means it should be possible to isolate the real points that matter, rather than letting every aspect of the transaction remain open.

7. Is specialist evidence likely to matter?

In some disputes, expert valuation, technical, or legal input may be important. Revenue Scotland says it may obtain specialist advice early, but usually will not share that advice itself. A taxpayer may therefore need to focus on the reasoning shown in Revenue Scotland’s decisions rather than expecting disclosure of internal advice.

Example

This is an illustration based on the guidance, not a statement of law for any specific case.

A taxpayer and Revenue Scotland disagree about the tax treatment of a land transaction. Part of the disagreement is factual: the parties have different understandings of how the transaction was structured and what documents were intended to do. Another part is legal: once the facts are established, the legislation may still be interpreted differently.

In that situation, mediation may be useful if it helps clear up misunderstandings about the facts or the use of information. But if, after the facts are agreed, the remaining issue is a pure point of statutory interpretation with only one correct answer, Revenue Scotland may take the view that the case is effectively all or nothing and not suitable for a negotiated middle ground.

If the same point affects many similar transactions, Revenue Scotland may also decide that a tribunal ruling is worth pursuing to clarify the law, even if settlement might have been possible in a one-off dispute.

Why this can be difficult in practice

The hardest part is that these are principles, not rigid rules. Revenue Scotland repeatedly says they require judgement. That means the outcome in a particular case may depend on how different factors are weighed.

Several tensions are built into the guidance.

• Revenue Scotland says it is open to settlement, but also says it will not split the difference or compromise its legal view.
• It says it wants quick and non-confrontational resolution, but also says using formal powers, making protective assessments, or taking a firm line is compatible with that aim.
• It says each issue should be considered separately, but also says the wider effect on other disputes and future compliance may be relevant.
• It says it will seek the best practicable result for the Exchequer, but that concept is deliberately broad and may include policy and deterrence considerations as well as the immediate tax at stake.

Another practical difficulty is deciding whether a dispute is truly “all or nothing”. In some cases that will be obvious. In others, the legislation may allow evaluative judgments, apportionments, or competing views about the likely tribunal outcome. The guidance accepts that many disputes involve a range of possible outcomes. But it does not give a detailed test for deciding when a case moves from a range case to a binary case.

There is also an important distinction between what the law requires and what the guidance says about Revenue Scotland’s internal approach. The SLPs do not alter statutory rights of appeal or the legal test under the tax legislation. They are better understood as a public statement of how Revenue Scotland intends to exercise its discretion and conduct disputes. That can still matter, especially if there is an argument that Revenue Scotland acted inconsistently with its own published approach.

Key takeaways

• Revenue Scotland says it will try to resolve civil tax disputes by agreement where possible, including mediation where appropriate.
• It does not present settlement as bargaining or compromise for its own sake: it says it will not split the difference, trade one issue against another, or abandon its view of the law to secure agreement.
• The principles are not law, but they are still important because they explain how Revenue Scotland intends to handle disputes and may be relevant to questions of fairness, consistency, and rational decision-making.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Revenue Scotland’s Settlement and Litigation Principles for Tax Dispute Resolution Guidance

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