How Tax Experts Deal With Conflicting Facts and Assumptions in Tax Disputes

Conflicting facts and assumptions can complicate tax disputes, particularly where the correct tax treatment depends on the circumstances of a transaction, the reliability of financial records or the interpretation of available evidence. For solicitors dealing with HMRC disputes and tax litigation, understanding how these differences affect an expert's analysis can help clarify the issues that require further examination.

A UK tax expert witness might be instructed to assess the technical tax implications of particular facts, examine the assumptions underlying an assessment or explain how alternative factual scenarios could affect an opinion. The expert's role will depend on the instructions, the subject matter and the applicable procedural framework.

The existence of conflicting evidence does not necessarily prevent an expert from providing an opinion. However, the expert may need to identify the uncertainty, explain its significance and qualify conclusions that depend on facts that have not been established.

This guide examines how tax experts may approach conflicting evidence and assumptions in tax disputes, including HMRC investigations and tribunal proceedings.

Why Conflicting Facts Matter in Tax Disputes

The tax treatment of a transaction may depend on what happened, when it happened, the parties involved and the commercial circumstances surrounding it. If the available evidence supports different accounts of those circumstances, the expert's analysis may need to account for the differences.

Conflicts can arise in several ways, including:

• Differences between contractual documents and the parties' subsequent conduct
• Inconsistencies between accounting records and tax returns
• Disagreement about the purpose or substance of a transaction
• Missing invoices, incomplete records or unexplained financial movements
• Differences between witness accounts and contemporaneous documents
• Disagreement about the assumptions used in HMRC's calculations
• Uncertainty about the timing, nature or value of a transaction

The significance of a conflict will depend on the issue under consideration. A discrepancy may have little effect on one part of a tax analysis but materially affect another.

For example, where a tax dispute concerns the treatment of a payment, the date, purpose and recipient of that payment may be relevant to the technical analysis. If those details are disputed, the expert may need to explain how the uncertainty affects the opinion rather than treating one version as established without sufficient basis.

1. Distinguishing Established Facts from Disputed Evidence

An important starting point is to distinguish between information that is established for the purposes of the expert's instructions and information that remains uncertain or disputed.

This distinction helps prevent an expert opinion from being presented as more conclusive than the available evidence permits.

Reviewing the Available Documents

Depending on the dispute, relevant material may include:

• Contracts and transaction agreements
• Bank statements and accounting records
• Invoices, receipts and payment records
• Tax returns and supporting computations
• Correspondence between the parties
• HMRC enquiry letters and assessment calculations
• Internal business records
• Witness statements or other factual evidence

The expert may consider whether these materials are consistent with one another and whether any discrepancies affect the technical questions being examined.

However, a document's existence does not automatically establish the truth of every statement it contains. Its relevance and evidential significance will depend on the circumstances.

Identifying Unresolved Factual Questions

Where the evidence is inconsistent, the expert may identify the particular question that remains unresolved.

For example, records may show that a payment was made, while the documents describing its purpose are inconsistent. The fact of payment and the purpose attributed to it are separate matters. The expert may need to explain whether the distinction affects the tax analysis.

The expert should avoid presenting a disputed factual proposition as conclusively established merely because it is consistent with one party's position.

2. Understanding the Difference Between Facts and Assumptions

Facts and assumptions perform different functions in a tax expert's analysis.

A fact may be supported by documentary evidence, agreed by the parties or otherwise treated as established for the purposes of the instructions. An assumption is a proposition adopted as a basis for analysis, whether because it has been specified in the instructions or because the available information does not resolve the issue.

The distinction is particularly important when the expert is asked to consider a hypothetical or disputed factual scenario.

When Assumptions Are Necessary

An expert may be asked to provide an opinion based on an assumed set of circumstances. This may be appropriate where the parties disagree about what happened or where the factual issues are being considered separately from the technical tax questions.

For example, an expert might be asked to examine the tax implications of a transaction on two alternative assumptions about the capacity in which a payment was made.

The expert could explain the technical analysis under each scenario, provided both fall within the expert's instructions and area of expertise.

The expert should make the assumptions clear and identify any material limitations that follow from them.

Why Assumptions Should Be Transparent

An opinion based on an assumption should not be mistaken for independent confirmation that the assumed facts are correct.

If a conclusion depends on a disputed assumption, the report should explain that dependency where it is material. This enables the instructing solicitors and other readers to understand the circumstances in which the opinion may apply.

For further information about the role of specialist tax analysis, see the technical tax opinion service.

3. Examining Conflicting Financial Records

Financial records can be an important source of evidence in HMRC disputes. However, records may be incomplete, inconsistent or prepared for purposes that do not directly resolve the tax question in dispute.

A tax expert may need to examine the relationship between the available records and the technical issue being considered.

Reconciling Differences Between Records

Depending on the circumstances, the expert may examine whether:

• Accounting entries correspond with underlying transactions
• Reported figures can be reconciled with supporting documents
• Differences arise from timing, classification or recording practices
• Particular transactions have been omitted or recorded more than once
• The figures used in a tax computation are consistent with the underlying evidence

The appropriate approach will depend on the nature of the records and the expert's specialist knowledge.

Where the issue primarily concerns reconstructing financial activity, a forensic accountant may also be relevant. If the dispute requires both financial reconstruction and specialist tax analysis, the respective roles may need to be defined clearly. The site's guide to HMRC investigation types provides further context on investigations where financial records and tax methodology may require examination.

Avoiding Unsupported Conclusions

A discrepancy does not, by itself, establish why the discrepancy arose.

For example, a difference between a bank statement and an accounting ledger may require further investigation before its cause can be identified. It would not necessarily be appropriate to treat the difference as undeclared taxable income without examining the relevant circumstances and applicable tax rules.

The expert should explain what the evidence supports, what remains uncertain and whether the unresolved issue affects the opinion.

4. Assessing Assumptions in HMRC Assessments and Reconstructions

Some HMRC disputes involve calculations or reconstructions based on incomplete records, estimated figures or assumptions about business activity.

In these circumstances, the assumptions used in the calculation may be relevant to the technical assessment of the position.

A tax expert may be instructed to examine the basis of HMRC's analysis, including whether the data and methodology are appropriate for the circumstances being considered.

Questions That May Require Examination

Depending on the case, relevant questions may include:

• What source data was used?
• Are the figures consistent with the available records?
• What assumptions were made where information was missing?
• Do the assumptions reflect the circumstances of the business or transaction?
• Have material limitations in the underlying data been identified?
• How sensitive is the resulting calculation to a change in a key assumption?

The answers will depend on the evidence, the relevant tax rules and the nature of the assessment.

An expert should not assume that an HMRC calculation is necessarily correct or incorrect simply because it uses estimates. The analysis should consider the basis of the estimate and whether the method is appropriate to the question in dispute.

The site's HMRC methodology challenge guide provides further context on the examination of reconstruction methods and their underlying assumptions.

5. Considering Alternative Factual Scenarios

Where a material fact remains disputed, it may be useful to examine how different factual scenarios affect the technical tax analysis.

This does not mean that every possible scenario must be explored. The appropriate scope will depend on the instructions, the relevance of the disputed issue and the available evidence.

Comparing Alternative Assumptions

Suppose a tax dispute concerns whether a payment related to a particular transaction or to a separate commercial arrangement.

The expert might be asked to explain the tax implications under each factual scenario, if the distinction is relevant to the question being considered.

The analysis might identify:

1. The factual assumption used for each scenario.
2. The technical tax considerations relevant to that assumption.
3. The evidence that may support or undermine the assumption.
4. Any differences in the resulting technical analysis.
5. The limitations that remain unresolved.

This approach can help clarify whether the disagreement concerns the facts, the tax treatment or both.

Avoiding False Precision

Alternative scenarios should not create an impression of certainty where the evidence remains incomplete.

Where a calculation depends on uncertain figures, the expert may need to explain the effect of those uncertainties rather than present a single figure without qualification.

Any numerical analysis should be appropriate to the evidence and the purpose of the instruction. The level of detail required will depend on the dispute.

6. Explaining Uncertainty Without Overstating the Opinion

A tax expert's report should communicate the strength and limitations of the analysis clearly.

Where conflicting facts affect the opinion, the expert may need to distinguish between conclusions that can be reached on the available information and matters that remain dependent on further evidence or factual findings.

Identifying the Effect of Missing Evidence

Not every gap in the evidence will materially affect the opinion. The expert should consider whether the missing information is relevant to the technical question being addressed.

For example, a missing document might be significant if it is necessary to establish the nature of a transaction. In another case, the available records may provide sufficient information to address the technical issue despite the absence of that document.

The report should explain the significance of the gap where it affects the analysis.

Distinguishing Technical Conclusions from Factual Findings

An expert can explain the tax implications of a stated set of facts without necessarily determining which version of disputed events is correct.

The resolution of disputed facts will depend on the relevant proceedings and the responsibilities of the court or tribunal and other participants.

The expert should therefore make clear where an opinion is conditional on a factual assumption and avoid presenting assumed facts as findings that fall outside the expert's role.

7. What Solicitors Can Clarify When Instructing a Tax Expert

Clear instructions can help the expert identify the relevant factual disputes and avoid unnecessary ambiguity in the scope of the opinion.

Where material facts are disputed, solicitors may wish to clarify the following matters.

Which Facts Are Agreed or Assumed

The instructions should identify, where practicable, which facts can be treated as agreed, which assumptions the expert should adopt and which issues remain disputed.

Which Questions Require Technical Tax Analysis

The expert should understand the specific tax questions that require specialist opinion. This can help keep the analysis focused and distinguish it from factual disputes or legal submissions.

Whether Alternative Scenarios Should Be Considered

If a disputed fact could materially affect the tax analysis, the solicitors may consider whether the expert should examine more than one scenario.

The decision will depend on the issues in the case and the purpose of the instruction.

What Further Information Might Be Required

The expert may identify documents or information that could assist with the analysis. Whether further material can be obtained and how it should be addressed will depend on the circumstances and applicable procedural requirements.

For wider context on specialist evidence in UK tax disputes, see the tax disputes guide.

8. Reviewing the Expert's Treatment of Conflicting Evidence

When reviewing a tax expert's opinion, solicitors may wish to consider whether the report deals with material conflicts transparently and consistently.

Relevant questions may include:

• Does the report identify the important disputed facts?
• Are assumptions distinguished from established facts?
• Is the documentary evidence considered in context?
• Does the expert explain how conflicting information affects the analysis?
• Are alternative scenarios considered where appropriate to the instructions?
• Are the limitations of the opinion stated clearly?
• Do the conclusions remain within the expert's area of expertise?

These questions are not a substitute for the applicable procedural requirements. They are practical considerations that may help identify whether further clarification is required.

If new evidence emerges after the report has been prepared, the expert may need to consider whether it affects a material assumption or conclusion. Any amendment, supplementary opinion or further evidence will need to be considered in light of the circumstances and applicable rules.

Conclusion

Conflicting facts and assumptions can affect the analysis of a UK tax dispute, but their significance will depend on the issue being examined and the available evidence.

A tax expert may need to distinguish established facts from disputed information, identify material assumptions, examine inconsistencies in financial records and explain how alternative factual scenarios affect the technical tax opinion. Where uncertainty remains, the limitations of the analysis should be communicated clearly.

For solicitors, defining the factual issues and the questions requiring specialist tax analysis can help establish an appropriate scope for the instruction. The expert's role remains to provide an independent opinion within their area of expertise, rather than to determine disputed facts that fall outside that role.

Disclaimer: This article provides general information about conflicting facts and assumptions in UK tax disputes. It is not legal, tax or procedural advice. The appropriate approach to expert evidence will depend on the facts, issues and procedural requirements of the individual case.

Last Reviewed: October 2026