ADR process

By Tolley in association with Philip Rutherford

The following Owner-Managed Businesses guidance note by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • ADR process
  • How cases are selected
  • When should ADR be considered?
  • What is agreed when the parties join up?
  • How does the ADR process work?
  • Outcome of ADR

Historically, HMRC disputes tended to be resolved either by protracted correspondence and negotiation or in the Tribunal. Enquiries were often time consuming and costly affairs with neither party achieving a satisfactory outcome. HMRC began a pilot alternative dispute resolution (ADR) programme in 2011 with the aim of settling disputes in a more time efficient and cost efficient way, without the need for formal litigation.

Following the success of the pilot schemes, ADR became ‘business as usual’ for small and medium enterprises and individuals, as well as large and complex cases.

In tax disputes with HMRC, ADR takes the form of mediation, where an independent mediator acts as a facilitator in order to try to resolve the dispute without binding the parties in advance of any outcome. The mediator will give directions for how the parties are to engage in the process. If ADR fails, the parties can still decide to adopt the litigation route.

For more information on the background of ADR and the need for the agreement to be in line with the HMRC litigation and settlement strategy, see the HMRC policy on ADR guidance note.

This guidance note considers the ADR process in more detail.

How cases are selected

The following characteristics are outlined by HMRC as situations they consider would be suitable for ADR process:

  • there is a disagreement on key points between HMRC and the taxpayer
  • working relationships between the parties has broken down
  • both parties are entrenched in their own position and without the intervention of a third party are not prepared to consider alternatives

More on Dispute resolution procedure: