Alternative Dispute Resolution (ADR) process

By Tolley

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Alternative Dispute Resolution (ADR) process
  • Background
  • When can ADR be used?
  • Applying for ADR
  • Mediation process


ADR has been introduced as an alternative method to settle disputes between HMRC and the taxpayer. It includes the use of an independent trained mediator within HMRC who will assist the parties involved in this dispute with reaching an agreement or preparing for litigation. The mediator will not take over responsibility for the dispute but will try to assist the parties with exploring ways to resolve the issue and dispute. HMRC believes that this approach is especially useful if the parties have been involved in a long-running dispute.

CH280400; Code of governance for resolving tax disputes ; Use Alternative Dispute Resolution to settle a tax dispute 

The benefits of such an approach have been shown to be that it is both cheaper and quicker than going to court. Both parties need to agree that they wish to use ADR. ADR, unlike arbitration, leaves the decision-making in the hands of the parties involved in the dispute. HMRC will be governed by the terms of the litigation and settlement strategy (LSS) and associated governance.

The aim of ADR is to reach settlement within the terms of the LSS with the intention of avoiding the need to litigate. In summary, the LSS states that HMRC will only resolve tax disputes consistently with:

  • the law, whether by agreement with the customer or through litigation
  • our objectives of efficiently determining and collecting the correct tax to maximise revenue flows while reducing costs and improving customer experience

More information on the LSS in can be found on the HMRC litigation and settlement strategy guidance note, CH40000 and Resolving tax disputes: Commentary on the litigation and settlement strategy .

HMRC will be expected to consider the following:

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