Alternative dispute resolution 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:

  • Alternative dispute resolution process
  • How cases are selected for ADR
  • 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 to ADR and the need for the agreement to be in line with the HMRC litigation and settlement strategy, see the HMRC policy on alternative dispute resolution guidance note and Simon’s Taxes A5.713.

This guidance note considers the ADR process in more detail.

How cases are selected for ADR

HMRC has issued guidance that suggests that ADR may be an alternative to taking cases to litigation. The following characteristics are outlined by HMRC as indicative of situations that it considers may be suitable for ADR process:

  • there is a disagreement on key points between HMRC and the taxpayer

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