What is alternative dispute resolution (ADR)?
To resolve conflicts outside of the courtroom, consumers and traders can utilize Alternative Dispute Resolution, a process designed for efficient dispute management.
Alternative dispute resolution (ADR) is for cases where an individual or company and HMRC disagree over the tax liability, or where communication between them has broken down.
ADR can help both sides reach an agreement or identify the contentious issue. It is a way of attempting to resolve the matter without the need, cost and hassle of involving the tax tribunal.
What are the advantages of alternative dispute resolution?
Alternative Dispute Resolution provides a range of benefits for businesses and individuals facing tax disputes with HMRC. By opting for ADR, taxpayers can resolve conflicts more efficiently and cost-effectively while avoiding the stress of formal litigation.
Faster resolution times
Tax disputes handled through ADR are resolved much more quickly than those that proceed to a tribunal or court. Litigation can take months or even years, whereas ADR often leads to a resolution within a few months.
Reduced legal and advisory costs
The costs associated with tax disputes, such as legal fees, accountancy services, and expert advice, can be significant when a case goes to court. ADR minimises these costs and provides a more streamlined process, requiring fewer legal proceedings. Businesses, in particular, benefit from reduced financial strain as they will not have the financial burden of an extended litigation.
Improved relationship with HMRC
ADR allows for negotiation and compromise, enabling solutions that may not be available through a tribunal or court decision. In some cases, HMRC and taxpayers can agree to tailored resolutions. This collaborative approach often results in solutions that both parties find acceptable, rather than one side “winning” and the other “losing”.
How we can help
Getting expert advice at the outset of ADR can make an enormous difference to the outcome. Our tax dispute resolution team knows the ADR system inside out. And in our experience, ADR almost always helps both sides clarify the disputed issues.
We’ll walk you through the whole process, helping you prepare for your mediation meeting and give careful consideration to the statement setting out the contentious points. In short, we’ll shoulder the burden so you don’t have to.
How the process works
HMRC assigns a trained mediator to act as a neutral facilitator, working with both the taxpayer and HMRC to explore potential resolutions. The mediator requires you the taxpayer and HMRC to participate fully in the process (which must not exceed 90 days) and provide all the information requested. The mediator’s role is not to make a final decision but to encourage open discussions, clarify misunderstandings and guide negotiations toward a settlement.
To ensure the ADR process is effective, HMRC and the taxpayer are required to engage. This includes providing all relevant documentation and responding promptly to requests for information. The entire mediation process must be concluded within 90 days, ensuring that disputes do not become unnecessarily prolonged.
When can alternative dispute resolution be used?
ADR can be used during a tax enquiry or once HMRC has decided what tax is payable and the matter is heading towards a formal decision by the tax tribunal. However, HMRC does not accept all cases into ADR and considers whether the application is relevant.
It’s worth noting that ADR does not affect your right to appeal to the tax tribunal or request for a statutory review of HMRC’s decision.
If you’d like to talk to us about alternative dispute resolution, don’t hesitate to get in touch with team lead, John Hood.
