Long-running HMRC enquiry? A dispute over a tax-geared penalty? Have you considered HMRC’s Alternative Dispute Resolution?

Tax enquiries can be time-consuming and frustrating. HMRC’s Alternative Dispute Resolution (ADR) process can provide a genuine ‘alternative’ to the frustration of exchanging letters for months on end. HMRC’s 2016/17 annual report showed that 79% of cases going through ADR were resolved by agreement so if you’re struggling to make progress with HMRC then ADR might be something you should consider.

What is ADR?

ADR is an informal mediation process aimed at helping HMRC and your client to agree with a resolution. It uses HMRC trained facilitators who must act impartially to help both sides agree on the evidence/facts so that they can reach an agreement.  It requires a commitment from both sides to co-operate without delay and a willingness to explore possible resolutions.

Many enquiries drag on for longer than necessary but ADR encourages everyone to focus on the evidence, how it might be interpreted and the possible options for resolution, all within a target time of 4 months.

The simple introduction of a ‘neutral’ party can help overcome challenging correspondence and increase understanding, enabling everyone to focus on the evidence and securing agreement.  ADR is part of the First Tier Tribunal rules and feedback from those who have tried it is very positive, as shown by the number of applications doubling in 2016/17. It is also quick as the target time for ADR cases remains 4 months from acceptance, with cases being resolved by email, phone, face to face meeting or a combination of all three.

What cases are suitable?

Put simply – Disputes on decisions which can be appealed to the First Tier Tribunal (FtT).

You can apply as soon as you are at an impasse, you do not have to wait until a formal decision is issued. It is ideally suited to those disputes where:

  • The dispute is fact rich and with scope for both sides to reach a compromise within a range of possible settlement scenarios.
  • Positions are entrenched on an ‘all or nothing’ issue but there is scope to explore the evidence and its technical interpretation.
  • Evidence gathering is not yet complete or testimony from the client may be valuable.
  • There is a lack of understanding of each other’s arguments or how the evidence might be evaluated.

Not all disputes will be suitable such as those involving fixed penalties, surcharges or fraud/evasion however because ADR has positive outcomes, HMRC are keen to use it where there is a realistic prospect of reaching an agreement. Sometimes just applying for ADR encourages HMRC to review their position and be more willing to consider options for settlement. The involvement of a facilitator overcomes unconstructive exchange by providing a trusted and safe environment in which both sides can voice the real issues and listen to what each has to say. Resolution is reached by people and ADR is founded on enabling people to work together toward a common goal.

Key benefits from ADR:
  • Provides a safe environment for swift, focused discussions to resolve the impasse or dispute.
  • Encourages a collaborative approach.
  • Clarifies the arguments and evidence involved.
  • Aids understanding as to the strengths and weaknesses of your case and likely success at each stage of the compliance check/litigation process.
  • Opportunity to explore possible settlement outcomes on a without prejudice basis.

The majority of disputes can be helped by better communication but in reality, disputes arise for a variety of reasons. If you are struggling to have a constructive dialogue with HMRC, feel they are misunderstanding your position or simply taking an unrealistic stance then ADR can help overcome these issues and enable quick progress. It will require a commitment of time and energy but the chances of success are high once accepted.

HMRC guidance on ADR is HERE

Croner Taxwise provides expert consultancy support for clients who wish to use ADR. If you would like to discuss whether a case is suitable for ADR, getting the best result from a compliance check or tax geared penalties please contact us to make an initial telephone appointment with David Ramsdale on 0844 728 0120 or email David direct at

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