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HMRC rolls out alternative dispute resolution process

19 September 2013

The HMRC Alternative Dispute Resolution (ADR) process has been extended to individuals and small and medium sized businesses following a successful pilot. The ADR process aims to provide a cheaper, quicker and more efficient way of resolving tax disputes. The scheme encompasses disputes over both VAT and direct taxes and is available to those whose tax is processed by HMRC’s Local Compliance SME and Local Compliance Individuals and Public Bodies units.

How it works

The process takes the form of mediation and will be conducted by HMRC facilitators. The aim is to help the parties reach a mutually acceptable outcome and put into place a binding agreement. The facilitators are specially trained in ADR and operate as a separate unit of HMRC, so will not be involved in processing tax. It is hoped, therefore, that this will allow them to function as a neutral party in the process.


Crucially, if an agreement cannot be achieved, either party retains the right to apply to the Tribunal Service and the Courts for binding determination. ADR is an additional option, which should be cheaper and more efficient, but it will not replace the existing tax litigation processes. As such, taxpayers will be able to use the process if they wish, but chose to withdraw, if they cannot reach an acceptable agreement with HMRC.

Whilst it is still envisaged that legal assistance will be required in preparing for ADR, the costs are likely to significantly lower than in preparing for Tribunal or trial. Furthermore, initiating ADR will require HMRC to identify issues of concern clearly, which is likely to see speculative or insubstantial points dropped. Even if the process fails, it should narrow the dispute, focus subsequent litigation and reduce the legal costs involved.


The HMRC ADR process is likely to become the first step in the resolution of tax disputes, particularly where the value is relatively low. Provided the new scheme is well run and resourced, it should certainly help reduce the backlog of cases waiting at the Tribunal door. In any event, the addition of a cheap, quick and efficient alternative for dealing with tax disputes which also allows the taxpayer to retain control of the process, is a welcome development.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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