Partner Article

A Different Route (ADR) to sorting out tax disputes

Arbitration is common in the commercial world, so why hasn’t there been a prescribed arbitration system for the resolution of tax disputes?

Perhaps a means whereby the taxpayer and HMRC can consider their respective cases in front of an independent mediator?

Well the good news for taxpayers is that HMRC has announced this week that, following a successful pilot, ‘Alternative Dispute Resolution’ (ADR) is now available to SMEs and individual taxpayers.

A taxpayer can request ADR whether or not an appealable decision has been made by HMRC, and the dispute can then proceed to mediation, conducted by a suitably trained and, crucially, impartial HMRC facilitator.

The mediation follows a defined process whereby each side begins by setting out its case. The facilitator then conducts some shuttle diplomacy to bring out answers to points in dispute and to identify possible areas of compromise on the facts and interpretation. Finally, everyone is brought back together to try to reach agreement.

ADR is a less adversarial and, perhaps more importantly, quicker way of resolving a dispute with HMRC without having to resort to taking appeals to the Tax Tribunal.

It is understood that the Tax Tribunal system is facing a serious backlog of cases, with HMRC proving intransigent in following their ‘Litigation and Settlement Strategy’ and on the other side, taxpayers defending their positions by being prepared to have their day in court. There were reports that the backlog could take years to clear.

With this in mind, ADR is surely a better way for aggrieved taxpayers to argue their cases without the hassle and expense of taking a case to the Tax Tribunal? Until now, HMRC has only offered an internal review by independent officers when a decision is disputed. It is no surprise that the public seems to have little faith in that review system. In that context, ADR is to be welcomed as part of HMRC’s normal business processes.

This was posted in Bdaily's Members' News section by Baker Tilly .