HMRC’s Alternative Dispute Resolution (ADR) service has come a long way since the initial two pilot schemes in 2011. Embedded into HMRC’s day to day operations since 2013, the range of tax disputes now considered by the ADR team has developed and widened significantly.
This was the central message Bryan Mason, HMRC’s ADR Assistant Director, was keen to convey to us in person at Abbey Tax last month. He stressed how his team are in regular contact with HMRC’s policy division and are prepared to test policy red lines where the same frequent disputes keep arising.
He also expressed an increased willingness to get involved with what many practitioners would consider to be ‘black or white’ technical issues, where a yes or no outcome has traditionally been the answer.
For those accountants or taxpayers unfamiliar with the ADR process, here is a quick Q&A round up:
What is ADR?
Alternative Dispute Resolution is an informal process whereby a facilitator is appointed to mediate between HMRC and the accountant and taxpayer who have reached an impasse over a tax issue.
Whilst the facilitator is drawn from HMRC, the appointed officer will not have been involved in the tax dispute previously and acts impartially, to assist the parties in disagreement to reach a negotiated compromise.
ADR is an informal process because it does not have a legislative background, although it is part of HMRC’s Litigation and Settlement Strategy.
The facilitators work for HMRC. How can they be impartial?
HMRC currently has 25 trained and accredited facilitators drawn from various tax grades. The facilitators are chosen primarily for their analytical and negotiating skills and are independent in the ADR process. It is not unusual for the facilitator to encounter stiff resistance and hostility from their HMRC colleagues, rather than the accountant and taxpayer.
The facilitators are not targeted by HMRC to generate a tax yield from any disputes and are not under pressure to settle in favour of one side or the other.
The team is expanding and seeking to recruit another five facilitators before the end of this year.
How does ADR work in practice?
Face to face facilitation typically lasts a day and will involve presentations by the parties in dispute setting out their areas of disagreement. The facilitator will then work with the parties to try and draw out potential lines of compromise and negotiation, although any subsequent agreement has to be consistent with tax law.
Video and telephone facilitations are also available where the geographical locations of the parties are prohibitive.
What sort of cases are suitable for ADR?
All types of tax disputes are within scope of the ADR process, apart from criminal enquiries and large business disagreements.
Bulk mediations are considered as well now, where a group of taxpayers with the same dispute can apply for help.
What are the advantages of ADR?
All discussions and meetings are conducted on a ‘without prejudice’ basis, which means there is no loss of statutory rights to an internal review or appeal.
It is an alternative to litigation and can help avoid requiring the need for a Tribunal hearing.
During 2015/16, 79% of cases were fully resolved, with the total rising to 93% when partially resolved cases are included.
How is an application for ADR made?
Applications are made online here.
As much information as possible about the nature of the dispute should be entered on to the online form to enable the ADR team to fully consider whether a facilitator can help.
HMRC processes 90% of all applications within 30 days.
As Bryan pointed out, the ADR process is a quicker, cheaper and a more collaborative process compared to the litigation route, when waiting for a Tribunal date to become free can literally take months.
Two of our Senior Tax Consultants, Steve Price and James Cordiner, are going to be delivering a series of ADR training workshops later this year, putting the theory into practice and talking attendees through real case studies and examples. Both Steve and James have experience of the ADR process and have enjoyed considerable success representing clients.
To pre-register for these workshops, please email firstname.lastname@example.org
Author: Guy Smith, Tax Investigations Manager