Alternative Dispute Resolution – what is it?
Posted: 21st September 2023
Tax is a complex subject, especially when you have a dispute with HMRC that you’re struggling to resolve. Alternative Dispute Resolution (ADR) is a method of resolving disputes between HMRC and taxpayers available to both individuals and businesses when there is a dispute over a tax issue. Throughout this blog, we’re going to take you through what ADR is, and how it might be the best solution to your tax dispute issue.
How Does Alternative Dispute Resolution Work?
An HMRC mediator (or facilitator) will work with both parties to search for a resolution by using their mediation skills and techniques to encourage open communication and make sure that the subject stays on track by focusing on the areas that need to be settled. ADR covers both VAT and direct tax disputes and according to HMRC itself, entering into the ADR process doesn’t affect the taxpayer’s right to appeal a decision or ask for a review. All applications are considered individually, but there are some areas where you cannot use ADR, for example:
- Complaints about delays or misleading advice
- Cases being dealt with by criminal investigators
- Cases categorised as paper or basic
- Payment or debt recovery issues
- Tax credit disputes
- Late filing penalties
- Default surcharges
- PAYE coding notices
Among others.
HMRC has published a factsheet of compliance checks where you can check whether you are eligible to use the service to resolve your dispute. It is worth checking out because ADR is not a statutory process, so HMRC can reject applications that do not match the criteria.
ADR is available to everyone to help to resolve a dispute with HMRC whether individuals, organisations or agents representing either of the former, and can be used for specific issues:
- Where communications between both parties have broken down
- When the facts are disputed
- A misunderstanding may be behind the dispute
- The taxpayer is puzzled why HMRC wants to use alternative evidence rather than the evidence they provided
- The taxpayer feels that HMRC has made incorrect assumptions
- The taxpayer wants an explanation from HMRC about why they need more information
The Benefits of Opting for ADR in Tax Investigations
Tax investigation can take many forms from simple random checks through to raids and full-blown fraud investigations. No matter what kind of tax investigation it is, it can take over the lives of taxpayers while the matter is sorted out. It causes significant amounts of stress, uncertainty and worry. Having to go through court proceedings or an appeals process because of a dispute over HMRC’s findings can prove time-heavy and expensive.
ADR was introduced by HMRC to try to resolve differences when the two parties are some way apart in their views and litigation seems to be the only viable option to resolve the tax dispute. As this can take many years to conclude, the process is costly both for HMRC and the taxpayers involved, no matter which side wins in the end. A viable alternative, ADR offers a quick and flexible process which can avoid the costs, stress and uncertainty of the more traditional route of litigation.
The main advantages of choosing ADR over traditional resolution processes are the cost-effectiveness and the speed of the process. These can often lead to faster resolutions compared to lengthy court proceedings. As the dispute is settled by mediation, both parties can expect complete privacy and confidentiality. This is something that will not apply in open court. A major benefit to both individual taxpayers and organisations is not having to pay substantial legal fees. This is especially true when a court case may continue for a considerable length of time.
And if ADR doesn’t result in an acceptable outcome for the taxpayer it is still open to them to pursue the matter to Tribunal.
The informality of an ADR environment, where more creative solutions may be expounded, creates a platform where open dialogue is encouraged. The setting is less adversarial, reducing the risk of arguments and recriminations and removing barriers to finding a solution.
Resolving HMRC Tax Investigations
We are driven to help our clients resolve their problems, bringing both reassurance and peace of mind that HMRC disputes are dealt with by experts. Our team of skilled professionals are well-versed in tax law, negotiation and communication. This helps to ensure the interests of our clients are represented effectively throughout the process.
We’re non-judgemental and represent our client’s best interests at all times. We help them achieve the best possible result. So if you are undergoing a tax investigation, you do not have to go through it alone. If you need advice about ADR, get in touch today for a consultation.
Alternative Dispute Resolution is a viable alternative to the Tax Tribunal. It provides a high level of confidentiality and a collaborative approach while saving money, time, stress, uncertainty and mental anguish. It can help to reduce the burden of the tax investigation process on both individuals and companies. You may want to explore whether it can help before HMRC makes a formal decision about your case. It is worth remembering that you only need to pay HMRC what is due. NHD Tax Solutions Ltd has expertise in representing clients in Tax Appeals and Tribunals. We can offer help and guidance if you have questions about ADR or the HMRC appeals process.
We have worked in the tax sector for more than 40 years. Our specialists have decades of experience in representing our client’s best interests and achieving the best possible outcomes for them. Call us for advice on 0114 290 3608 or contact us. Let’s discuss how we can put forward your point of view to bring a resolution effectively.
