The Alternative Dispute Resolution, or ADR as it is known, is an initiative by HMRC to try to make progress and resolve issues in tax enquiry and tax investigation cases: where the taxpayer feels matters have got bogged down.
What is the ADR?
Most tax enquiries and tax disputes are resolved following a process of correspondence, discussion, exchange of information, and negotiation. However, sometimes taxpayers can feel that the investigating tax inspector is acting in an unreasonable manner, not listening to them, or simply not understanding the points their advisers are trying to put across.
Where disputes cannot be settled by agreement, then taxpayers can have recourse by way of appeal to the formal Tax Tribunal. Or they could ask for a so-called “statutory review” – where an employee of HM Revenue and Customs (outside of the management chain of the investigating officer), will review the case. Another method is to apply for the Alternative Dispute Resolution programme.
The ADR has to be applied for. HMRC can turn down the application. If the application is accepted a so-called “independent” HMRC employee – specially trained in mediation skills and techniques – is appointed as a “mediator”: to act as a bridge between you and the investigating inspector. The mediator will try to facilitate the communication process, and accelerate the settlement of the case. However, the HMRC facilitator cannot decide the outcome of any dispute. They can simply advise both sides (i.e. his HMRC colleague and the taxpayer) on the best way to break the log-jam and progress matters.
Is ADR worthwhile?
ADR can be useful if you feel the compliance officer is just not listening to you, or keeps misunderstanding you. But it won’t be very useful where the facts are agreed but the inspector clearly disagrees with your interpretation.
Where the relationship with the investigating tax inspector has broken down, then the ADR route can be useful to move things forward. This is usually adopted prior to the Statutory Review or appeal to the
ADR can be used when: communications have broken down between you and HMRC; there are disputes about the facts; there appears to be a misunderstanding; you want to know why HMRC has not agreed evidence you supplied; you don’t understand or agree why the investigator insists on you providing yet more information; or you think they may have made incorrect assumptions or drawn the wrong inferences.
If you are represented by an experienced tax enquiry specialist it will be rare for you to have to resort to the ADR. On the other hand, if you do need to resort to ADR you will get more out of the process if you are accompanied by a tax negotiation expert.
How do I apply for ADR?
Anyone can apply for ADR.
HMRC say that each application is considered on separately, and they reserve the right to reject applications that they don’t feel are appropriate for the programme.
You cannot use ADR for: complaints and disputes about HMRC delays in using information or giving you misleading advice; debt recovery or payment issues; disputes about tax credits, default surcharges, automatic late payment or late filing penalties; criminal investigations; and certain other categories.
When can you apply for ADR?
Generally you can apply for ADR at any stage of an enquiry.
However, if HMRC has made a formal “decision” and you have appealed against it then you have to apply as follows. Once HMRC accepted the appeal as being valid, but have not offered you a statutory review. If they have offered you a statutory review and you accepted – then you must wait for the review to end, appeal to the Tax Tribunal and have the appeal accepted as valid before applying for ADR. If you turned down the offer of a statutory review you must appeal to the Tribunal first, and have the appeal accepted as valid before applying for ADR.
If you have appealed to the Tax Tribunal and HMRC’s Statement of Case has been served (or is due within 10 days of you applying for ADR) your application will only be accepted in exceptional circumstances.
How do I apply for ADR?
Applications for ADR have to be made online: either by you or your adviser.
You have to agree to a set of “principles” as below. If HMRC accept your application, you must follow these principles or they may stop the ADR process.
You and your representative must be available within 90 days for a face to face meeting; possibly lasting a full day. If the mediator asks you for more information, you must provide it within 15 days. If you tell the mediator something which significantly changes your tax or penalty position, or provides evidence of criminality, will pass this to the investigator and it may be used in formal proceedings, including those on criminal lines.
The ADR team will let you know within 30 days if you are accepted into the process.
What if ADR doesn’t resolve matters?
If no agreement is reached via the ADR process the HMRC mediator will tell you what you can do next. Usually this will involve you conceding, or taking your appeal to the Tax Tribunal.
How Can Lynam Tax Dispute Specialists Help Me?
The Tax Enquiry Experts at Lynam Tax can usually resolve most HMRC investigations without needing to go to any of the formal measures such as: Statutory Review, Alternative Dispute Resolution, or a formal hearing at the Tax Tribunal. However, we do have lots of experience of successfully navigating clients through the ADR process. Although the mediator tries to play an impartial role, the fact is they are an HMRC employee: and of course the original investigator (who you were frustrated with) is still in charge. You will get a much better, and quicker, outcome if you are represented by skilled and highly experienced specialists like us.
If you need advice and help in a contentious tax dispute call:
Paul Lynam: 0845 643 9997 or
Andrew Nutbrown: 0771 877 8710