Alternative Dispute Resolution (ADR) & HMRC Tax Disputes
In a previous article entitled ‘Adjudication | Alternative Dispute Resolution’ we explored the nature of Alternative Dispute Resolution (‘ADR’). We detailed that, as established in Halsey v Milton Keynes General NHS Trust, parties involved in any civil dispute are generally expected to engage in ADR unless there is a reasonable reason for failing to do so.
KANGS provides ADR services to both corporations and individuals, facilitating conflict resolution through mediation, arbitration and negotiation. The purpose of ADR is to provide a platform for resolving disputes without the protracted and expensive involvement of a civil court.
ADR has become an established procedure in tax disputes involving HMRC and whilst there exist many similarities with ADR conducted during civil litigation, there are differences.
In February 2023, HMRC published a full manual setting out its approach to ADR containing, amongst other things, the process, those cases suitable for mediation and those which are not.
Hamraj Kang of KANGS comments upon certain aspects of ADR in disputes involving HMRC.
Cases Suitable for ADR
ADR is often useful in circumstances where:
- in a dispute between HMRC and a taxpayer, communications have broken down and there appears to be no clear chance of resolution,
- there appears uncertainty about what the important facts are,
- matters appear to be heading towards a Tribunal Hearing, even though neither party wishes it,
- there is uncertainty concerning the use of evidence,
- it is not clear what information HMRC has used and why more information is required.
Specified excluded cases from ADR
In addition to specific areas of tax where HMRC will not entertain ADR, the following are excluded:
- complaints and disputes about HMRC delays in using information or giving misleading advice,
- cases being dealt with by HMRC’s criminal investigators,
- cases the First Tier Tax Tribunal has categorised as ‘paper’ or ‘basic,’
- debt recovery or payment issues,
- disputes about tax credits,
- disputes over default surcharges,
- automatic late payment or late filing penalties,
- high Income child benefit charges,
- disputes about the National Minimum Wage,
- civil evasion penalties,
- forfeiture,
- PAYE coding notices.
Cases Disputed as to Suitability for ADR
It may be that a disagreement arises about the suitability of a case for ADR when, for example:
- the recommended decision of the HMRC Case Team is that the case is not suitable for ADR,
- some or all members of the HMRC Case Team believe the case is unsuitable, but others believe that it is,
- referrals are made by HMRC Caseworkers for complex or sensitive cases where they would like to offer ADR to the taxpayer.
The ADR Panel will consider requests for ADR in all circumstances where there is uncertainty about the suitability of ADR. The Panel will ensure that applications for ADR in the most complex or contentious cases are properly and consistently assessed. Decisions made by the Panel will be notified to the taxpayer within five working days of the Panel meeting.
Important points to note | ADR With HMRC
- ADR is only available if both parties agree to utilise the ADR process.
- The parties in dispute are always in control of the decision to settle or not to settle and can create their own negotiated agreement rather that leaving the decision to a Tribunal Judge.
- ADR Meetings are held on a ‘without prejudice’ basis, enabling the parties to propose and explore possible settlement options without the fear of any admissions subsequently being relied on in a court hearing. However, there is an exception to the extent that any ‘tax fact,’ being a fact which has legal and technical implications for a taxpayer’s liability, which comes to light will not be treated as confidential to the mediation meeting and should be recorded as such in the formal Record of the Meeting compiled by the Mediator.
- ADR is almost exclusively held through mediation. The Mediator appointed will be an independently trained HMRC Officer. Specific guidance now allows taxpayers the option to hire their own independent non-HMRC mediator at their own cost.
- From commencing ADR proceedings, HMRC will aim to settle the matter within four months. ADR seeks therefore, to provide flexible, less time consuming and more cost-effective method for settlement, than is likely to be the position before a civil court.
- There is no charge to enter the mediation process. However, failure to engage in ADR, particularly if deemed unreasonable may result in the incurrence of additional costs.
How Can We Assist?
Should you become involved in any form of Tax Investigation or dispute involving HMRC expert legal assistance should be sought immediately.
The Team at KANGS has gained extensive experience managing a wide range of disputes with HMRC on behalf of clients. Should you require assistance, please do not hesitate to contact our Team using the details below:
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through live conferencing or telephone.
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