Alternative Dispute Resolution for SMEs

In 2013, following a trial, the HMRC Alternative Dispute Resolution service was extended to Small and Medium-sized Enterprises.

This is a freeview 'At a glance' guide to Alternative Dispute Resolution (ADR).

HMRC extended their Alternative Dispute Resolution (ADR) to Small and Medium-sized Enterprise (SME) customers as part of a rollout of the service to all taxes. ADR is an alternative way of resolving tax disputes relating to tax enquiries.

Under ADR, an independent facilitator who has not been involved in the dispute before, will work with both the taxpayer and the HMRC to try to broker an agreement between the parties. ADR is proven to be a cost-effective way of resolving legal disputes.

ADR covers both VAT and direct taxes disputes. Entering into the ADR process will not affect a taxpayer's existing review and appeal rights.

ADR can be used when:

• Communications have broken down between you and HMRC.
• There are disputes about the facts and/or a dispute appears to be the result of a misunderstanding.
• You want to know why HMRC have not agreed with the evidence you have given them, and why they want to use other evidence.
• You are not clear on what information HMRC have used and think they may have made wrong assumptions.
• You want HMRC to explain why they need more information from you.

You cannot use ADR for:

• Complaints and disputes about HMRC delays in using the information or giving you misleading advice.
• Cases that HMRC’s criminal investigators are dealing with.
• Cases the First Tier Tax Tribunal have categorised as ‘paper’ or ‘basic’.
• Debt recovery or payment issues.
• Disputes over default surcharges.
• Automatic late payment or late filing penalties.
• PAYE coding notices.
• Extra statutory concessions.
• High-Income Child Benefit Charges.
• Disputes about the National Minimum Wage.
• Accelerated payments and follower notices.
• Forfeiture.
• Civil evasion penalties.

ADR can be used before or after HMRC has issued an appealable decision and at any time during an enquiry or compliance check.

All discussions with the mediator are held on a 'without prejudice' basis meaning that the parties are free to propose and explore possible solutions without having to worry that their discussions can be regarded as an admission should the parties not reach an agreement.

HMRC figures show that in 2020-21 80% of cases were resolved using ADR.

You can apply for ADR online here. You will hear back from HMRC within 30 days and they aim for the whole process to take no more than four months. You or your representative (and correspondingly HMRC) must be available within 90 days for a meeting with the mediator.

External link

HMRC guidance: Use Alternative Dispute Resolution to settle a tax dispute

HMRC Alternative Dispute Resolution Manual