In The Serpentine Trust Ltd  v HMRC [2018] TC06719 the First Tier Tribunal (FTT) held that an agreement reached with HMRC under Alternative Dispute Resolution was ultra vires; it was contrary to the law and unenforceable by the taxpayer.

Alternative dispute resolution (ADR) was introduced by HMRC in 2013. It is a form of mediation that is designed to resolve tax disputes without the need to go to a formal tribunal.

It does not affect the right to appeal or ask for a Statutory review. 

The Serpentine Trust Ltd runs art galleries in London and is a registered charity.

  • It entered into ADR with HMRC regarding the VAT treatment of certain contributions received from supporters of the galleries under various ‘supporter schemes’.
  • An agreement was reached under ADR in respect of some of the schemes ("the ADR agreed schemes”).
  • No agreement was reached on the other schemes: HMRC raised assessments and reduced repayments to the trust for over £330,000.
  • The trust appealed.

During the first FTT hearing the judge commented on the VAT treatment agreed under ADR stating that it was wrong in law and inconsistent with HMRC’s published position.

  • Following the hearing HMRC assessed the trust to a further £65,268 in respect of the ADR agreed schemes suggesting that the trust had misunderstood the ADR agreement.
  • The trust appealed to the FTT again.

The the second hearing FTT judge dismissed the appeal:

  • Following ADR there was a contract between HMRC and the trust in respect of the ADR agreed schemes.
  • There was no unilateral mistake by HMRC which rendered the ADR contract void however it prevented HMRC from correctly applying the law so was ultra vires.
  • The only course of action available to the trust was judicial review on the grounds of Legitimate expectation


This case shows that neither taxpayer or HMRC can 'do deals' and expect the courts to enforce them unless the agreement is within the law.


Grounds for appeal toolkit

Statutory review 

External links:

The Serpentine Trust Ltd v HMRC [2018] TC06719

HMRC guidance Tax disputes: Alternative Dispute Resolution