The Tax Administration Framework Review – Improving HMRC’s approach to dispute resolution

Q: Annex A: Relevant (current) government legislation

Relevant legislation includes the following: Tribunals, Courts and Enforcement Act 2007 Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 Taxes Management Act 1970

Question 1

Summary

Accepted Answer

Subject of this consultation

Modernising and improving HMRC’s approach to dispute resolution.

Scope of this consultation

The consultation seeks views on options for simplifying, modernising and reforming HMRC’s approach to dispute resolution. It focuses on the ease of access and use of HMRC’s alternative dispute resolution (ADR) and statutory review processes.

Who should read this

Any individual or organisation with views on HMRC’s ADR and statutory review processes and how these could be made more efficient and simpler by helping increase taxpayer awareness and understanding to improve access and use of these processes.

The consultation is likely to be of particular interest to individuals, companies, and those acting on their behalf. Taxpayer representative bodies, charities, and other voluntary organisations that help people with clients’ tax affairs will also have an interest.

Duration

The consultation will run for 10 weeks from 28 April 2025 to 7 July 2025.

Lead official

The lead officials are Fahema Bibi, Naomi Harding and Alastair Dougans of HM Revenue and Customs (HMRC).

How to respond or enquire about this consultation

Any responses or queries about this consultation should be sent to tafrcompliance@hmrc.gov.uk.

Respondents do not have to respond to all the questions in this document. HMRC welcomes partial responses focused on the individual aspects that are most relevant to the respondent.

Additional ways to be involved

HMRC welcomes collaboration with a wide range of stakeholders and will organise stakeholder discussions to support contributions from across the range of taxpayers and intermediaries. Please contact HMRC using the email address above if you would like to be involved.

After the consultation

Responses to this consultation will inform decisions on whether policy proposals to reform the tax administration framework are taken forward. Any proposals could be subject to further consultation in accordance with the tax policy-making process.

Getting to this stage

On 15 February 2024, HMRC published a call for evidence The Tax Administration Framework Review – enquiry and assessment powers, penalties, safeguards, which sought stakeholder views on those aspects of the tax administration framework relating to tax compliance, including dispute resolution. The government published a summary of responses, The Tax Administration Framework Review: enquiry and assessment powers, penalties, safeguards – summary of responses to the call for evidence at Autumn Budget, on 30 October 2024.

In the summary of responses, the government committed to build on the feedback to the call for evidence and consult on how to raise awareness of the dispute resolution processes, improve access to ADR and statutory review and improve taxpayers’ knowledge in order to help them make the right choice for their circumstances.

Previous engagement

HMRC has held discussions with several tax professional bodies and taxpayer representative groups as part of the call for evidence referenced above. HMRC continues to build an evidence base through further discussions with external stakeholders and other tax authorities.

Question 2

1.  Introduction

Accepted Answer

The HMRC Charter and HMRC’s published Compliance Professional Standards set out what taxpayers and their representatives can expect where HMRC undertakes a compliance intervention into a taxpayer’s tax affairs. Wherever possible, HMRC will look to resolve disagreements during the compliance intervention so that disputes can be prevented and without it being necessary to use formal dispute resolution mechanisms, including appeals to the First-tier Tax Tribunal. As a result, the vast majority of tax compliance interventions conclude without dispute. In the minority of cases where HMRC and the taxpayer are unable to reach an agreement, HMRC will seek to resolve any resulting dispute as quickly and cost-effectively as possible, working in collaboration with taxpayers and their representatives.

There are a number of important taxpayer safeguards to ensure taxpayers are treated fairly and in accordance with the law when a dispute does arise. In 2024, the government sought views on options to modernise and reform taxpayer safeguards, specifically, appeals to tribunal, statutory review and ADR methods. This also gathered views on improving access to statutory review and ADR.

Respondents agreed improving access to ADR and statutory review was necessary and felt they were underutilised, often due to a lack of awareness of the processes, or trust in their independence. Consequently, taxpayers may appeal to the First-tier Tax Tribunal instead, a more costly and time-consuming process for both the taxpayer and HMRC, where a dispute could have been effectively resolved at an earlier stage. External research identified several barriers to the take up of statutory review including lack of awareness of the review and its benefits and the perception of a lack of impartiality.

HMRC wants to make it easier to resolve disagreements before the end of a compliance intervention, supporting taxpayers to pay the right tax, through simplification and alignment of processes across different taxes. HMRC also wants to make it easier for taxpayers to understand their options once an enquiry has concluded so that, if a dispute does remain, taxpayers can identify and access the quickest and most appropriate method of dispute resolution for their circumstances.

This is an important part of HMRC’s work to improve customer experience, build trust, and modernise our services.

This consultation focuses on opportunities for improvement at various points in the taxpayer journey, both during and after a compliance intervention has closed.

The outcome of this consultation will directly inform the next stage of policy development. The government intends to draw upon this feedback and consider how the reforms and design features explored in this consultation could be applied.

Chapter 2 provides an overview of the existing taxpayer journey, and the dispute resolution processes this consultation seeks to improve.

Chapter 3 explores improvements to support and guidance for customers going through a compliance check.

Chapter 4 looks at simplifying and aligning processes, in order to allow easier and more consistent access into ADR and statutory review processes.

Chapter 5 sets out potential improvements to broaden the scope of ADR.

Annex A shows the main pieces of legislation in this area.

Annex B provides further background on safeguards overall, the wider mechanisms in place and an overview of findings from the 2024 call for evidence and summary of responses.

Annex C provides references to research HMRC, and other government departments have conducted relating to dispute resolution.

Question 3

2.  The existing taxpayer journey and dispute resolution processes

Accepted Answer

During the course of a compliance intervention, taxpayers will likely seek guidance and support from HMRC and other independent advisory sources. They will have direct contact with an HMRC compliance team, and encounter and consider various processes for resolving disagreements or, if necessary, dispute resolution.

If a taxpayer cannot reach agreement with HMRC during a compliance intervention and they do decide to dispute the decision, these are some of the terms and processes they may encounter.

Current HMRC terms and processes for dispute resolution

A dispute typically involves a disagreement between HMRC, a taxpayer, or their agent relating to a decision HMRC has made. For example, differing views on tax liabilities, tax returns, transactions, requests for further information, notices, or arrangements. Sometimes, a dispute can occur due to a misunderstanding or a legitimate disagreement about the interpretation of the law, which can result in an impasse between HMRC and a taxpayer. Wherever possible, HMRC will seek to resolve disagreements through a collaborative compliance approach during its interventions.

The Litigation and Settlement Strategy (LSS) is HMRC’s framework for handling and resolving all civil tax disputes, applying equally to disputes resolved by agreement or litigation. Alongside HMRC’s Charter and its Compliance Professional Standards, the LSS encourages HMRC to resolve disputes by agreement where possible. Since its introduction, the LSS has supported HMRC in ensuring disputes are resolved lawfully and consistently. Several factors are considered when HMRC decides whether to pursue and resolve a tax dispute, but generally HMRC only pursues a dispute where securing the best net return for the Exchequer seems likely and it believes litigation would be successful.

ADR, as applied in HMRC, involves a trained and externally accredited HMRC mediator who works with the taxpayer, their representative, and the HMRC caseworker to help address any breakdown in communication or allow exploration of points that may have been misunderstood. This can be requested by the taxpayer or HMRC and can take place at any point during a compliance check, both before and after a decision has been issued. The mediator will have had no prior involvement in the case.

Statutory review is a legal right available to taxpayers once a decision has been made at the end of a compliance intervention. An independent, trained review officer from the HMRC Legal Group, who has had no prior involvement in the case and is outside the chain of line management of the decision maker, reviews the decision in light of the taxpayer’s representations to ensure it is legally and technically correct and in line with HMRC policy. The review officer can uphold, vary, or cancel the decision.

Appeal to the First-tier Tax Tribunal is where an independent judge or panel receives arguments from the taxpayer and HMRC to resolve points under dispute. A taxpayer can appeal to the tribunal at any point after receiving an appealable decision at the end of an enquiry. However, if a taxpayer is actively participating in a statutory review, this must first conclude prior to tribunal appeal. There are further rights of appeal to the Upper Tribunal and beyond.

ADR process

If HMRC has opened a compliance intervention, a taxpayer can apply for ADR at any stage of the intervention once an impasse has been reached. It is not a statutory process and does not affect the taxpayer’s right to appeal, or to request a statutory review. However, once HMRC has made a decision at the end of a compliance intervention, the application process can vary for direct and indirect taxes.

For direct taxes, an application for ADR can only be made when a taxpayer appeals against an HMRC decision and one of the following actions have been taken:

the taxpayer made the appeal to HMRC, but HMRC has not offered a statutory review
HMRC offered a statutory review that has been accepted – the taxpayer must wait for the review to end, then appeal to the tribunal and have received an acknowledgement letter before applying for ADR
HMRC offered a statutory review that has not been accepted – the taxpayer must appeal to the tribunal first and have received an acknowledgement letter before applying for ADR

For indirect taxes, an application for ADR can be made when HMRC has made a decision, and the taxpayer has:

accepted the offer of a statutory review – the taxpayer must wait for the review to end, then appeal to the tribunal and have received an acknowledgement letter before applying for ADR
requested an extension of the period to accept the offer of a review, and HMRC have accepted
not accepted the offer of a review – the taxpayer must then appeal to the tribunal first and have received an acknowledgement letter before applying

Statutory review process

Typically, for direct taxes, before a taxpayer asks HMRC for a statutory review of an HMRC decision, they must first give notice of an appeal to HMRC (this is also prior to any appeal to tribunal). This notice of appeal to HMRC must be made within 30 days of the decision in dispute. Once an appeal is received, this may trigger further discussions between the taxpayer and the HMRC caseworker who made the original decision. If this initial appeal cannot be settled by agreement, HMRC will issue a ‘view of the matter’ letter, stating HMRC’s current position and offering the taxpayer a statutory review.

The taxpayer then has 30 days within which they can accept the offer of a statutory review or notify the appeal to the tribunal.

For indirect taxes statutory reviews, there is no requirement to give notice of an appeal to HMRC first. For most tax decisions that result in an assessment, it is good practice to write to the taxpayer giving HMRC’s views before formally sending HMRC’s decision (a pre-decision letter). When issuing an appealable decision, HMRC must offer a statutory review alongside it. The taxpayer then has 30 days to accept the offer of review or appeal directly to the tribunal.

Appeals to the First-tier Tax Tribunal

In 2023 to 2024 there were 12,668 new appeals made to the First-tier Tribunal, with 47,250 appeals in progress ^{[footnote 1]}. Of the 1,500 decided appeals in 2023 to 2024, 88% of decisions from hearings were in HMRC’s favour or the substantive elements of the case succeeded for HMRC.

Simpler cases can end up at tribunal where a taxpayer is not aware of or does not understand other dispute resolution options. The cost and time take to proceed to litigation can vary based on a number of factors but where it is possible to resolve disputes by other means, including dealing with disagreements during a compliance intervention before a dispute arises, it will be a cheaper and quicker option.

HMRC generally succeeds in litigation, which suggests there are disputes getting to litigation which could have been resolved earlier with greater support to taxpayers and more trust in other dispute resolution mechanisms.

Question 4

3.  Reforms to improve support and guidance for customers going through a compliance intervention

Accepted Answer

HMRC is aware taxpayers going through a compliance check may not have prior knowledge of their rights and obligations, especially where they do not have access to representation. As a result, HMRC has undertaken significant work and is considering a number of further improvements to the support and guidance for customers going through a compliance intervention.

Compliance professional standards

HMRC has published the Compliance professional standards, which sets out how it should apply the HMRC Charter and Civil Service Code in its compliance activity. This forms part of HMRC’s ongoing commitment to operating professionally, focusing on strengthening how the department works with taxpayers, and improving the experience of those who are subject to a compliance check. This will be a key component of HMRC’s approach to improving dispute resolution.

Statutory reviews

As a result of recommendations by the House of Lords and the Office of Tax Simplification, HMRC has made and continues to make improvement to the reviews process. Examples of improvements are better signposting of the process and benefits of statutory reviews to the taxpayer in HMRC letters, guidance and in GOV.UK information. Changes have also been made to the process to improve impartiality by routing requests for review directly to the review officer. Other communication methods to explain the benefits of the review include a series of YouTube videos. This has encouraged the use of statutory reviews as an effective means of resolving disputes and has resulted in an increased take up of the statutory review.

Streamlining online applications and further digital appeal routes

HMRC is exploring the scope for streamlining the online process for applying for dispute resolution such as ADR or statutory review, to make it more accessible. This could also provide the added benefit of being able to track progress directly within their existing tax accounts. Streamlining the online application process and integrating with digital systems such as customer tax accounts could improve taxpayer trust, increase transparency in the system and lead to better user engagement.

Question 1: How should digital appeal routes for taxpayers looking to pursue dispute resolution with HMRC be designed?

Question 2: How could the dispute resolution process best be streamlined and integrated with digital services?

Question 5

4.  Simplifying and aligning processes

Accepted Answer

HMRC always seeks to resolve any disagreement with a taxpayer during the compliance intervention. However sometimes it may not be possible to resolve an impasse or dispute early in the taxpayer journey. This chapter sets out potential reforms to align processes in ways that still promote and foster engagement and informal resolution and allow easier and more consistent access into ADR and statutory review processes where required.

Current appeal and ADR processes

The processes for making an appeal and applying for ADR differ between direct and indirect taxes.

Direct taxes

For direct taxes, the taxpayer must first give notice of an appeal to HMRC within 30 days of the decision in dispute, before requesting a statutory review. Once the initial appeal is received this may trigger further discussions between the taxpayer and the HMRC caseworker who made the original decision. If the appeal cannot be settled by agreement, then HMRC may issue a ‘view of the matter’ letter and offer the taxpayer a statutory review. However, if a review is requested before it is offered, HMRC will accept this and provide a ‘view of the matter’ letter without the need for the taxpayer to initially appeal to HMRC, thus skipping the initial appeal to HMRC. ADR is available at any stage of a compliance intervention once an impasse has been reached.

Indirect taxes

For indirect taxes, where appropriate, HMRC may initially provide a pre-decision letter to explain its position. This can trigger further discussion between the taxpayer and HMRC. When a formal decision is issued, a statutory review offer is provided alongside it. ADR is available only after receiving an appealable decision, and taxpayers are rejected if they have not made an appeal to the tribunal first, in order to protect their 30-day time limit.

For both taxes, the taxpayer then has 30 days within which to choose whether to accept the offer of review or appeal directly to the tribunal.

Opportunities to simplify

In HMRC’s 2024 call for evidence on enquiry and assessment powers, penalties and safeguards, one of the reforms options explored considered adopting an aligned approach to appeals across all regimes.

The majority of respondents supported aligning appeals processes, specifically favouring the approach used in direct taxes as it allowed for more opportunities to use ADR before and after an appealable decision. Additionally, respondents preferred the direct taxes payment requirements, which postpone payment of tax owed, as opposed to the indirect approach, which requires upfront payment in order to appeal to the tribunal, unless hardship can be proven. Some respondents favoured a hybrid approach, feeling that this would better serve the existing differences between the direct and indirect taxes process and could encompass aspects of both approaches.

Several respondents noted the indirect appeals process had challenges, mainly from the requirement to pay upfront unless hardship was proven. Some were concerned this may limit access to justice based on a taxpayer’s means or ability to afford legal representation or other forms of representation. This reform focuses on processes rather than payments and would have no impact on aligning payment requirements, which would require detailed and separate consideration.

Potential benefits

HMRC would like to explore the benefits of a more simplified and aligned approach for appeals processes which would combine the benefits of both indirect and direct taxes approaches. In particular:

putting a stronger focus on continuing to engage on an informal basis by replacing the direct tax ’view of the matter’ stage with the indirect tax pre-decision letter approach
improving accessibility to ADR for indirect taxes by adopting the direct tax approach – this would remove the requirement to appeal to the tribunal in order to apply for ADR for indirect taxes and allow applications to be made at any time during the compliance intervention
bringing greater consistency and clarity across taxes by aligning the notification of decisions and offer of a statutory review at the same time

Statutory review offer after pre-decision stage

Where early discussions or ADR have not resulted in a resolution, taxpayers can seek recourse through a statutory review.

When receiving a formal decision, a taxpayer can opt for statutory review. Once this concludes, they still have the option to appeal to tribunal. A taxpayer can also opt to go to tribunal in the first instance without having had a statutory review. For direct taxes, a statutory review is offered after a ‘view of the matter’ is provided, following an appeal to HMRC about the formal decision. A statutory review can be requested earlier during the initial appeal to HMRC. For indirect taxes, a statutory review is offered when issuing a formal decision.

Reviews usually settle disputes and are quicker and more cost-effective than an appeal to tribunal. It can, therefore, be beneficial for taxpayers to seek a review in the first instance. If a taxpayer requests a review and does not agree with the outcome, they can still make an appeal to the tribunal.

This reform proposes aligning these processes into a single model, where HMRC would offer a statutory review alongside a formal decision for both taxes. This could improve consistency for taxpayers who deal with HMRC across different taxes and help taxpayers understand the most suitable dispute options at their disposal.

Diagram 1: Current direct taxes model

Diagram 2: Current indirect taxes model

Diagram 3: Proposed direct and indirect aligned model

Brought together, this new aligned model for all taxpayers could work as follows:

if appropriate, HMRC issues a pre-decision letter prior to the formal decision letter – this allows the taxpayer to query or clarify any details, prior to a formal decision being shared, and provides an opportunity to reach an LSS compliant settlement. ADR can be used at this stage, where suitable
if an early settlement is not reached, HMRC issues its formal decision and makes an offer of statutory review – they can also choose to appeal to the tribunal instead
the taxpayer can accept the formal decision, or they have 30 days to accept or decline the statutory review offer, in line with current statutory time limits – they can also choose to appeal to the tribunal instead
ADR continues to be available after receiving an appealable decision
after statutory review or ADR is concluded, the right to appeal to the tribunal remains in line with current statutory time limits
currently, a taxpayer can appeal to a tribunal without considering ADR – HMRC could implement a requirement for the taxpayer to consider ADR for suitable cases, prior to a tribunal appeal (this is explored further in the document, in chapter 5)

Individual changes required to make an aligned model

For direct taxes this would mean reforms as follows:

remove the legislative requirement for an initial appeal to HMRC, instead providing the taxpayer with the following:
- where appropriate, a pre-decision letter (which can provide time for additional information and discussions)
- an offer of statutory review alongside the formal decision letter
- if the decision is not accepted, the taxpayer would have 30 days to accept or decline the statutory review offer, in line with the current statutory time limit

For indirect taxes this would mean reforms as follows to increase earlier use of ADR:

after receiving an appealable decision, the taxpayer accepts or declines the offer of a statutory review
in line with HMRC’s ADR principles, if suitable (as found in direct taxes), ADR is available without the requirement to appeal to tribunal
this would require the creation and implementation of legislation to allow taxpayers to request entry into the ADR process rather than a requirement to appeal to the tribunal within 30 days
the 30-day time limit to appeal to the tribunal would commence on conclusion of the ADR and statutory review processes
this could grant some additional options for taxpayers to try and resolve a dispute before entering into the tribunal

In this model, both regimes can still maintain their unique differences, but allow for simplification of the process and easier access to dispute resolution by aligning aspects of both taxes’ appeals processes. As a result, they would have similar steps leading up to a tribunal appeal, and the stages where statutory review and ADR are available would also be the same. A simplified, aligned approach could be helpful in improving understanding of the process and reducing possibility for error, with a focus on suitable resolutions that provide taxpayers with certainty.

Ensuring taxpayers are aware of all options available to them is important to ensure cases are resolved effectively using the most suitable method and only suitable cases are appealed to tribunal. This is particularly important when considering unrepresented taxpayers or small businesses without access to an agent. This reform may help to inform taxpayers that statutory reviews could achieve a similar result as a tribunal appeal and may be more cost and time effective. It could also ensure ADR is used more widely and potentially prevent disputes or narrow down the points in dispute. Highlighting these options when an appealable decision is made could also improve taxpayer understanding of dispute resolution and help provide certainty earlier due to the typically shorter duration of a statutory review.

Challenges of aligning the appeals process

Risk of over-simplification

To ensure any alignment successfully simplifies the appeals process it will be important to consider where unique features across regimes necessitate different approaches.

Technical expertise

Pre-decision letters can require input from an HMRC technical lead with a sufficient level of expertise. This is currently also the case when a ‘view of the matter’ letter is provided. Similarly, ADR and statutory review require the appropriate expertise. Given this existing commonality, a shift to move the direct tax approach to the pre-decision approach is expected to be largely resource-neutral.

A full assessment of this to ensure there are no negative impacts on the ability to access the appropriate resource and level of technical input will be undertaken as part of further policy development (the change in the use of ADR is not expected to be resource-neutral but the availability of the required funding will be fully considered as part of the policy development process).

Automated decisions

Where a decision has been automated, as for Self Assessment late filing penalties, there would continue to be no opportunity for early dispute resolution prior to statutory review.

HMRC is interested in views on whether a more informal consideration stage could be more appropriate in these circumstances to allow for the taxpayer to provide additional information or ask questions.

Question 3: Does the model proposed provide a simpler process to resolve disagreements?

Question 4: Would the model potentially improve access to statutory review and ADR where disagreements cannot be resolved in other ways?

Question 5: Is there anything further this model could incorporate to provide a simpler process?

Question 6: Are there aspects of the current ‘view of the matter’ stage that provide benefits and should be retained?

Question 7: Would it be preferable to retain the initial appeal to HMRC while incorporating the rest of the proposed model where possible?

Question 8: What could be the unintended consequences of this suggested model?

Question 9: Are there any other aligned appeal processes, which improve access to dispute resolution, you think HMRC should consider?

Question 10: Should HMRC consider an initial review/alternative stage to the process where a decision has been automated?

Question 11: Are there particular taxpayer groups for who this reform would be best or ill suited, and why?

Question 6

5.  Reforms to improve access to alternative dispute resolution

Accepted Answer

HMRC’s annual report and accounts 2023 to 2024 highlighted that ADR has a positive impact on over 80% of the cases which are accepted into the process. In this instance, positive impact means that the case has been progressed, either by fully or partially resolving the dispute, or by clarifying both sides’ positions and enabling them to make an informed decision on how to move forward.

ADR aims to improve customer experience, reduce the time it takes to complete a compliance check, reduce the need for independent tribunal hearings, and reduce costs for taxpayers and HMRC. Additionally, using ADR in more complex cases may avoid the need for taxpayers to make a long formal written submission to the tribunal to support their appeal.

If a case goes to ADR, it will typically incur no cost to the taxpayer, unless they choose to be represented by an agent, or hire a mediator of their own choice to co-mediate. When ADR is accepted, a mediator will aim to conclude the process within 4 months.

A principled approach to reducing ADR exclusions

Part of the reason ADR applications can be rejected is due to appeals made to tribunal, which need to be acknowledged and categorised prior to acceptance into the ADR process. This means that if a taxpayer applies for ADR after a decision has been made by HMRC, without first appealing to the tribunal, their ADR application will be rejected. Furthermore, when the tribunal acknowledges and categorises cases, if they categorise a case as ‘paper’ or ‘basic’, this excludes a case from ADR. Applications can also be rejected on the basis that issues can be better resolved through other means, the ADR process would not add value to the taxpayer journey, or that they were not suitable for ADR, for example, disputes over default surcharges and automatic late payment or late filing penalties.

ADR application data in 2023 to 2024 showed:

HMRC received 1,309 applications for ADR
of these applications 512 were accepted
of the 367 cases closed, 307 cases were resolved
this resulted in a resolution rate of 84%

This illustrates the benefit of ADR in resolving and clarifying points to ensure both parties come to an agreement and prevent unnecessary litigation. However, it also shows a high number of applications rejected.

HMRC has recently reviewed its ADR exclusion list. Feedback obtained during this review highlighted that the current list is too restrictive, creating barriers in accessing ADR. As a result, HMRC is developing a principle-based approach for cases coming into the ADR process, as opposed to the current ‘out of scope list’. This should widen the net for more taxpayers to be accepted into ADR and help resolve more disputes at the appropriate stage.

Where ADR is considered, parties entering ADR will agree to work collaboratively and have a resolution mindset. The principle-based approach will look to consider cases where ADR can add value to the case and the taxpayer journey, and ultimately progress the case for all parties.

More active promotion of ADR during a compliance intervention

Ensuring early use of ADR requires taxpayer awareness. HMRC believes it can do more to encourage and support taxpayers to make the fullest and most effective use of tools like ADR to help settle disputes. By offering and signposting to ADR more actively, HMRC can help to inform taxpayers suitable for ADR, that both they and HMRC can apply for ADR if an early impasse occurs which may delay a compliance check and reduce certainty for taxpayers. Highlighting this option early on could also help prevent a dispute later down the line, while still preserving taxpayers’ right to dispute resolution processes and appeal to tribunal.

Rule 3 (1) of the Tribunal Procedure (First-Tier tribunal) (Tax Chamber) Rules 2009 (SI 2009/273) states where appropriate, the tribunal can bring to the parties’ attention the availability of ADR and, if the parties wish and it is compatible with the overriding objective, to facilitate use of ADR. This is supplemented by the Chamber President’s practice statement from June 2020. HMRC could consider this as an example approach to bring attention to ADR for taxpayers and increase active promotion. This practice statement is currently being updated.

A requirement to consider ADR

Building on the proposals to promote ADR more actively and encourage early resolution of disputes, one option would be to require taxpayers and HMRC to have considered ADR prior to appealing to tribunal. This could be particularly effective where a case is suitable for ADR and could provide earlier resolution. This would not be a requirement to have participated in ADR where it was not suitable, but rather a requirement for both parties to have given it due consideration prior to an appeal.

Increasing awareness and use of ADR would have challenges in order to ensure it is providing the intended service and functioning successfully. For example, when HM Courts and Tribunal Service Small Claims Mediation Service implemented an auto-referral scheme, they more than doubled their resource and improved systems to ensure their automatic referral was fit for purpose. It would be necessary to have the appropriate resource, adequate training and consolidation period for staff and departmental systems to implement any form of change.

Question 12: Should it be a requirement for HMRC and taxpayers to demonstrate they have considered other means of dispute resolution prior to appealing to tribunal?

Question 13: At what point in the taxpayer journey would it be best to make this consideration? For example, when a taxpayer is first informed about their statutory time limit to appeal to the tribunal.

Question 14: What would be the benefits and risks of such an approach?

Question 15: Including current provisions on ADR exclusions, what criteria would be most appropriate to refer taxpayers to ADR without overwhelming resource and capability?

Question 16: How can we best identify taxpayers who are most likely to be unaware of ADR as an effective dispute resolution tool?

Question 17: What types of impasses or queries best suit a referral to ADR?

Question 18: What points within the taxpayer journey are best to refer a taxpayer to ADR?

Question 19: Are there other approaches for an ADR consideration requirement that HMRC could consider?

Question 20: Is it feasible for HMRC to charge the taxpayer for using the ADR service?

Question 7

6.  Assessment of impacts

Accepted Answer

Summary of impact

Year	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030
Exchequer impact (£m)	nil	nil	nil	nil	nil	nil

Exchequer Impact Assessment

Publication of the consultation has no Exchequer impact. Any Exchequer impact will be estimated following consultation, final scope and design, and will be subject to scrutiny by the Office for Budget Responsibility.

Impacts	Comment
Economic impact	Any economic impact will be estimated following consultation, final scope and design, and will be subject to scrutiny by the Office for Budget Responsibility.
Impact on individuals, households and families	There are expected to be no impacts for individuals at present by publishing the consultation. Any future impacts will be fully examined and detailed.
Equalities impacts	It is not anticipated that there will be impacts on those in groups sharing protected characteristics by publishing a consultation on dispute resolution. Any future impacts will be fully examined and detailed following any developments after the consultation.
Impact on businesses and Civil Society Organisations	There are expected to be no impacts for businesses and civil society organisations at present by publishing the consultation. Any future impacts will be fully examined and detailed.
Impact on HMRC or other public sector delivery organisations	Publication of the consultation is not expected to have any operational and delivery impacts or costs at this stage. Any future funding requirements will be assessed following the consultation.
Other impacts	Other impacts have been considered and none has been identified.

Question 8

7.  Summary of consultation questions

Accepted Answer