ADRG02700 - What types of cases are suitable for Alternative Dispute Resolution

Whenever HMRC and a customer are locked in a dispute and there is no clear exit point, or when disputes seem destined for the Tribunal, it is sensible for both sides in the dispute to consider ADR. In most cases coming into the ADR process the customer will already have appealed against a formal HMRC decision on the issue, but mediation can also be used effectively before matters have reached this stage.

If there is no collaborative working going on, or if working relationships have broken down, then the introduction of a mediator can help take the heat out of the situation. Instead of arguing directly with each other, each party is talking to an impartial mediator who is focused on brokering a resolution.

Cases may also be suitable for mediation where both sides are working collaboratively but find they are not making progress. For example, it may be proving difficult to pin down the essential points of disagreement, or there may be uncertainty about the other party’s underlying position.

Sometimes there is uncertainty about what the important facts actually are. In some long running cases the customer will be reluctant to provide further information in addition to earlier submissions of documents because they have lost faith in the enquiry process and see no end in sight to HMRC’s requests for information. A mediator can help the sides decide and agree what facts are the relevant ones and also what further facts need to be disclosed so that a decision can be made.

Another area that may be suitable for mediation is where matters seem to be heading inexorably towards a Tribunal hearing even though the parties do not want to resolve the dispute in this way.

Mediation will be considered even where the issue appears to be an “all or nothing” argument, because sometimes it is possible that more exploration could uncover additional evidence or an alternative approach that would enable HMRC and the customer to resolve the dispute.

In fact, even in substantial “all or nothing” cases where HMRC is prepared to litigate because there is an established ‘HMRC view’ on a technical issue, and there does not appear to be any exceptional facts or circumstances that justify a departure from this view, a mediation day may still help conclude matters more swiftly. This is because a meeting may help clarify the situation for the customer who has the opportunity to hear about the HMRC position directly and reassure themselves that their view has been heard and properly considered by HMRC. At this point some customers decide to accept the HMRC position rather than pressing on to a Tribunal hearing. However, it should be noted that, in line with the Litigation and Settlement Strategy, case teams should always thoroughly explain their decisions to customers.

The customer may also be able to seek reassurance about how HMRC will view them after the dispute is resolved, and the mediator can help work on constructing a more open and positive relationship for the future.

Of course, ADR in “all or nothing” cases need to be carefully managed by the mediator to ensure that no false expectations are raised in the customer or their agent’s mind by agreeing to a short period of mediation.