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HMRC internal manual

Compliance Handbook

How to do a compliance check: resolving issues and disputes: Alternative Dispute Resolution

In certain cases Alternative Dispute Resolution (ADR) can help support the resolution of disputes by

  • facilitating agreement between the parties or
  • helping the parties to prepare for litigation.

Alternative Dispute Resolution is another way of settling disputes in a collaborative way. It includes the use of an independent person from HMRC (a facilitator) who has been specially trained to act as a third party mediator. The facilitator will not take over responsibility for your compliance check but will help both parties explore ways of resolving issues and disputes. This approach can be especially useful in long running disputes.

The facilitator works with the person and the HMRC caseowner to try and focus on the areas that need to be resolved and, if needed, they will help re-establish dialogue. In practical terms this could be through meetings and telephone conversations.

Resolving disputes by agreement is likely to be the most cost effective and efficient outcome in the majority of cases. However, HMRC will not compromise on its view of the law to secure agreement, and in that context there will be cases where litigation offers the most effective and efficient means of resolving disputes. In such circumstances, HMRC will seek to reach resolution of the dispute by litigation as quickly as possible.

ADR is customers are in the ‘SME, individuals and CITEX’ sectors. Entering into the ADR process will not affect the person’s existing review and appeal rights.

ADR is not appropriate for disputes about

  • payments
  • fixed penalties on the grounds of reasonable excuse
  • tax credits
  • PAYE coding
  • claims for tax not to be collected under ESC A19
  • cases being dealt with by HMRC’s Criminal Investigators.

The person can request their case be considered for the ADR process at any stage in a dispute although it should be noted the ADR process should be restricted to cases where the parties have reached an impasse.

The person, or their advisor, can apply for ADR directly to HMRC using the following link Application to use Alternative Dispute Resolution.

The aim of ADR is to reach settlement within the terms of the terms of HMRC’s Litigation and Settlement Strategy (LSS) and avoid the need to litigate. This means that you will always have in mind

  • the costs to both HMRC and the person involved in opening or pursuing a dispute
  • the likely outcome in terms of tax, or in positively influencing customer behaviour
  • whether any proposed settlement reaches the right amount of tax within the law
  • the chance of success in the event of litigation.

For further information about the ADR process see frequently asked questions.

For further information on litigation and rights of appeal, judicial review and statutory internal reviews see the Appeals reviews and tribunals guidance (ARTG).