Small Business Tax Dispute Service

HMRC have announced an extension to its Alternative Dispute Resolution (ADR) Scheme, following a successful initial trial period.

The essence of the scheme is to offer an is for an "independent HMRC facilitator" to offer a mediation-based approach to resolving a tax disputes which arise during the course of a compliance check, before an assessment or appealable decision is issued.  Its aim is to reach a quick and fair conclusion the dispute and to avoid the need for either party to take the case to tax tribunal.

The scheme received a mixed reaction initially with some questioning the "independence" of the HMRC facilitators.  However, initial reports have been favourable with 60% of cases been either fully or partially resolved.  The scheme was originally made available in the North West of England and North Wales but has now been extended to include London, South West England and South Wales.

It is important to note that this is a different, and reportedly more impartial, service to HMRC's Internal Review process and that the scheme is only being trialled at the moment.  The success of the scheme will depend partly on the amount of take-up by taxpayers and their agents; those involved in tax disputes should try and use the service, wherever possible.  Using the service does not subsequently affect the taxpayer's right of appeal and even if a favourable outcome cannot be reached during through ADR, it may provide a useful pointer as to which way a future tribunal case might go.

The scheme may be used for both VAT and direct tax disputes.

HMRC advise that cases potentially suitable for ADR may involve any of the following features:

  • Facts which are capable of further clarification;
  • Disputes that may benefit from obtaining more suitable evidence;
  • Fact and/or technical matters in which there is legitimate scope for any party to obtain a better understanding of the other’s arguments; 
  • Issues which are capable of further mediation and settlement by agreement within the 
  • framework of the Litigation and Settlements Strategy (LSS).