Put simply ADR is a mediation process that can be used to facilitate the settlement of tax disputes where progress 
has been stalled, or parties have reached an impasse. It applies to all taxes and is available to all taxpayers.
Although still in its infancy ADR is proving popular. There were more applications for ADR in the first half of 2016 than in the whole of 2015. HMRC want ADR to work – 75% of requests for ADR were accepted and 62% of these reached a successful resolution.
ADR is more frequently used by small businesses, this may be because larger businesses are more likely to be able to afford the costs of litigation.
Only 4% of ADR cases proceeded to litigation – a costlier route for the taxpayer.
Before ADR the taxpayer had to rest all its hopes on the Internal Review process. In its 2016 Annual report HMRC state the clear majority of cases referred for Internal Review are penalty cases and over half of these were cancelled or varied in some way. For cases that did not concern a penalty of some sort only 30% were cancelled or varied. Surprisingly, 87% of this cases were put forward by unrepresented taxpayers.
This is probably bacause most tax advisers have had a negative experience of the Internal review process. For matters that concern policy or practice HMRC officers have no discretion beyond the existing policy or practice. For cases requiring technical clarification the Referring Officer often finds it necessary to refer to a specialist – this is very often the same individual who determined the matter in the first instance. Internal review in these circumstances is just a rubber-stamping exercise for HMRC.
If you find yourself at logger heads with HMRC make sure you understand what options are available to you and when to use them.
There are more cost effective alternatives to the Tax Tribunal if you don’t agree with the stance that HMRC have taken.
The Bedrock team are experienced in resolving disputes with HMRC on behalf of accountants and their clients. Get in touch today if you’d like to learn more.
Alternatively you can read more about our tax dispute service here.
