Alternative Dispute Resolution
The Alternative Dispute Resolution (ADR) is a mediation service offered by HMRC where there is a dispute (usually in a tax investigation) between HMRC and the taxpayer or their tax advisor.
In effect HMRC provide a trained mediator (who is an HMRC employee) who a neutral third-party mediation to explore a way round the dispute.
Dispute for the purpose of the ADR has a number of wide meanings including:
- A dispute about why HMRC have asked a taxpayer to do something in the tax investigation
- A disagreement about a point of view
- Where HMRC and the taxpayer are in dispute about the facts
- Where there is debate on a technical matter
- There has been a breakdown in communication between the parties
- HMRC have made unfounded allegations or assumptions
As part of the Alternative Dispute process the role of the mediator is to assist the parties in getting to the bottom of what the dispute is actually about. There are often a number of areas where agreement can be reached, and the mediators role is to identify the exact area where the dispute occurs and the exact facts in dispute. This then enables parties to focus on these areas and to try to explore if common ground can be reached. If agreement cannot be reached then the process if very useful for focussing on the key matters in any formal action at the Tax Tribunal or to enable HMRC to conduct an independent technical review done to ensure that their original view is correct.
The ADR mediator does not express a personal opinion but seeks to fully understand each party’s point of view and help each party explain this to the other side.
Although HMRC can suggest that a taxpayer and his advisor take part in the ADR they cannot insist on it. The application to take part in the ADR has to be done by the taxpayer or his advisor.
The initial application is relatively easy to do and must include a brief outline of the dispute. The Alternative Dispute Resolution mediator then calls all parties (which will normally be HMRC and the tax advisor representing the taxpayer) and seeks to find out more about the dispute. The mediator also tries to establish that the people taking part in the mediation are doing it to try to actually reach agreement rather than being completely intransigent in their position.
If the ADR mediator thinks that the dispute is appropriate for mediation all parties are notified that they have been accepted into the process and a date is set for a meeting. All parties will also be asked to sign up to an agreement known as a memorandum of understanding which basically says that all parties:
- Enter the ADR process as they want to try to settle the dispute
- Provide information to the ADR mediator within 15 working days of it being requested
- That all parties will be available for a meeting within 90 days
- That agreement is not guaranteed
The memorandum of understanding also makes it clear that if people do not take the matter seriously and refuse to try to mediate or provide timely responses that the process will be withdrawn.
As part of the process each party has to submit a written summary of the points in dispute along with the view of the matter. This varies from tax investigation to tax investigation.
The facilitator uses this to get background on the matter before the meeting (or telephone conference).
In the process the officer responsible for the dispute and their manager must attend.
At the meeting it may be that there has been such a breakdown in communication that each party may be in a different room. The facilitator first will try to get all parties to agree to be in the same room together. This may mean that there are some issues raised which need to be cleared before the meeting takes place. The ADR mediator (rightly) believes that getting parties talking to each other is the best way to either reach agreement or get to the key points which need to be litigated.
At the end of the process if the matter has been resolved then the ADR mediator will draw up a document setting out what was agreed for all parties to sign.
If the matter has not been resolved, then the dispute goes back into the normal HMRC process where a taxpayer may:
- Ask HMRC for an independent officer to review the case
- Raise a complaint about the matter for further HMRC review
- Take the matter forward to the Tax Tribunal
If HMRC have raised an assessment, it is important that the normal appeal and tax hand over process is followed as the ADR does not extend the 30 day appeal time limit.
The ADR can be a very useful process and where all parties genuinely come to the process with a desire to sort matters out and avoid litigation Gilbert Tax’s experience (both in taking part in the process and in speaking to people who have taken part) is that it is very useful and can assist in really moving matters forward. The only problems appear to occur where the HMRC officer with whom the taxpayer is having a dispute does not really want to take part and refuses to acknowledge there are other view points and that they are capable of being wrong.
Our experience is that the mediators are well trained and that they are truly independent. We would recommend that the taxpayer does not take part in the ADR on their own and that they engage a tax advisor to assist with the process.
Gilbert Tax understands that people sometimes make mistakes in their dealings with HMRC and that HMRC make mistakes in dealing with taxpayers. Many people do not know how to deal with HMRC or who to turn to for help resolve the tax dispute.
Gilbert Tax is a firm of tax advisors who specialise in resolving people's problems with HMRC. We have extensive expertise in dealing with all forms of tax investigations and tax disputes as well as with taking matters to the Tax Tribunal where agreement cannot be reached.
Gilbert Tax deal both directly with the individual who is under enquiry and also work with many firms of accountants supporting them in dealing with HMRC disputes and advising them on how to handle HRMC to get the best result.
The fact is that proper management of HMRC is the best way of reducing the tax, interest and penalty as well as the time taken in resolving any tax dispute.
Gilbert Tax are none judgemental and rigorously defend your position within the scope and parameter of the law. We take control and manage the process to minimise the interruptions that any form of tax investigation causes to an individual's life and business.