Alternative Dispute Resolution for Tax Disputes

When you're locked in a disagreement with HMRC about your tax affairs, you don't always have to go to tribunal to resolve it. Alternative Dispute Resolution (ADR) is a free mediation service that can help break deadlocks and find solutions without formal legal proceedings. Understanding when and...

What is Alternative Dispute Resolution?

Alternative Dispute Resolution is a mediation service where an HMRC-trained mediator works with you and the HMRC officer handling your case to help resolve your dispute. The mediator won't take over your case or make decisions for you. Instead, they help both sides focus on the key issues, explore possible solutions, and re-establish communication if things have broken down.

The process doesn't affect your legal rights — you can still appeal or request a statutory review even if you use ADR.

Who can use ADR?

Anyone can apply for ADR, including:

Individuals dealing with personal tax issues
Businesses dealing with company tax matters
Landlords with property tax disputes
Agents or accountants representing clients

When ADR can help

ADR works well in several situations:

You and HMRC can't reach an agreement and progress has stalled
Communications have broken down between you and HMRC
There are disagreements about the facts of your case
The dispute seems to result from a misunderstanding
You want to understand why HMRC hasn't accepted your evidence or wants to use different evidence
You're unclear what information HMRC has used and suspect they may have made incorrect assumptions
You need HMRC to explain why they require more information from you

ADR can be used during a compliance check (HMRC's investigation into your tax affairs), at the end of a check when you want to appeal a decision, or at any stage of tribunal proceedings.

When you cannot use ADR

ADR isn't available for everything. You cannot use it for:

Complaints about HMRC delays or misleading advice (use HMRC's complaints process instead)
Criminal investigation cases
Cases the First Tier Tax Tribunal has categorised as 'paper' or 'basic'
Debt recovery or payment problems (contact HMRC about Time to Pay arrangements instead)
Tax credits disputes
Default surcharges
Automatic late payment or late filing penalties
PAYE coding notices
High Income Child Benefit Charges
National Minimum Wage disputes
Accelerated payments and follower notices
Civil evasion penalties

HMRC considers each application individually and reserves the right to reject applications it considers unsuitable for ADR.

When you can apply

You can apply for ADR at any stage once you have a dispute with HMRC. If HMRC has opened an enquiry into your tax affairs, you can apply at any point during the enquiry or tribunal proceedings.

If you're applying after HMRC has made a decision, the timing depends on the type of tax involved.

For direct taxes

Direct taxes include Income Tax, Corporation Tax, and Inheritance Tax. You can apply for ADR when HMRC has made a decision you've appealed against and you have:

Accepted the appeal but haven't been offered a statutory review
Accepted a statutory review offer — you must wait for the review to end, appeal to the tribunal, and receive an acknowledgement letter before applying
Not accepted a statutory review offer — you must appeal to the tribunal first and receive an acknowledgement letter before applying

For indirect taxes

Indirect taxes include VAT, excise duty, and Customs Duty. You can apply for ADR when HMRC has made a decision and you have either:

Accepted HMRC's offer of a review — you must wait for the review to end, appeal to the tribunal, and receive an acknowledgement letter before applying
Not accepted the review offer — you must appeal to the tribunal first and receive an acknowledgement letter before applying

How to apply

The easiest way to apply is using HMRC's online form. Your agent or tax adviser can apply on your behalf if you have one.

If you don't have internet access or need additional help, you can call 03000 538177. This is a 24-hour answerphone service where you leave your name and phone number. A mediator will contact you within 30 days to discuss your application.

When applying, have any correspondence from HMRC about your dispute to hand. You'll need to provide information about the dispute and agree to certain principles.

What you're committing to

By applying for ADR, you're agreeing to:

Provide additional information if asked
Respond to requests within 15 working days
Attend a meeting (by phone, video, or in person) within 90 days of your application being accepted
Share all information promptly

If you're an agent, you must confirm your client agrees to these principles.

If these commitments are broken, HMRC can remove your dispute from the ADR process.

What happens next

HMRC will respond within 30 days of receiving your application to tell you whether ADR is suitable for your dispute.

All applications recommended for rejection go through strict governance procedures. A panel of independent tax professionals must agree any decision to reject an application. If your application is rejected, HMRC will explain why.

If you're unable to reach an agreement at the end of the ADR process, your mediator will advise you on your next steps, which may include proceeding to tribunal.

Sources

Use alternative dispute resolution to settle a tax dispute

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.