HMRC has updated its guidance on the use of the Alternative Dispute Resolution (ADR) service, providing taxpayers with improved information over when and in what circumstances the service can be used
The ADR service can be used to resolve disputes with HMRC. Introduced in 2014, it provides small and medium-sized enterprises (SMEs) and individuals with a means of resolving direct tax and VAT disputes with the tax authority, with the objective of cutting costs and reducing the number of cases that reach the First Tier Tribunal (FTT).
It is designed to deal with cases resulting from disputes over direct taxes, such as income tax, inheritance tax (IHT) and corporation tax, and indirect taxes, such as VAT and excise duty.
Applications are looked at on a case-by-case basis and an HMRC mediator works with both the tax authority and the concerned party to resolve the dispute.
The guidance on the ADR service has been expanded to explain in what circumstances the service can be used for. These include situations where communication between the two parties has broken down, where the dispute is over the facts of the case or due to a misunderstanding, or where the concerned party might believe that HMRC has disregarded evidence or made wrong assumptions.
However, ADR cannot be used in a number of circumstances. Cases where there have been complaints about HMRC delaying the use of information or giving misleading advice are to be referred to a dedicated complaint line. Issues with debt recovery, tax credits or default surcharges are excluded from the service.
Furthermore, cases that HMRC’s criminal investigators are dealing with will not be considered, nor will cases that the FTT has categorised as ‘paper’ or ‘basic’.
Applications to use the service can be submitted via an online form. The ADR will consider the case and let the concerned party known within 30 days if the service is suitable for resolving the dispute.
If so, the concerned party will be required to fill out a ‘memorandum of understanding’ which sets out the process and certain conditions. Breaking these conditions can result in a cancellation of the ADR process.
Report by James Bunney