Out-Law / Your Daily Need-To-Know

Extension of HMRC's alternative dispute resolution is good news for small businesses and individuals, says expert

Out-Law News | 06 Sep 2013 | 3:31 pm | 2 min. read

Small businesses and individual taxpayers who find themselves involved in disputes with HM Revenue and Customs (HMRC) can now take advantage of a quicker, cheaper alternative dispute resolution (ADR) process.

The ADR service, which uses impartial HMRC facilitators to resolve disputes between HMRC and taxpayers at an early stage, has been made available to all individuals and small and medium-sized enterprises (SMEs) following a successful two-year trial.

Tax expert Phil Berwick of Pinsent Masons, the law firm behind Out-Law.com, said that the new service had "little downside", as taxpayers' existing right to take an unresolved dispute to a tribunal were unaffected. They would also be able to retain control of the dispute and withdraw from the process if an unacceptable settlement was not possible, he said.

"Even if agreement cannot be reached under ADR, the process will at least allow the taxpayer to find out what the outstanding issues of the tax inspector are," he said.

"Even requesting ADR might get HMRC to concede points – the existence of the ADR route might help to focus the inspector's mind, even if the process is not eventually used," he said.

The ADR process used by HMRC is a form of mediation, in which a third-party facilitator helps the parties to come to a mutual, binding agreement. If agreement cannot be reached, the parties retain the right to proceed to the Tribunal Service and Courts for binding determination. Specially-trained members of HMRC staff who have not previously been involved in the dispute will act as facilitators.

The new service is available to small businesses and individual taxpayers where a tax issue is in dispute, whether or not an appealable tax decision or assessment has been made by HMRC. It is open to all taxpayers whose tax affairs are handled by HMRC's Local Compliance SME and Local Compliance Individuals and Public Bodies units, and covers disputes in relation to both VAT and direct taxes.

"I am delighted to announce that alternative dispute resolution for small businesses and individuals has entered mainstream HMRC business," said Richard Summersgill, HMRC's director of local compliance.

"We know that taxpayers like the speed and flexibility of alternative dispute resolution, and evidence has shown that by using the simple service, many disputes can be significantly shortened and resolved without recourse to tribunal," he said.

Tax expert Phil Berwick said that using ADR could help taxpayers get a decision more quickly, and at considerably less cost.

"Whilst you might still want specialist help to prepare for ADR, the costs will be lower than preparation for the tribunal," he said.

"As ADR is less formal than a tribunal the amount of time than an individual or a business owner needs to spend at the dispute resolution meeting will be far shorter. They should also get a far quicker decision from ADR than at a tribunal, as there is currently a very large backlog of cases waiting to be heard by the tribunal," he said.