Where are we with Alternative Dispute Resolution (ADR)?

What is Alternative Dispute Resolution (ADR)?

In a tax context, ADR has now been around for a few years but is not used much. In 2017/2018, there were only 612 ADR applications. ADR in the context of tax generally means a mediation service whereby an impartial third party can try to move on arguments between HMRC and the tax payer which have become entrenched and unproductive. This will often involve a HMRC mediator (therefore some people question the impartiality!) who will sit between a professional firm and HMRC to try to move ‘road blocks’ to arguments.


Should we be taking another look?

After correspondence with HMRC reaches a certain point in broad terms a client must decide to put up or shut up. ‘Put up’ here means stumping up for the costs of a first tier tribunal. This can be extremely expensive and clearly there are no guarantees that the client will get the result that they want.  ‘Shut up’ here means conceding to HMRC’s position. ADR can come in here as a handy last ditch attempt to close an enquiry (favourably) without the need for a tribunal. The main pros and cons are as follows:



  1. Not much to lose / worth a go.
  2. Can remove the need for tribunal.
  3. ADR may make client see the futility of a tribunal (ie they agree with HMRC).
  4. ADR will usually be positive preparation for a tribunal.
  5. Arguably the client will be viewed more favourably by the tribunal if they have tried ADR.



  1. Perception that HMRC ADR mediator is not impartial.
  2. ADR may go well but the main HMRC decision makers may not attend.
  3. Delay caused by ADR creates a longer period of uncertainty.


Last word

From a cost/benefit analysis if HMRC and a client do not see eye to eye over a particular tax issue, ADR should be worth a punt. The best case scenario will be that HMRC will change its stance and the worst case will be that a case proceeds to tribunal but the client’s representative has a clearer understanding of HMRC’s stance – which can only be a good thing.




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