Have you ever felt that an HMRC officer is simply not paying consideration to representations made? They might be brash, difficult or simply persistently concentrating on one or two minor points delaying the resolution to an enquiry. What can an adviser do to sort the problem out?
Knowing how an officer works and thinks is a good start (although not always particularly nice). It is usually helpful for an adviser to bounce the position off a specialist (we’re happy to have chats) but it might be appropriate to seek alternative dispute resolution (or suggest you are considering it – but be careful).
In 2011 HMRC piloted the Alternative Dispute Resolution (ADR) for this purpose, and in 2013/14 stated that ADR is “business as usual” for SMEs and Individuals. It aims to help taxpayers resolve disputes or agree which issues need to be taken for a legal ruling; it doesn’t affect the right to appeal or ask for a statutory review.
The Alternative Dispute Resolution gives the option of having an independent third party mediator to work with a taxpayer and the HMRC officer dealing with the case to explore ways of resolving the dispute through meetings and telephone conversations. They don’t take over responsibility for the dispute, but they work with you both to help you focus on the areas that need to be resolved.
HMRC is clear that ADR is not suitable for all disputes, and should definitely not be used to appeal against any filing penalties. The cases that will be considered are ones where each party has already undertaken detailed discussions and generally are heading towards litigation or are of a protracted nature. Some examples of situations where it may be useful are when:
- the working relationship between the parties has broken down
- there is a disagreement on the key points or underlying facts of the case
- there is disagreement on relevance of certain facts or evidence requested/submitted
- neither party is prepared to consider alternatives without the intervention
- further suitable evidence needs to be obtained to assist in resolving the dispute
It is not just cases where there are disagreements on the facts as HMRC also recommends in some instances cases which appear to be ‘all or nothing’ or where only a dispute over points of law exist might be suitable for ADR.
Large businesses which have an HMRC Customer Relationship Manager or a dedicated caseworker should first contact them to discuss Alternative Dispute Resolution. For small and medium sized businesses or if personal tax affairs are complicated, there’s an online form to send details to HMRC.
HMRC has confirmed that using the Alternative Dispute Resolution process will not have a negative impact on their relationship or dealings with HMRC and will not prevent the client from requesting an internal review procedure or appealing to the tribunal.
HMRC will let you know within 30 days if ADR is suitable for resolving the dispute. A Memorandum of Understanding (MoU) will need entering into, which includes a summary from each party as to what is in dispute and how each party plans to work together. The MoU also sets out the process and confirming agreement to take part. Each side will suggest who they believe should be appointed as mediator and who will be the representatives for each side. If at any time the terms of the agreement are broken, HMRC can remove your dispute from the process.