Tax cases in Alternative Dispute Resolution rise by over 70 per cent

New figures show that the number of personal and small business tax disputes accepted for Alternative Dispute Resolution (ADR) has risen by over 70 per cent in the last year.

The figures, obtained by audit, tax and consulting firm RSM under a freedom of information request, reveal that HMRC accepted 413 applications for ADR from SMEs and individuals in 2014/15, up from 240 in the previous year.

The statistics also show that the taxman is increasingly likely to try and resolve tax disputes through ADR mechanisms rather than expensive civil litigation. In 2013-14, 66 per cent of applications were accepted for ADR, but in 2014-15 this figure had risen to 82 per cent.

ADR was first trialled by HMRC in 2011, the idea being to help resolve disputes or get agreement between parties about issues which would otherwise have been taken to Tax Tribunal. While ADR is mainly aimed at helping businesses with tax disputes, it can also be used to resolve disputes in complex personal tax cases.

Mike Down, RSM’s Head of Tax Investigations said:

‘These statistics show that HMRC is now increasingly likely to accept applications for ADR as a means of resolving contentious tax issues.

‘Some disputes can result in a complete breakdown of trust between HMRC and taxpayers so having the option of a neutral mediator getting involved can often break the deadlock. The facilitators will invariably be HMRC personnel, so while they cannot accurately be described as being truly independent, in our experience they have always been scrupulously fair to both parties.

‘Clearly this is a cost effective way for HMRC to conclude tax disputes, but there are potentially significant benefits for taxpayers who may be able to settle their affairs more quickly and without being drawn into expensive and lengthy litigation.’