A pilot introducing a new way of resolving disputes between SMEs and HM Revenue & Customs (HMRC) was launched today.

The Alternative Dispute Resolution (ADR) is a pilot for small and medium enterprises. It uses independent HMRC facilitators to resolve disputes between HMRC and customers during a compliance check but before a decision or assessment has been made. ADR aims to find a fair and quick outcome for both parties, helping to reduce their costs and avoid a tribunal.

The pilot in North Wales and the North West follows a successful trial earlier this year, where 60 per cent of disputes were either fully or partially resolved.

HMRC’s, Jim Stevenson, assistant director, local compliance, said:

“ADR will help SMEs resolve disputes without having to go to a tribunal – saving them both time and money. It is a good opportunity for HMRC to work together with our customers to potentially resolve disputes much earlier than at present.

“The facilitators are HMRC members of staff who have been trained in ADR techniques and have not been involved in the dispute.

“We have found that often there are communication problems. So the HMRC facilitator will help all parties reach a shared and full understanding of the disputed facts and arguments. They will also ensure there is good communication, and help explain what each side is trying to say to the other. The aim is to resolve the dispute or, if not, as many issues as possible.”

ADR does not affect existing processes or review and appeal rights, and covers both VAT and direct taxes.

The Chartered Institute of Taxation (CIOT) has welcomed the announcement by HM Revenue and Customs (HMRC) that they will be trialling a new way of resolving disputes between small businesses and the taxman over the next six months.

Andrew Gotch, chairman of the CIOT’s Owner Managed Business Sub-Committee, said:

“This is a welcome move. ADR has the potential to be a valuable Gordian knot-cutter in investigations and technical disputes that have run into the sand. Anything which can help resolve disputes between HMRC and taxpayers to mutual satisfaction without the need to resort to expensive and time-consuming litigation has to be good news for all sides.

“There has already been a small-scale pilot of this new technique, using a few hand-picked cases which had already reached the stage of an appeal against a decision. Under this new trial, cases will be accepted at an earlier stage, where no appeal has yet been made, which is sensible. Additionally, taxpayers and their advisers will also be able to put cases forward for ADR, whereas in the first pilot HMRC did the selecting in most cases.

“It is very important that HMRC are able to gather reliable data from this next stage in the ADR pilot, so that an informed decision can be made as to whether the facility should be extended nationally. So, even though at this stage only those in some parts of the country will be able to participate, I would encourage all small businesses and their tax advisers who can take advantage of the facility to consider using it in situations where there are intractable disagreements with HMRC. This is an entirely voluntary process, from which neither side can possibly emerge worse off. In fact, evidence from the earlier phase of the pilot suggests that participants usually emerge far better off either in terms of getting a solution or understanding each others’ positions better, thus saving stress, time and costs all round”.

 

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