Q. I’m currently in dispute with H M Revenue & Customs (HMRC) and my accountant is having problems in getting the Inspector dealing with the enquiry to understand my specific business and how it operates. I believe HMRC have recently launched a pilot scheme which allows a review of the case with a different officer and my accountant. Is this true and if so how does the review work and would I be bound by any outcome?
A. You are correct as HMRC launched a pilot scheme for Alternative Dispute Resolution (ADR) from the 1 January. However as this is a pilot scheme at present it is restricted to businesses based in North Wales and the North West.
If you are based in this geographical area then you could possibly make use of ADR. The pilot is for small and medium enterprises. It uses “independent” HMRC facilitators to resolve disputes between HMRC and taxpayers during a compliance check but before a decision or assessment has been made. HMRC states that ADR aims to find a “fair and quick” outcome for both parties, helping to reduce their costs and avoid a tribunal.
The facilitators are HMRC members of staff who have been trained in ADR techniques and have not been involved in the dispute previously. It is the role of the HMRC facilitator to help all parties reach a shared and full understanding of the disputed facts and arguments if possible. 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.
So how do you ask for a case to be included in the ADR and what happens once it has? For the purposes of the pilot and because HMRC want to test the success of ADR at an earlier stage in the compliance check process, they are restricting the availability of ADR to cases where an appealable tax decision or assessment has not been made. Where a taxpayer and/or his representative believes that ADR may speed up resolution of their dispute with HMRC, they can make a telephone application to be included in the pilot
HMRC will advise taxpayers and/or their representative, whether a case has been accepted for ADR within 30 days of receipt of the request.
HMRC have indicated that for this pilot suitable cases for ADR may involve disputes were facts are capable of further clarification, or disputes that may benefit from obtaining more suitable evidence and fact and/or technical matters in which there is legitimate scope for any party to obtain a better understanding of the other’s arguments.
Areas not suitable for ADR are identified as those which may involve issues which require clarification in the wider public interest – these might include matters of industry wide application, issues linked to or involving co-ordinated appeals issues (‘stood behind’ cases) for example ‘Compound Interest’ type disputes and cases that could only be resolved by an HMRC departure from its established technical or policy view
Where the case falls within the appropriate criteria, the facilitator will contact the taxpayer or their representative to explain the process, and ask for the completion of a simple Memorandum of Understanding to confirm the customer’s participation in and commitment to ADR. Similar agreements are a feature common to Dispute Resolution in all areas of dispute, not just tax.
The facilitator will then work closely with the taxpayer and/or their representative and the HMRC officer who has been dealing with the case, in an open, flexible and objective way to see whether progress can be made towards resolving the tax dispute.
For those involved in the pilot at the end of the ADR process HMRC will ask participating taxpayers and their representatives for feedback on how well the process has, or hasn’t, worked.
Taking part in the pilot in no way prejudices a taxpayers case and it does not affect their right to have an internal review or to take their appeal to Tribunal. The facilitator will not be called as a witness by HMRC or be involved in the appeal.
If you need any further help please call the TaxWise Advice Service on 01455 852555 and one of our specialists will be happy to help.