ECSH92000 - Consider Alternative Dispute Resolution
Source: gov.uk (2025-01-08)


What is Alternative Dispute Resolution?

Alternative Dispute Resolution (ADR) in HMRC is a flexible process in which an impartial and neutral HMRC mediator actively assists parties in working towards resolving a tax dispute outside of the Tribunal or Court. The parties in dispute have ultimate control of the decision to settle.

When a dispute arises between HMRC and a customer, we can offer ADR in which the parties in dispute can call on the services of an impartial and neutral HMRC mediator, who will help them explore ways of resolving the dispute without the need for formal proceedings if possible.

ADR can be used before or after HMRC has issued a decision that can be appealed against, and at any stage of an enquiry, including:
- During a compliance check, when both parties are unable to reach an agreement, or where progress in the enquiry has stalled.
- A the end of a compliance check, when a decision has been made that the customer can appeal against, once the appeal has been made.
In EC-S it is more likely that the ADR will be used in the second scenario.

How can ADR be used within EC-S?

In many cases where EC-S makes a decision that can be appealed against, ADR will not be appropriate, as it requires there to be a disputable point. For example, if an Estate Agency Business that has been trading whilst unregistered since 2018, was issued with a late registration penalty in 2024, and there was overwhelming evidence they had been acting as an EAB during this time, it is unlikely that ADR would be suitable, as the business should have been registered and it is unlikely they could dispute the fact. However, if the business was fined for non-compliance but believes it exercised all due diligence and took all reasonable care, making a fine inappropriate due to reg 76(4), there may facts in dispute which ADR could resolve.

Professionally trained and accredited mediators from the HMRC ADR team work with HMRC officers, and the business and any representatives they have, with the aim of resolving their dispute.

Either EC-S or the business can suggest the use of ADR. The business can make an application through the HMRC website by completing a short digital form (https://www.tax.service.gov.uk/submissions/composite-auth/auth-selection-form/apply-for-alternative-dispute-resolution-to-settle-tax-dispute?continue=%2Fsubmissions%2Fnew-form%2Fapply-for-alternative-dispute-resolution-to-settle-tax-dispute).

The dispute is then referred to an HMRC mediator who will decide whether the case is suitable for ADR within 30 days. EC-S will be notified of the request by the ADR/Mediation team.

The format for the mediation process will be determined by the mediator after considering all aspects of the case, and the process may change during the mediation depending on how matters develop.

When will ADR not be used within EC-S?

Mediation will only be used in cases where there is a potential benefit right at the start. For example, if the business has not made any representations and has not engaged with EC-S throughout the penalty process then it is unlikely mediation would be suitable. It should not be used if there is no realistic prospect of progress leading to settlement of the dispute and further discussion will just delay matters.

If the customer doesn’t want mediation, then it will not happen.

In some cases, EC-S may want to get a “test case” before the Tribunal to get a ruling on a disputed issue that is occurring in several other similar cases, so mediation may not be available, depending on the particular circumstances.

Mediation is unlikely to be useful where there is significant doubt about the veracity or strength of the evidence provided and HMRC wish to test it by cross-examination at Tribunal.

Further Guidance

More information on ADR is available in HMRC’s ADR Guidance (https://www.gov.uk/hmrc-internal-manuals/alternative-dispute-resolution-guidance).