HMRC’s Alternative Dispute Resolution scheme

A pilot scheme launched by HM Revenue & Customs (HMRC) to resolve tax disputes between inspectors and small businesses has received a mixed reception from business groups.

The Alternative Dispute Resolution scheme (ADR), which will be piloted in north Wales and the north west, has been described as a “very good thing” by tax expert Ian Young at the Institute of Chartered Accountants for England and Wales (ICAEW).

However, the Forum of Private Business (FPB) was less impressed.

“While a mechanism addressing small-business owners’ disputes with HMRC is much needed, it seems ludicrous that it has had to come to this,”

said FPB senior policy adviser Phil McCabe.

“Good customer service should be standard practice yet we continually hear about poor administrative procedures as well as the attitude of inspectors towards business owners.”

The ADR follows a successful trial last year in which 60 per cent of disputes were fully or partially resolved. The scheme will apply to cases concerning both direct taxes and VAT and will include an independent facilitator — an HMRC employee who has not been involved in the case — trying to broker an agreement during compliance checks before a decision or assessment has been made.

“It’s a very good thing,”

said Young, noting that in the past HMRC had tended to take a rigid view in tax disputes.

“It’s most obviously going to be beneficial in complicated cases where you may need to have more information or where there’s more than one way of looking at payment, such as cases involving transfer pricing.”

HMRC’s assistant director of local compliance, Jim Stevenson, said ADR would save businesses time and money.

“We have found that often there are communication problems,” he said. “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.”

Facilitators will be trained in resolving disputes fairly, but the FPB questioned their impartiality.

“We will monitor the effectiveness of the service closely,” said a spokesman.

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