HMRC needs to improve its speed over the processing of large and complex tax disputes using its Alternative Dispute Resolution tool, a leading tax expert has said, after reviewing the tax authority's report on its ADR pilot.

Heather Self, tax expert at Pinsent Masons said that while the report demonstrated good progress in identifying cases for ADR, the cases themselves were still not resolved quickly enough.

'Of the 66 cases accepted into ADR, just one third have so far been resolved, with 39 still in the system.'

'Initial results are positive, but more needs to be done to make sure the process moves forward and does not become mired in detail. The 24 weeks quoted for cases which have been resolved is positive, but too many cases are still shown as outstanding almost six months after the pilot phase ended,' she said.

Self's comments contradict the tax authority, which last week desribed ADR as a 'useful tool in resolving entrenched disputes' for large and complex tax disputes when it published its report on the ADR pilot.

The pilot, which ended in March, tested the effectiveness of using mediation to resolve large or complex tax disputes in a manner consistent with HMRC's Litigation and Settlement Strategy (LSS).

The ADR service uses impartial HMRC facilitators to resolve disputes between HMRC and taxpayers at an early stage, with the intention of resolving issues quickly and cheaply, and as an alternative to the Courts and Tribunal Service. Parties do however retain the right to refer the case to the courts for binding determination. This month, the service was made available to all individuals and small businesses.

The large and complex disputes ADR pilot ran in two phases. Phase I (July 2011 to March 2012) took on 14 cases and resolved 11 of these. HMRC's target for Phase II was to accept 50 further cases and resolve 35 of these by the end of March 2013; but due to a slow start receiving cases this target was later reduced to 25. The pilot was open to any tax dispute including those involving corporation tax, income tax, capital gains tax, customs duty and VAT.

HMRC originally expected to use external mediators, unconnected with both parties, for all cases within the pilot. However, according to the report, HMRC staff, trained as mediators who had had no previous involvement with the case were able to 'facilitate structured discussions' leading to resolution. Ultimately, 26 cases were resolved in this way while only two used external mediators.

'The use of HMRC facilitators, often acting jointly with an external mediator, is a pragmatic compromise but shows that independent mediation has a long way to go to reach full acceptance within HMRC,' said Self.

The average elapsed time between application and resolution in cases using ADR was 24 weeks. An average of 34 weeks passed between application and ADR attempt for those cases remained unresolved after the attempt.

Cases processed through ADR represented tax at stake of just over £57m while cases still currently progressing have tax at stake of around £93m, HMRC said.