HMRC says its recent trial of using Alternative Dispute Resolution (ADR) in large or complex cases has shown that this approach is a 'useful tool in resolving entrenched disputes'.
The department ran two pilots starting in June 2011 to test the use of ADR techniques for large or complex cases ranging across business customers, public bodies and individuals. HMRC says the outcomes show that ADR can be useful in speeding up dispute outcomes in suitable cases.
Phase I of the pilot (July 2011 to March 2012) took on 14 cases and resolved 11 of these. Phase II got off to a slow start with receiving cases, but eventually saw 98 applications by the end of March 2013. Those cases which have been through ADR represented tax at stake of just over £57m. Cases currently still working within the pilot have tax at stake of around £93m.
The cases brought to ADR included disputes over corporation tax, income tax, capital gains tax, VAT, PAYE, customs duty, construction industry scheme and penalties, and were suggested by either by the client's advisers or by HMRC officials reviewing cases.
HMRC says it is confident that resolving disputes through the ADR process produces 'significant' cost and time savings for both HMRC and the customer, although these are hard to quantify because of the large number of variables in each case, including whether or not a particular case would go to appeal.
However, in the pilots, the average length of time to resolve a case in ADR was 24 weeks, compared with a 70 week average between making an appeal to the tribunal service and the hearing. HMRC also put the cost of taking a case to First Tier Tribunal at around £90,000 for HMRC, with potentially significant additional legal costs for the customer.
HMRC says analysis of the pilots shows that a dispute is more likely to resolve through ADR where a hearing before the tribunal is some way off. In addition, where formal routes are well advanced, irrespective of whether the dispute resolves through ADR, entering into the ADR process increases the time a dispute takes to resolve.
HMRC says this is because when a case is close to a tribunal hearing date, to allow the ADR process to proceed, a stay of the tribunal hearing is usually required. This makes the benefits of attempting ADR in cases which are well advanced towards a hearing before the tribunal less obvious and the case for accepting such applications less compelling.
The pilots have now ended, but HMRC says ADR will continue to be available and anyone who wants to consider an ADR in relation to a current dispute should consult their caseworker or customer relationship manager. The Dispute Resolution Unit (DRU) will continue to act as the central point of contact for those wishing to adopt this approach.
