Look at any current tax/accounting magazine or website and the abbreviation ADR will jump out and hit you, says Jennifer Adams.
ADR, or Alternative Dispute Resolution, is the buzz word at the moment. Therefore I was in two minds whether to accept an invitation to attend a webinar on the subject presented by Val Hennelly HMRC head of dispute resolution and Andrew Gotch chair of CIOT OMB sub-committee, presided over by John Whiting CIOT tax policy director, but I was intrigued as to what people at the coal face thought of the new scheme.
In the end I was glad I attended although I did find some of the language difficult to follow in places being in “HMRC tech-speak” rather than words of one syllable.
Val Hennelly started proceedings by explaining the reasons for the new Litigation Strategy. Each sounded relevant and viable, the reduction in costs (on both sides) and intention to “stabilise and improve customer relations” catching the attention. The idea is to enable mediation to take place as an opportunity to resolve conflict - and as Andrew Gotch pointed out “allows resolution without loss of face on both sides.” The procedure intends for both sides to sit back, take stock and with a trained facilitator see if both parties can solve a problem without the cost of going to a tribunal or further.
Currently there are two types of taxpayer (sorry... “customer”) who can take advantage of the procedure, namely the large companies and SMEs, although Ms Hennelly did indicate that personal tax issues are being considered for inclusion and suggested that should practitioners have any personal tax cases where proceedings seem to have come to a halt then they could request that the case be considered.
Examples of suitable problem areas would be R&D and employment status. Questions covering VAT partial exemption, Fleming claims (VAT three year - time limit claims), domicile and transfer of intangibles have been settled using ADR.
HMRC has been actively looking at cases that would otherwise be on their way to tribunal to see if they would be suitable. Ms Hennelly said that the benefit can already been seen with cases being dealt with in an average turnaround of 56 days, taking only 14 hours in Revenue time. Add to that the reduction in time on the customer side and the benefits are clear.
HMRC has been training its staff in the new procedure and there are a number of new independent facilitators now on board who not only come from the accounting profession but there is also at least one insolvency practitioner bringing their experience to the process.
However, as Nick Huber commented in his article, accountants have given the scheme a mixed reaction and all the presenters on the webinar agreed that the take up had been disappointing especially the SME scheme (namely less than 30 cases when 150 are needed). ADR for large companies will proceed but ADR for SMEs is in question needing all the help it can get to continue or indeed to get going effectively. It was stressed that if the scheme is not used it would be withdrawn and then all that would be left would be the internal review which leans more on the side of the Revenue with the taxpayer having little or no say.
Andrew Gotch described ADR as a “no lose facility” - if you don’t like the result then there is always the tribunal. ADR does not affect existing processes or review and appeal rights. Indeed the scheme can be used to set out arguments and facts objectively which can then be presented to tribunal thus reducing overall costs and time.
It all sounds an excellent idea but I wonder whether the reason for the lack of interest from the practitioners side of the fence is that it is perceived to be a scheme for the “big boys” and their more complex client cases, despite the separate SME scheme. Maybe the practitioner is finding it difficult to find cases to present, the SME client wanting to just roll over and accept his fate or is it that practitioners do not want to be the first to try?
So ... would you use the scheme - and if not why not?
Here’s the TAXtv interview with Andrew Gotch where he discusses the new ADR trials:
Visit the LexisNexis website for the full ADR webinar slides.