Tax Enquiry deadlocked? VAT dispute? Try the Alternative Dispute Resolution service, says Guy Smith of Abbey Tax Protection.
Background
HM Revenue & Customs (HMRC) has announced an extension to phase 2 of its Alternative Dispute Resolution (ADR) pilot scheme today. For the first time, the ADR will now include individuals who are in dispute with HMRC, as well as Small and Medium Enterprises (SMEs). The geographical scope of the ADR has been widened too, to cover the whole of the UK.
The purpose of the ADR pilot is to test whether deadlocked enquiries can be settled informally by the appointment of an HMRC facilitator. The ADR team can handle around 250 cases, with 10 facilitators available for SMEs and 6 available for individuals. The team is currently working on 35 active cases, with a further 9 to be taken up shortly.
What is the Facilitator’s Role?
The facilitator works with the individual/SME/tax adviser and the investigating HMRC officer to try and break the deadlock, with a view to reaching a settlement which is acceptable to all parties. The facilitator is completely independent of the dispute in question and has had no prior involvement with the case. If the ADR process is unsuccessful, the facilitator cannot subsequently be called as an HMRC witness, in the event of the dispute proceeding to a Tribunal Hearing.
What Kinds of Cases is the ADR Team Looking For?
Common scenarios include :
- Where the relationship between the individual/SME and their tax adviser has broken down with the HMRC officer.
- Disputes revolving around the quantum of any adjustments due. For example, say the investigating HMRC officer believes an adjustment to turnover is due of £10,000 based on a business economics exercise, but the tax adviser disagrees and proposes £3,000 based on a bank deposits reconciliation.
- Where an individual/SME is in dispute over a goodwill or Capital Gains Tax valuation.
- Where there is a dispute about the rate of VAT that should be charged on a supply.
What Kinds of Cases will the ADR Team NOT Accept?
During the first phase of the pilot, the ADR team selected cases which had already ‘gone formal’ and an appealable decision had been made. For example, a discovery assessment had been raised, an appeal made and an Internal Review conducted.
During this current phase of the pilot, the ADR team is looking to get involved before the dispute has ‘gone formal’ and will not accept any applications to join the ADR process if assessments have been raised, or a Closure Notice issued. Disputes around a specific technical legislative point which may set a precedent will also not be accepted.
What’s in it for the Individual/SME and their Tax Adviser?
The ADR route is voluntary and non statutory. You can withdraw from the ADR at any point. So, by entering the pilot, you are not governed by formal time limits and set on a route towards an Internal Review and, perhaps, a Tribunal Hearing.
The pilot is a free service from HMRC and considers both direct and indirect disputes.
It offers a less confrontational option, where the facilitator is more concerned with reaching a cost effective settlement, compared to the HMRC officer who may be more occupied with saving face and maximising the tax yield from the dispute.
How do I Apply to Use the ADR?
The ADR team is inviting individuals/SMEs or their tax advisers to ring 01492 523747, between 9am and 4pm Monday to Friday, to participate in the pilot.
The pilot is due to close at the end of July 2012, so applications need to be made quickly.
What Happens After I have Applied?
The ADR team will advise the individual/SME whether their dispute has been accepted into the pilot within 30 days.
A Memorandum of Understanding (MOU) is then issued to the individual/SME to sign and date. By signing the MOU, the individual/SME commits to engage with the ADR process constructively, by responding to the facilitator within 15 working days when information is requested and by agreeing to attend meetings or participate in telephone conference calls; all with the common objective of resolving the dispute.
Evaluation
The ADR process is going to be evaluated through August and September 2012. Careful consideration is going to be given by HMRC as to whether the ADR has more of an impact pre appealable decision (phase 2) or post appealable (phase 1).
For more information, please telephone the Abbey Tax ReSource Consultancy Team on 0870 166 6270 or e mail marketing@abbeytax.co.uk
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