ADR - a useful alternative to VAT Tribunals

When Alternative Dispute Resolution (“ADR”) was first introduced many people were sceptical regarding the benefits given that this is a HMRC staffed and controlled offering. However, the problem is that the alternative, a VAT Tribunal hearing, can be a costly process.

 

The idea of ADR is that it gives both sides of the dispute the opportunity to discuss their respective positions, understand both points of view and ideally reach an agreement on the way forward without recourse to a VAT tribunal. The agreement for the way forward could be to concede that one party in the dispute is correct, or to reach a compromise, or simply that a tribunal hearing is required.

 

The process is facilitated by an ADR manager who in our experience acts as an independent and neutral observer who is also willing to negotiate between the two parties, act as an arbitrator and clarify areas where they misunderstand each others view point.

 

To date we have been pleasantly surprised by how useful an ADR meeting can be if well managed by both the ADR facilitator and the taxpayers representative. Of course, in some cases an agreement cannot be reached and the case would need to move to Tribunal . However we have managed outcomes where HMRC have withdrawn a disputed decision or where a compromise has been reached. For example:

 

Recently a compromise was reached over the level of business use of costs following our representations at an ADR meeting. This resulted in the end to a two year old VAT dispute that had caused the business owners some distress and the reduction in a VAT assessment by 70%.

 

Whilst in our view there was a good argument for full VAT recovery, the time cost and further stress for the client in pursuing the appeal to Tribunal made the option of a compromise worth agreeing with HMRC.

 

It is well worth contacting our firm on our free VAT helpline for further advice if you are involved in a dispute with HMRC as the ADR option may be worth considering.

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