HMRC Dispute Prevention and Resolution

Alternative Dispute Resolution - ADR for HMRC

If your business is involved in a dispute with HMRC regarding the payment of VAT, we can help you to find a solution. Our specialist VAT consultants have decades of experience in helping companies to deal with this type of issue, and will guide you every step of the way to ensure your best interests are prioritised.

We have helped businesses and not-for-profit organisations across a variety of sectors to resolve HMRC disputes, including many complicated and difficult cases. Speak to one of our experienced VAT consultants about your circumstances today by calling 0161 477 6600 or complete an online enquiry form and we will contact you at a time that is convenient for you.

How can we help you

The Alternative Dispute Resolution (ADR) scheme is a highly effective method of resolving VAT disputes without resorting to courtroom litigation. As your seasoned partner in VAT matters, we, at The VAT People, bring to the table our vast experience and unparalleled expertise to guide you through this process, ensuring your rights and interests are always at the forefront.

The VAT People has a great deal of experience in dealing with companies that believe they are being treated unfairly or incorrectly by HMRC, or businesses that have received incorrect advice from HMRC and, despite following this guidance, have incurred an unexpected VAT liability. In most cases, advice provided by HMRC is only an option and does not override the law. Very often, HMRC will not accept responsibility for its actions if it can avoid doing so. It is vital that you do not allow HMRC disputes to fester as they can yield serious implications for your business. Click here to read more about the penalties that you can incur from failing to acknowledge your VAT responsibilities.

Why choose us?

●     HMRC has taken an opposing view on the VAT liability of a transaction, or a series of transactions
●     A business fails to address a VAT matter in a timely manner, such as a late application to register for VAT, which can incur penalties
●     There have been errors in submitting information to HMRC, which again can lead to penalties

We have over 20 years of experience in the very complex arena of VAT consultancy, meaning we are well placed to help you to understand and make the most out of the VAT options available to you.

We have dealt with HMRC for more than 20 years, and we are therefore able to deliver unrivalled advice relating to VAT dispute resolution.

Find out how we have helped others in your situation by reading our client success stories.

The need for alternative dispute resolution (ADR) in VAT disputes

Disputes over VAT matters can arise for a myriad of reasons including, but not limited to, disagreements over tax liabilities, inconsistencies in invoices, and divergent interpretations of complex VAT laws. When such disputes occur, alternative dispute resolution offers an expedient and cost-effective mediation method to achieve a resolution.

Exploring the benefits of alternative dispute resolution

Opting for alternative dispute resolution in VAT disputes yields a multitude of advantages. It accelerates resolution, ensures confidentiality, and most importantly, preserves business relationships, given its cooperative and conciliatory nature. It paves the way for an equitable resolution with the guidance of an impartial entity.

The role of an HMRC-appointed mediator

An HMRC-appointed mediator serves as an independent and neutral entity, working alongside both parties to facilitate negotiations. They also assume the role of an arbitrator, elucidating areas of potential misinterpretation of consumer disputes, thus fostering better understanding between parties involved.

Scenarios for opting for ADR

Alternative dispute resolution is an ideal recourse when communication with HMRC becomes challenging, or if disagreements emerge around case facts. It is also beneficial when clarity is sought around the information that HMRC has used, or when there is a need to comprehend why further details are requested by them.

What is a non-statutory clearance?

A non-statutory clearance is a specific service that HMRC is required to provide to any business that has identified a material uncertainty regarding tax treatment. HMRC has produced a non-statutory clearance checklist, and any failure to deal accurately with the points detailed may invalidate the clearance. For this reason, a non-statutory clearance requires a great deal of work and knowledge regarding VAT legislation.

The work involved in obtaining clearance can be significant, but if material sums of tax are at stake and the business requires certainty, it can deliver considerable value to your business, along with peace of mind.

Does HMRC ever review its decisions?

If it appears that HMRC’s view on the VAT dispute matter is incorrect, then The VAT People usually suggests that a review of the matter is requested. Our specialist consultants have years of experience in drafting this type of document, and our detailed knowledge of the law means we have experience in pointing HMRC to more favourable interpretations that are in the best interest of the client.

In cases where an assessment has already been raised, it is important to handle the process quickly due to strict deadlines that are in place.

What is alternative dispute resolution (ADR)?

This process is available in some cases of dispute, and can be helpful in resolving disagreements or agreeing the issues that require a legal ruling in court or at a Tax Tribunal. A third-party mediator will assist in exploring how the dispute can be resolved. Our specialist consultants can assist in this process.

The ADR process gives businesses the opportunity to settle certain disputes more quickly and with less expense for both sides. In September 2013, HMRC announced that ADR would form part of their regular business when dealing with small and medium-sized businesses and individuals.

It is important to note that not all cases of dispute would be suitable for ADR or arbitration. However, the following features in a dispute indicate that the process may be an option:

● Where communications between parties have broken down

● Where more evidence would be helpful

● Where there is scope for a better understanding of facts between parties

What is a VAT tribunal?

In cases where a resolution cannot be reached in any other way, it may be necessary to appeal to a tribunal. This process can be particularly daunting to those businesses with no experience in this area. The VAT People can help by advising or acting as an agent throughout the process. In addition, we would support your business by helping to prepare a notice of appeal, statements of case and other relevant Tribunal documentation.

What are surcharges and how can I avoid them?

Surcharges are penalties that are applied in the event that VAT returns, and any resulting payments, are submitted late. Should the business have a reasonable excuse for late submission/payment, HMRC may decide not to apply a surcharge.

No financial penalty is raised when a business first ‘defaults’. However, a default surcharge period lasting 12 months is initiated, and further late submission/payment will be subject to a penalty, calculated as a percentage of VAT due to HMRC as a result of the return. Each time a business defaults, the surcharge period begins again and subsequent defaults will be subject to additional penalties.

Reasonable excuses are not simply quantifiable, and vary on a case-by-case basis. Therefore, if you believe you have a reasonable excuse in relation to a default, it is advisable to consult VAT experts, such as those at The VAT People, before submitting any evidence or pleas.

In a relevant case, Caligor RX Limited appealed against a default surcharge of approximately £35,000 issued by HMRC that was imposed due to a late payment arising from the business’s VAT return whilst a surcharge period was already in place.

The default surcharge is related to the late submission of a VAT return in addition to the late payment of VAT due to HMRC as a result of the return, with the return and monies reaching HMRC five days after the deadline. Caligor appealed the application of the surcharge on the grounds that, due to an unforeseen IT failure, the business's accounts were inaccessible for an extended period of time, and the VAT return was submitted as soon as the accounting system was fixed.

Caligor supplied HMRC with an invoice relating to work required to fix the issue as proof of the problem, and the First-Tier Tribunal, therefore, assessed whether Caligor had a reasonable excuse for the late submission of the VAT return.

Caligor's appeal was rejected and the default surcharge was upheld on the basis that, at no point during the period between when the return was due and when the return was submitted, did the business contact HMRC to attempt to discuss or arrange a time to pay agreement. Caligor also did not submit an estimate of the figures on the return within the time limits that would have served to, at the very least, reduce the surcharge issued.

If you have been issued with a default surcharge and are unsure over what course of action to take, or require assistance in arranging a time to pay agreement with HMRC, call our free VAT helpline for expert advice.

Speak to us

Our specialist team of consultants is well placed to offer support and guidance if you are involved in a dispute with HMRC. We offer effective, clear and easy to understand advice, and are completely dedicated to helping you find an effective solution.

Get in touch with us by calling 0161 477 6600, or fill in an online enquiry form and we will get back to you at a time that is convenient for you.

FAQs around alternative dispute resolution - ADR

What is Alternative Dispute Resolution (ADR)?

ADR is a process or procedure for resolving disputes without litigation, such as arbitration, mediation, or negotiation. It's often faster, more flexible, and less confrontational than traditional court proceedings.

What types of disputes are suitable for ADR?

Most types of disputes can be resolved using ADR. In the context of VAT, this can include disputes over tax liabilities, the application of VAT rates, and other related issues.

Can a consumer dispute involving VAT be settled through ADR?

Yes. ADR can help in resolving VAT disputes between businesses and consumers. 

What types of ADR services are available for VAT disputes?

ADR services for VAT disputes include mediation, facilitated negotiation, and arbitration. The most suitable option will depend on the nature and complexity of the dispute.

What is the ADR scheme for VAT?

The ADR scheme for VAT is an initiative by HM Revenue and Customs (HMRC) to help resolve disputes between taxpayers and HMRC. It uses independent mediators to help both sides reach an agreement.

Who operates the ADR scheme for VAT disputes?

The ADR scheme for VAT disputes is operated by HMRC. However, the mediation process is undertaken by an independent facilitator who isn't involved in the dispute.

What is the complaints procedure in the ADR scheme?

If a party involved in the ADR process is unhappy with the process or outcome, they can raise a complaint with the HMRC Complaints Handler. This should be done within 30 days of the event causing dissatisfaction.

Can trade associations help with VAT disputes?

Yes, trade associations can often provide advice or assistance to their members regarding VAT disputes. Some may even offer ADR services or can recommend professional mediators.

Is the ADR process for VAT disputes legally binding?

The ADR process itself is not legally binding. However, if both parties agree on a resolution, that agreement may be contractually binding.

Can I still go to court if ADR fails?

Yes. If ADR fails to resolve the dispute, the parties retain their right to escalate the matter to court.