The programme’s goal is to allow taxpayers to resolve disputes with HM Revenue and Custom sand avoid protracted litigation. It began in February 2011 and will run until July.
So far, the programme has been limited to small and medium sized enterprises, but the report is also likely to suggest expanding it to include large enterprises.
It will not be surprising if the programme is heralded as a success; from its inception taxpayers and officials had been eager to develop a tool for resolving disputes.
Large corporate taxpayers especially are looking for a new way to interact with HMRC. They have been consistently frustrated with efforts to work with Revenue since introduction of its Litigation and Settlement Strategy in 2007.
HMRC also agreed to create a small working group to help foster communication between it and taxpayers and to finalise the design of the programme.
From the time that the ADR pilot began HMRC had plans to expand it.
“Though this pilot initially seeks to test the benefits of introducing a third party facilitator into the resolution of a dispute it has a much wider potential scope and application,” said the HMRC in a statement.
“Our pilot work will seek to develop an evidence base that can inform our wider understanding of the life of a dispute. This evidence will inform ongoing work within HMRC which seeks where appropriate to re-engineer our intervention processes,” the agency continued.
HMRC selected certain cases that were already undergoing a statutory review process as the first entrants into the pilot. The largest cases of these cases have tended to involve issues of indirect tax, including value added tax.
Though HMRC has not announced a formal agenda for the next stages of the programme, it has already been preparing to expand its scope.
HMRC is working with the Centre for Effective Dispute Resolution (CEDR), a non-profit organisation and independent provider of ADR training. Twelve senior tax officials are taking part in a one week mediation training course. Another 12 representatives of different professions and industries will also be joining the training.
“I think this can be seen as the next phase of an ongoing push by HMRC, a push that is supported by most large corporates, that it is time to clarify and encourage a collaborative approach to finding principled resolutions to contentious tax issues which can often involve large number and complex facts,” said Andrew Watters, director at Berwin Leighton Paisner.
“Given the fact of large numbers and complex issues, it will probably be helpful if both sides are operating along what might be thought of as common rules of engagement,” he added.
Another group that could potentially be affected by the expanded ADR programme is high net worth individuals. HMRC has already dedicated an office to deal with the complex and sophisticated tax questions that arise with these taxpayers. If the ADR initiative continues to expand, it is likely that this group would also come within its scope at some point.
Tax professionals know that introducing a broader ADR programme will not eliminate the need for litigation in all circumstances. It can, however, provide a framework for resolution of those cases where it may not be necessary to go to trial.
“This will be a case of procedural evolution rather than revolution,” said Watters.
