What Is Alternative Dispute Resolution (ADR) with HMRC?

If you’re facing a disagreement with HMRC—whether it’s about VAT, income tax, corporation tax, or compliance issues—you don’t always have to go straight to a tribunal or court. Alternative Dispute Resolution (ADR) offers a way to resolve matters more informally, often faster and with fewer costs.

ADR is a structured process in which a trained HMRC mediator helps both parties—taxpayer and HMRC—work towards a resolution. It doesn’t override HMRC’s legal powers or change your obligations, but it gives you a chance to resolve the issue constructively, often before litigation becomes necessary.

Why ADR Exists

Tax disputes can escalate quickly. Formal appeals are time-consuming, expensive, and often adversarial. HMRC introduced ADR to help manage this load and provide a practical alternative. The aim is not just faster resolution but also greater fairness, transparency, and reduced burden on both sides.

When to Consider ADR

HMRC’s alternative dispute resolution process is voluntary, but it’s particularly useful when:

• Communication between you and HMRC has broken down

• You believe HMRC has misunderstood the facts or the law

• You think a third-party mediator could clarify or unlock the deadlock

• You want to try all available options before entering into a tribunal

That said, ADR is not suitable for every case. If your issue involves statutory interest, penalties already applied, or questions purely of law with no factual dispute, ADR might not help.

Mediation, Not Negotiation

It’s important to understand that the ADR mediator is not a judge or an advocate. Their role is to help both sides explore the issues, reframe them if needed, and identify solutions that may not have been considered before.

ADR doesn’t guarantee a result—but it often leads to one. According to HMRC statistics, around 80% of ADR cases result in full or partial resolution without the need for tribunal hearings.

Step 1: Check If Your Case Qualifies for ADR with HMRC

Before you begin the alternative dispute resolution HMRC process, you need to determine whether your dispute actually qualifies for ADR. Not all disagreements fall within its scope, and applying without eligibility can waste valuable time.

Types of Cases Suitable for ADR

ADR with HMRC works best in disputes involving facts or communication issues, rather than pure points of law. Here are common situations where ADR may be accepted:

• HMRC and the taxpayer disagree on how the law applies to specific facts

• The taxpayer believes HMRC hasn’t fully understood their position

• There’s evidence that communication breakdowns are fuelling the dispute

• The taxpayer believes there’s new evidence that HMRC has not properly considered

• You and HMRC agree on the facts, but disagree on how those facts are interpreted

When ADR Is Not Appropriate

There are some cases where ADR simply isn’t viable. These include:

• Disputes that rest entirely on legal interpretation with no factual disagreement

• Applications for time to pay (which fall outside ADR scope)

• Refund or repayment requests that have been formally denied

• Penalties that are fixed by statute and not subject to negotiation

• Complaints that have already gone through the full tribunal process

In such cases, you may have to proceed via HMRC’s internal review or go directly to the First-tier Tribunal (Tax).

Timing Is Everything

You can apply for ADR before or after a formal appeal to a tribunal. However, applying early in the dispute—even before filing an appeal—often results in better outcomes. That said, even if a tribunal date has been set, ADR can still be requested, provided HMRC agrees to it.

Internal vs External ADR

HMRC primarily offers internal ADR, where trained mediators from within HMRC but outside your case team lead the process. However, in particularly complex or high-value cases, external mediators (such as from the Centre for Effective Dispute Resolution) may be involved—though this is rare and generally reserved for large businesses.

Step 2: Prepare Your Application for ADR

Once you’ve confirmed your dispute is suitable, the next stage in the alternative dispute resolution HMRC process is preparing your application. A well-prepared application increases your chances of acceptance and helps set the tone for a productive mediation.

How to Access the Application Form

HMRC requires all ADR applications to be submitted via the online form on the GOV.UK website. There is no paper or postal equivalent. The form is accessible here:

Apply for HMRC ADR – GOV.UK

Before starting the form, ensure you have the following:

• Your HMRC reference number

• The name and contact details of your representative (if applicable)

• Details of the tax(es) involved (e.g., VAT, PAYE, Corporation Tax)

• Copies or summaries of correspondence already exchanged with HMRC

• A clear description of the dispute

• Reasons why you think ADR is appropriate

• A summary of what outcome you’re hoping to reach

What to Include in Your Application

The key to a strong ADR application is clarity and completeness. Here’s what HMRC will be looking for:

1. A Clear Statement of the Dispute

Define what the disagreement is about. Avoid vague or emotional language. Focus on the facts, and be precise about where your position differs from HMRC’s.

2. Why ADR Could Help

Explain how a mediator could move things forward. Be specific—mention communication issues, misunderstandings, or the need for a third-party perspective.

3. What Resolution Looks Like

This is your chance to show that you’re open to dialogue. You don’t need to concede your position—but you should show willingness to explore alternative views.

Supporting Documents

You won’t upload documents directly with the online form. However, you’ll need to reference all key documents and correspondence. Once ADR is accepted, the mediator will request relevant files. Keep the following ready:

• Original enquiry or decision letters

• Previous responses and appeals

• Legal opinions (if any)

• Contracts or invoices (where relevant)

• Relevant timelines

Having your documentation in order signals that you’re prepared and professional, which strengthens your credibility during mediation.

Step 3: Submit Your ADR Application and What Happens Next

Once you’ve completed your online application, you’re officially in the alternative dispute resolution HMRC pipeline. But submitting the form is just the beginning—what follows is a structured sequence of internal assessments and communications that determine whether your case moves forward.

Submission Confirmation

After submitting the form online, you’ll receive an acknowledgement email from HMRC. This confirms that your application has been received but does not mean it has been accepted.

The email will usually include:

• A reference number for your ADR request

• A rough timeframe for when you can expect a decision

• Guidance on what to do if the tribunal date is approaching (if relevant)

Keep this email. If your ADR application is delayed or queried later, this timestamp is your proof of submission.

Internal HMRC Review

Once your application is submitted, HMRC’s ADR team reviews your case to determine suitability. This review usually takes between 14 to 28 days, depending on case complexity and volume.

HMRC will assess:

• Whether the dispute is appropriate for ADR (facts vs law)

• Whether a meaningful mediation process is likely

• Whether both parties are open to discussion

• The stage of the dispute (e.g., before or after appeal)

If your application is rejected, HMRC will explain why. If accepted, it will move forward to mediation planning.

Acceptance and Appointment of a Mediator

If approved, HMRC will assign a case mediator—someone not previously involved in your enquiry or decision. You’ll receive:

• Contact details for the mediator

• An outline of what to expect during ADR

• A proposed timeframe and method for the sessions (e.g., remote or in person)

This is your opportunity to begin preparing collaboratively, which includes agreeing to how and when the discussions will take place.

What If Your Case Is Rejected?

Rejection doesn’t necessarily end your options. You can:

• Continue with your statutory appeal to the First-tier Tribunal (Tax)

• Request a statutory review by another HMRC officer

• Reapply for ADR later if circumstances change

In some cases, if the rejection reason was administrative or unclear, you can request a reconsideration or clarification.

Ongoing Tribunal Proceedings

If you already have a tribunal date set, notify the tribunal that you’ve applied for ADR. If ADR is accepted, the tribunal can stay (pause) the case for up to 90 days to allow mediation.

You’re not penalised for pausing tribunal proceedings to try ADR—in fact, judges often see this as a positive step towards resolution.

Step 4: Prepare for the ADR Mediation Process

With your alternative dispute resolution HMRC application accepted and a mediator assigned, you now enter the preparation phase—a critical stage that can significantly influence the outcome. This is where strategic planning, clear documentation, and understanding your negotiation boundaries pay off.

Understand the ADR Format

ADR with HMRC typically takes one of two forms:

• Remote mediation: Conducted over Microsoft Teams or similar platforms. This is now the most common format, especially post-pandemic.

• In-person mediation: Usually reserved for complex or high-value cases. These are held at HMRC premises or neutral locations.

ADR is generally non-binding, which means either party can walk away if no agreement is reached. However, most participants find value in the process, even when a full resolution isn’t achieved.

What Happens During Mediation

ADR is not a formal hearing. There is no judge, no rulings, and no enforcement powers. The process is collaborative, with the mediator guiding both sides to:

• Clarify misunderstandings

• Explore new approaches

• Find compromise where possible

• Avoid unnecessary litigation

Sessions often include:

1. Opening meeting (joint session): Each side outlines its position

2. Private caucuses (separate discussions): Mediator speaks privately with each party

3. Joint problem-solving: Bringing both parties together to discuss options

Your Role as a Taxpayer or Representative

Come prepared. Your success in ADR will hinge on your ability to articulate your position, back it with facts, and engage constructively. Here’s how to prepare:

1. Know Your Objectives

Define what success looks like. Are you aiming for a reduced tax assessment? Clarification of your liability? A withdrawal of a specific charge?

2. Gather and Organise Your Documents

Bring only what’s relevant. Your mediator and the opposing HMRC team won’t appreciate being swamped with unnecessary details.

Prioritise:

• Contractual documents

• Email trails or written correspondence

• Previous legal or tax advice (if not confidential)

• Timeline of events

3. Be Open—but Professional

Avoid treating ADR as a debate to “win.” Your best chance at resolution is to listen, engage, and reframe issues collaboratively.

What HMRC Will Bring to the Table

HMRC’s team will generally include:

• The mediator (neutral party)

• A caseworker familiar with the dispute

• Possibly a policy or legal specialist

HMRC’s representatives are instructed to come with a willingness to explore outcomes—but they are not authorised to change the law or ignore policy. They can, however, recommend adjustments, re-open technical reviews, or facilitate new interpretations based on facts.

Step 5: Participate in the ADR Meeting with HMRC

The ADR meeting is the core event in the alternative dispute resolution HMRC process. This is where facts are clarified, misunderstandings are addressed, and opportunities for settlement or compromise are explored. While the mediator guides the process, your active, informed participation is essential to success.

What to Expect on the Day

ADR sessions can last anywhere from a few hours to a full day, depending on the complexity of the dispute and the number of issues in question. Most meetings follow a flexible structure:

1. Opening Remarks
   • Mediator sets the tone, outlines the process and ground rules.

   • Each party presents a summary of their position without interruption.

2. Issue Clarification
   • Parties drill into the detail of the dispute.

   • Clarifications and factual corrections often emerge here.

3. Private Breakouts
   • The mediator may separate parties into breakout rooms.

   • These sessions allow the mediator to test arguments privately and suggest concessions.

4. Joint Discussions
   • If progress is made, the mediator reconvenes everyone to test potential resolutions.

   • All parties remain free to agree, amend or reject any proposal.

Tips for Navigating the Meeting Successfully

Be factual, not confrontational.
Emotions can run high during tax disputes, but ADR isn’t about blame—it’s about finding a way forward. Stick to the issues.

Listen carefully.
You may hear HMRC acknowledge things they haven’t before, or clarify why they’ve taken a certain position. Listening may open up routes to settlement.

Use the mediator.
If you’re stuck, raise it in a private session. The mediator can suggest alternative ways of framing your point or help explore options HMRC might consider.

Be flexible.
You might enter the meeting seeking one resolution but leave with a better one you hadn’t considered. Keep an open mind.

Don’t commit under pressure.
You’re not obliged to settle on the day. If needed, ask for time to consult with your adviser or review the terms of any draft agreement.

Possible Outcomes from the ADR Meeting

Here’s what might happen by the end of the session:

• Full resolution: Agreement is reached on all disputed points. HMRC may withdraw decisions, revise assessments, or amend penalties.

• Partial resolution: Some issues are resolved; others may continue to a tribunal.

• No agreement: The matter proceeds along the formal appeals track, but often with clearer issues and positions.

Whatever the outcome, the mediator will provide a summary report. This isn’t legally binding but provides clarity on what was discussed and agreed (or not agreed).

ADR Agreement Documentation

If a resolution is reached, HMRC will:

• Send a written summary of the agreement

• Set out any changes to assessments, interest, or penalties

• Explain what steps you need to take (e.g., payments, revised submissions)

Make sure you review this carefully. Ask for clarification on anything you don’t fully understand before accepting.

Step 6: What Happens After ADR Ends

Once the mediation session concludes—whether it ends in a full agreement, partial resolution, or deadlock—the alternative dispute resolution HMRC process enters its final stage. This is where outcomes are implemented and, if necessary, the formal appeals route resumes.

If the Dispute Is Resolved

If ADR ends in a full or partial agreement, you can expect HMRC to follow up with:

• Written confirmation of the outcome
  A summary outlining what was agreed, any changes to tax assessments or penalties, and next steps for implementation.

• Revised decisions or settlements
  Where HMRC has agreed to amend its position, you’ll receive revised tax calculations, closure notices, or withdrawal of penalties.

• Deadlines for action
  If you agreed to make a payment, provide further documents, or file returns, the agreement will specify deadlines.

Important: Make sure to meet any commitments made in ADR, as failing to do so may allow HMRC to revert to its original position.

Post-ADR Documentation: What to Keep

Keep a clear record of:

• The ADR summary report (provided by the mediator)

• Any revised HMRC letters or assessments

• Internal notes from the session (if permitted)

• Copies of any documents exchanged or promised

These may be crucial if disputes re-emerge or if a tribunal still becomes necessary.

If No Agreement Is Reached

Not every ADR case ends in resolution. If the process ends in a stalemate, you still have options:

• Continue with a tribunal appeal
  ADR does not affect your right to pursue your case through the First-tier Tribunal (Tax). In fact, ADR often sharpens your arguments by clarifying the issues in dispute.

• Request a statutory review
  If not already done, you can request an internal HMRC review by a different officer who hasn’t been involved in the case. This must usually be requested within 30 days of a decision.

• Seek professional advice on next steps
  A tax specialist may now be better positioned to help you escalate your case, build a stronger legal position, or negotiate further informally.

When Is ADR with HMRC the Right Strategic Move?

Understanding when to engage in the alternative dispute resolution HMRC process is just as important as knowing how it works. While ADR is a powerful tool, it’s most effective when used with clear strategic intent—especially in high-stakes or fact-heavy tax disputes.

Ideal Scenarios for ADR

Here are common situations where ADR can offer substantial benefits:

1. Complex Fact Patterns

If your dispute involves detailed business activities, nuanced contractual relationships, or inconsistent evidence, ADR allows for a more flexible and dynamic forum than a rigid tribunal hearing.

2. Breakdown in Communication

When discussions with HMRC become circular or confrontational, the alternative dispute resolution HMRC process can reset the tone. A mediator helps move from positional arguments to problem-solving.

3. Early Stage Disputes

ADR is often most effective before formal appeals escalate. Applying early can prevent entrenchment, reduce legal costs, and resolve misunderstandings before they harden into intractable positions.

4. Avoiding Reputational Risk

Some businesses prefer to keep disputes out of the public tribunal system. ADR is confidential and allows resolution behind closed doors, which can be crucial for regulated entities or those concerned about investor confidence.

Frequently Asked Questions

1. What is the alternative dispute resolution HMRC process in simple terms?

The alternative dispute resolution HMRC process is a voluntary method for resolving tax disputes using a trained mediator. Instead of going straight to a tax tribunal, you work with HMRC in a structured environment to try to reach agreement on contested tax issues.

2. Who can apply for HMRC’s alternative dispute resolution process?

Anyone involved in a HMRC tax investigation process can apply—whether you’re an individual taxpayer, sole trader, or company. The alternative dispute resolution HMRC route is open as long as the issue involves disputed facts or communication problems rather than strict legal interpretation.

3. Is the alternative dispute resolution HMRC process legally binding?

No, ADR with HMRC is not legally binding. Neither party is forced to accept any outcome. However, if both parties agree to a resolution, HMRC will usually follow through by amending decisions or issuing revised assessments.

4. How long does the alternative dispute resolution HMRC process take?

It typically takes 1 to 3 months from application to mediation, depending on case complexity and HMRC workload. Most ADR sessions are completed within a day, and resolutions (if achieved) are confirmed within a few weeks.

5. Does applying for ADR pause my appeal or tribunal hearing?

Yes—once your alternative dispute resolution HMRC application is accepted and both parties agree to mediate, the tribunal can be asked to stay proceedings for up to 90 days to allow ADR to take place.

6. What types of tax disputes are best suited for the alternative dispute resolution HMRC route?

ADR is ideal for:

• Disputes involving business expenses or allowable deductions

• IR35 and employment status cases

• VAT classification or supply chain disagreements

• Misunderstandings about timelines, contracts, or supporting documentation

7. Can I have legal representation during the alternative dispute resolution HMRC process?

Yes. While not required, many businesses and individuals bring a tax adviser, solicitor, or accountant to help present their case and protect their interests. Legal representation is especially useful in complex or high-value disputes.

8. What happens if ADR doesn’t resolve my issue with HMRC?

If the alternative dispute resolution HMRC session fails to resolve your dispute, you can continue your formal appeal to the First-tier Tribunal. The ADR process does not affect your legal rights.

9. Is the alternative dispute resolution HMRC service free?

Yes. HMRC provides the ADR service at no cost to taxpayers. There are no application fees. However, you are responsible for any professional or legal advice you choose to engage independently.

10. Can ADR be used more than once with HMRC?

Generally, HMRC only allows one attempt at ADR per dispute. However, if new facts or evidence emerge, or the original ADR covered only part of the issue, a second application may be considered.

11. Is ADR confidential?

Yes. The alternative dispute resolution HMRC process is entirely confidential. Discussions during mediation cannot be used as evidence in later tribunal hearings unless both parties agree.

12. Will HMRC hold my past compliance record against me in ADR?

Not directly. ADR focuses on the facts of the current dispute. However, patterns in behaviour or past correspondence may be discussed, especially if they influence HMRC’s understanding of your intent or reliability.

13. Can I apply for ADR if I’ve already received a closure notice or decision letter?

Yes. The alternative dispute resolution HMRC application can be made before or after you receive a closure notice. You can even apply after filing a tribunal appeal, as long as the tribunal agrees to pause proceedings.

14. Where can I find the ADR application form?

You can apply online via GOV.UK:

Apply for Alternative Dispute Resolution with HMRC

Make sure you have your reference number and a clear summary of your dispute before starting the application.