Almost two thirds of Midlands firms are currently involved in tax disputes with HMRC that have lasted more than a year, according to a recent survey. Our VAT and Indirect Tax experts consider the survey findings and explain how Alternative Dispute Resolution (ADR) could accelerate the dispute process.
The concerning statistics from a recent BDO survey highlight the increasing complexity of the UK’s taxation system and the ongoing difficulties business owners face in trying to resolve tax queries. It has been widely reported that the delays are being caused by limited resources within the UK tax authority, with staffing issues having a negative impact on HMRC’s response and resolution times.
More than 500 mid-sized businesses from across the Midlands were invited to share their experiences with HMRC in the survey. The results showed that businesses pursuing formal legal disputes can also expect long wait times for resolutions – on average, it takes 36 months for a large business to settle an HMRC enquiry.
The survey findings also revealed an 8% increase in the number of tax tribunal appeals between 2022 and 2023, with 39,500 active cases as of 31st March 2023.
What is Alternative Dispute Resolution and how can it help?
Alternative Dispute Resolution (ADR) refers to a process where a trained HMRC mediator helps your business resolve an ongoing tax dispute by working with you and the HMRC officer handling your case.
HMRC aims to complete the ADR process within a 120-day window, resulting in a significantly shorter waiting period than the 36-month average time that large businesses currently face for resolution to disputes.
You can seek specialist support via ADR at any stage of a tax enquiry, including after HMRC has issued a decision.
Despite 90% of the surveyed businesses currently involved in HMRC disputes confirming they were aware of ADR, application rates are low. Only 1,013 applications were received for ADR during the 2022/23 financial year. Often taxpayers have lost faith in HMRC’s approach to resolving the dispute before ADR is considered, so this statistic is not surprising. However, ADR offers an effective opportunity to resolve matters where a breakdown in communication has occurred. It shifts the conversation from email chains and brief phone calls to a formalised meeting where both parties aim to settle matters.
Resolve your tax dispute with specialist support
Our VAT and Indirect Tax team specialises in the resolution of tax disputes. With more than 50 years’ collective experience in VAT, our experts can help your business with ADR and litigation support at all levels of your appeal. Contact us today to find out more.