Alternative dispute resolutions could relieve tribunal strain

THE ALTERNATIVE DISPUTE RESOLUTION'S introduction on a nation-wide scale for individuals and SMEs is certainly a timely one. The first-tier tribunal currently faces its longest waiting list in years, with some 22,100 cases awaiting hearings in the last quarter of 2011, while the number going through the process rose from 9,100 in 2010 to 11,000 last year.

It came as no surprise, then, that Pinsent Masons' tax partner Ian Hyde described the numbers as "indicative of the pressure HM Revenue & Customs (HMRC) is under to tackle tax avoidance". It also will have raised few eyebrows that the Revenue has rolled out the alternative dispute resolution nation-wide for small cases after a successful trial.

The hope is that, by introducing the measure, disputes can be resolved quickly, fairly and – hopefully – amicably, without the need for a tribunal to take place.

This will be achieved by impartial mediators supplied by the taxman, who will assess whether compliance rules have been breached. In this way, HMRC aims to dramatically cut the number of disputes populating the waiting list as the alternative dispute resolution (ADR) works alongside the tribunals.

The response so far has been largely positive following a successful trial in the north west, south west, Wales and London.

There had been legitimate concerns raised – notably by PKF – that the mediator in the ADR process may have issues with bias, having been supplied by the Revenue, but the pilot allayed those fears.

There are, though, ambitions among some commentators for those mediators to become fully independent of HMRC, thereby eliminating the potential for conflict of interest.

There was also a desire expressed by Ernst & Young's Geoff Lloyd for the scope of the ADRs to be broadened further to take in cases involving larger businesses.

ADR, he argues, has a role to play in larger and more complex cases and could help slash the number of cases pending tribunal, thereby saving a great deal of time and money.

For their part, HMRC is currently less convinced about ADR's potential for use in such cases, especially where they may require pragmatism and departure from established policy, and as such it is unlikely to extend its role further just yet.

It is, however, still piloting ADR in those cases, but it remains to be seen whether their target of resolving 50 disputes in this way by March next year will be reached.

The consensus among interested parties seems to be one of quiet optimism, with a clear desire for ADR's introduction in large, complex cases, with the caveat that there is a need for the process to be honed, adjusted and demonstrably effective in such cases.

However, the fact that ADR is able to operate in harmony with the tribunal system is seen as its biggest strength, and it is that which is the most appealing factor for all parties. The pilot will watched keenly and with great interest. If it is as effective as the previous ADR scheme proved, Pinsent Masons' concerns may well be addressed.

There is, though, some scepticism as to whether that will be the result. If it is not, the problem will keep growing.