--- title: "Alternative Dispute Resolution with HMRC Explained" url: https://taxdisputes.co.uk/2026/08/alternative-dispute-resolution-with-hmrc-explained/ date: 2026-08-21 modified: 2026-08-21 author: "Tax Dispute Solicitors" description: "HMRC can take money from a bank account, seize business assets or deduct sums from wages without ever going to court. This article sets out the order in which those powers are used, what protections apply at each stage, and where the process can be challenged before a tax debt becomes a winding up petition." categories: - "HMRC" - "HMRC Campaigns" - "HMRC Penalty" - "Tax Investigation" tags: - "coding out tax debt" - "HMRC bankruptcy petition" - "HMRC debt enforcement" - "HMRC direct recovery of debts" - "HMRC Penalties" - "HMRC security deposit" - "HMRC statutory demand" - "HMRC Winding Up Petition" - "judicial review HMRC" - "notice of enforcement" - "Personal Liability Notice" - "restrain petition advertisement" - "taking control of goods" - "Tax Tribunal Appeal" - "Time to Pay Arrangement" - "validation order" image: https://taxdisputes.co.uk/wp-content/uploads/2026/08/How-HMRC-resolves-ADR-1024x559.jpg word_count: 1414 --- # Alternative Dispute Resolution with HMRC Explained ***Most tax disputes are not resolved by a judge. They are resolved by two parties working out what the facts actually are and what the figures should have been. HMRC's Alternative Dispute Resolution service exists for exactly that purpose, and it is free to apply for, available at almost any stage of a dispute, and considerably faster than waiting for a tribunal hearing. It also carries a trap that catches taxpayers every year, and understanding that trap matters more than understanding the process itself.*** ## What HMRC's ADR Service Actually Is ADR brings in a trained facilitator who has had no previous involvement with the case. That facilitator does not decide anything. Their function is to get both sides talking properly, identify what is genuinely in dispute, and strip out the misunderstandings that have accumulated during a long [compliance check](https://taxdisputes.co.uk/hmrc-tax-investigations/). Anyone familiar with commercial mediation will recognise the model, which we describe in more detail on our page explaining [how mediation works](https://lexlaw.co.uk/mediation-settlement-alternative-dispute-resolution-adr-litigation-mediator-legal-advice/). One feature distinguishes it from ordinary commercial mediation. The facilitator is an HMRC officer. They are trained to act impartially and are drawn from outside the case team, but they are not independent of HMRC in the way a commercial mediator is independent of both parties. That does not make the process worthless. It does mean a taxpayer should enter it with proper [legal representation](https://taxdisputes.co.uk/legal-representation/) rather than treating it as an informal chat, and the preparation principles set out in our guidance on [preparing for mediation](https://lexlaw.co.uk/solicitors-london/preparation-for-mediation-in-uk/) apply with equal force. ## The Deadline That Catches People Out Applying for ADR does not stop the clock on your appeal rights. This is the single most expensive misunderstanding in this area. A taxpayer who receives [an appealable decision](https://taxdisputes.co.uk/hmrc-tax-appeals-solicitors-london/) has a statutory window in which to appeal, ordinarily thirty days. Entering ADR does not extend that window, suspend it, or create any fresh right to appeal once it has closed. The consequence is straightforward. A taxpayer who applies for ADR, waits for a response, and allows the appeal deadline to pass in the meantime may find the assessment has become final regardless of how the ADR discussion goes. The correct sequence is to protect your position first by lodging the appeal or requesting an [HMRC internal review](https://taxdisputes.co.uk/hmrc-internal-review-appeals-solicitors-london/), and then to pursue ADR alongside it. Our [tax appeal solicitors](https://taxdisputes.co.uk/hmrc-appeal-lawyers-london/) deal with the consequences of that error frequently. ## Which Disputes Are Suitable ADR works where the disagreement is about facts, evidence or communication. Cases where HMRC has misunderstood how a business operates respond well to it. So do cases where the officer and the taxpayer have reached deadlock over what documents are needed, or where an [enquiry](https://taxdisputes.co.uk/hmrc-tax-investigations/) has drifted for two years without either side articulating the actual point of difference, a pattern our [investigation specialists](https://lexlaw.co.uk/hmrc-tax-investigation-penalty-advice-solicitors/) see often. It also suits disputes where the numbers are contested rather than the law. Valuation disagreements, apportionment questions, and arguments about the quantum of an assessment are all capable of being narrowed in a room in a way they rarely are through correspondence. The same is true of [penalty disputes](https://taxdisputes.co.uk/hmrc-penalties/) turning on behaviour and disclosure, and of many [VAT enquiries](https://taxdisputes.co.uk/hmrc-vat-investigations-evasion-input-ouput-double-taxation-tribunal-legal-advice/) where the underlying commercial arrangement has simply not been understood. ## Which Disputes Are Not ADR is a poor fit where the dispute is purely about a point of law. If the facts are agreed and the disagreement is about how a statutory provision applies to them, no amount of facilitated discussion will resolve it, and HMRC may positively want the point tested. That is equally true of many [VAT de-registration and input tax decisions](https://lexlaw.co.uk/hmrc-vat-de-registration-tax-appeal-kittel-decision-input-tax-decision-letter-judicial-review-legal-advice/). Those cases belong before [the First-tier Tribunal](https://taxdisputes.co.uk/first-tier-tax-tribunal-solicitors-london/). It is also the wrong tool for several situations that are commonly confused with it. Complaints about HMRC's conduct or service go through the complaints process, not ADR. Arguments about how to pay a debt that is not itself disputed are a matter for a Time to Pay negotiation, addressed in our guidance on [negotiating with HMRC before enforcement](https://windinguppetitionsolicitors.co.uk/how-to-negotiate-with-hmrc-before-a-winding-up-petition-is-issued/). Where HMRC has acted outside its powers altogether, the remedy is [judicial review](https://taxdisputes.co.uk/judicial-review-applications-against-hmrc-challenge-decision-advice/). And a taxpayer under a [Code of Practice 9 investigation](https://taxdisputes.co.uk/tax-evasion-hmrc-code-practice-9-investigations/) is in an entirely different process with different rules. ## What Happens During the Process The application is made online and HMRC decides whether to accept the case. Acceptance is not automatic and refusals do happen, usually where HMRC considers the dispute unsuitable for the reasons above. If accepted, the facilitator contacts both sides, establishes what each party says is in issue, and arranges a meeting by telephone, video or in person. Our [tax appeal lawyers](https://taxdisputes.co.uk/hmrc-appeal-lawyers-london/) can prepare the application and the supporting analysis, drawing on the same approach we apply to [dispute resolution across our practice](https://lexlaw.co.uk/adr-alternative-dispute-resolution-second-opinion-legal-advice/). Sessions tend to run for a day. The facilitator will often move between the parties separately as well as bringing them together, testing each side's position and looking for the specific factual points where movement is possible. Nothing is binding until an agreement is recorded. Where the parties do reach terms on an appealed direct tax matter, that agreement is usually documented as a settlement that has the same effect as a tribunal determination, which is why the wording matters and why a taxpayer should not agree terms without advice from their [tax dispute solicitors](https://taxdisputes.co.uk/hmrc-tax-investigations-solicitors-london/). ## Running ADR Alongside a Tribunal Appeal A common misconception is that ADR and litigation are alternatives you must choose between. They are not. ADR remains available after an appeal has been notified to [the tribunal](https://taxdisputes.co.uk/first-tier-tax-tribunal-solicitors-london/), and can be pursued while the appeal proceeds, provided the timetable allows. Many disputes settle at exactly that stage, once both sides have set out their cases formally, which is why our [appeal team](https://taxdisputes.co.uk/hmrc-tax-appeals-solicitors-london/) keeps settlement under review throughout. There is a strategic point here worth taking seriously. Engaging constructively with dispute resolution is viewed favourably across the wider litigation system, and unreasonable refusal to engage has consequences in the civil courts, as we explain in our note on [costs consequences of refusing mediation](https://lexlaw.co.uk/solicitors-london/litigation-costs-refusal-mediation-indemnity-adr-cpr/). The choice between facilitated resolution and a determined hearing is one we help clients weigh through our [comparison of ADR options](https://lexlaw.co.uk/solicitors-london/alternative-dispute-resolution-adr-mediation-v-arbitration-pros-and-cons-second-opinion/). ## Preparing Properly Taxpayers who go into ADR expecting HMRC to drop the assessment are usually disappointed. Those who prepare a clear analysis of the evidence, identify precisely which figures they contest, and arrive with a realistic view of their weakest points tend to leave with something. The facilitator can only work with the material the parties bring, which is why we prepare cases for ADR to the same standard as a [tribunal hearing](https://taxdisputes.co.uk/first-tier-tax-tribunal-solicitors-london/), applying the method set out in our guidance on [mediation strategy](https://lexlaw.co.uk/alternative-dispute-resolution-adr-london-lawyer-mediation-advice/). Preparation also means knowing your fallback. Understand what the assessment becomes if no agreement is reached, what the [enforcement position](https://taxdisputes.co.uk/hmrc-enforcement-action/) would be, and whether the case is one you are content to argue at a hearing. A party who knows their alternative negotiates from a considerably stronger position, which is the same principle that governs commercial [dispute resolution generally](https://lexlaw.co.uk/alternative-dispute-resolution-lawyers-london/). ## How We Can Help Our dual qualified solicitors and barristers advise on whether ADR is the right route for a particular dispute, prepare the case for the session, and attend with clients throughout. Where the dispute is better suited to a determined outcome, we act in [tribunal proceedings](https://lexlaw.co.uk/first-tier-tax-tribunal-hmrc-representation-solicitor-london/) and, where HMRC has exceeded its powers, in [judicial review](https://lexlaw.co.uk/judicial-review-court-lawyers-london-hmrc-tax-dispute-decision-advice-representation/). If you have received an assessment, are deadlocked in an enquiry, or are facing [HMRC debt enforcement](https://lexlaw.co.uk/hmrc-debt-enforcement-defence-statutory-demand-winding-up-peititon-solicitor-london/) while a dispute remains unresolved, take advice before your appeal window closes. Contact us through our [case assessment form](https://taxdisputes.co.uk/legal-case-assessment/). ### Frequently Asked Questions (FAQs) 1. Does applying for ADR extend my appeal deadline? No. Your statutory appeal window continues to run regardless of any ADR application. Protect your position by appealing or requesting an [internal review](https://taxdisputes.co.uk/hmrc-internal-review-appeals-solicitors-london/) within the deadline, then pursue ADR alongside it. 2. Is the HMRC facilitator independent? They are trained to act impartially and take no part in the underlying case, but they remain an HMRC officer. That is a reason to attend with [proper representation](https://taxdisputes.co.uk/legal-representation/) rather than to avoid the process. 3. Can I use ADR after my appeal has gone to the tribunal? Yes. ADR remains available once an appeal has been notified and often produces settlement at that stage, once both sides have set out their cases. Our [tribunal team](https://taxdisputes.co.uk/first-tier-tax-tribunal-solicitors-london/) can advise on timing. 4. What if my dispute is purely about the law? ADR rarely helps where the facts are agreed and only the legal analysis is contested. Those disputes usually need determination, whether by [tribunal appeal](https://taxdisputes.co.uk/hmrc-tax-appeals-solicitors-london/) or, where HMRC has acted unlawfully, by [judicial review](https://taxdisputes.co.uk/judicial-review-applications-against-hmrc-challenge-decision-advice/). 5. Is any agreement reached binding? Nothing binds either party until terms are recorded. Once recorded, a settlement on an appealed matter generally carries the same effect as a tribunal determination, so the drafting matters. Take advice from our [tax dispute solicitors](https://taxdisputes.co.uk/hmrc-tax-investigations-solicitors-london/) before signing.