Updated July 2026. Written by Tax Dispute Consultants, specialist ex-HMRC tax investigation team. Read time: 9 minutes.

Not every tax dispute needs to go all the way to a tribunal hearing to be resolved. HMRC's Alternative Dispute Resolution process offers a structured, facilitated route to narrowing or settling a dispute, often faster and considerably less expensive than litigation, and a 2023 Court of Appeal decision has strengthened the tribunal's own power to push parties towards it.

What ADR actually is

HMRC's ADR process is a form of facilitated mediation. An HMRC facilitator, trained in mediation and, critically, not the officer who has been handling the underlying enquiry or dispute, works with the taxpayer (or their adviser) and the case officer in a structured process, typically a preparatory call followed by a facilitated meeting, aimed at identifying what is genuinely in dispute, testing each side's position, and exploring whether an agreed resolution is achievable. It is not arbitration: the facilitator does not decide the outcome or impose a settlement. It is a structured conversation designed to make settlement, on terms both sides can accept, more achievable than it might be through ordinary correspondence.

ADR can be used at different stages: before a formal appeal is made, during a live enquiry where communication has broken down, or after a notice of appeal has been lodged with the tribunal, running in parallel with the tribunal timetable rather than instead of it. Applying for ADR is free, and does not commit either side to accepting whatever emerges from the process if it does not lead to agreement, the underlying right to a statutory review or tribunal appeal remains available regardless of how the ADR process concludes.

ADR does not pause your appeal deadline: a common and costly misunderstanding. Applying for ADR does not, by itself, extend the 30-day window to request a review or notify an appeal to the tribunal. Protect those deadlines independently, in writing, before or alongside any ADR application, unless HMRC has expressly agreed in writing to hold the deadline open.

When ADR is, and isn't, likely to help

ADR tends to work best where the dispute has a significant factual dimension, disagreement about how a set of facts should be characterised, where the parties' respective evidence and interpretation genuinely have room to be tested and narrowed in conversation. Cases involving discovery assessment staleness arguments, the categorisation of behaviour for penalty purposes, or valuation and apportionment disputes are often well suited to it, because a facilitated conversation can surface evidence or context that correspondence alone has not brought out.

ADR is generally a poor fit where the dispute is a clean point of statutory interpretation with no meaningful factual overlap (there is little for a facilitator to mediate where the only question is what a provision means), where HMRC's position is dictated by a fixed policy position it has no discretion to depart from regardless of the individual facts, or where the dispute genuinely turns on contested evidence that can only properly be resolved by a tribunal hearing witnesses under oath and testing their credibility.

Churchill v Merthyr Tydfil: can ADR be compelled?

For many years, the received wisdom, largely following the earlier Court of Appeal decision in Halsey v Milton Keynes NHS Trust [2004] EWCA Civ 576, was that a court or tribunal could not compel parties into mediation, though it could penalise an unreasonable refusal to engage with it in a later costs decision. That position was revisited in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416, in which the Court of Appeal held that a court can lawfully stay proceedings for, or order parties to engage in, a non-court-based dispute resolution process, provided the order does not impair the essence of the claimant's right to a judicial hearing and is a proportionate means of achieving the legitimate aim of settling the dispute fairly, quickly and at reasonable cost.

Churchill does not make mediation compulsory as a matter of course, and its facts concerned a local authority's own internal complaints process rather than the tax tribunal specifically, but the principle it establishes, that a tribunal has the power to direct engagement with a dispute resolution process where proportionate, applies equally to the tax tribunal system. In practice, this strengthens the position of a party (including, in principle, HMRC) who can show the other side is refusing a proportionate, low-cost opportunity to narrow or resolve a dispute before committing both sides to the time and expense of a full hearing.

The costs dimension that predates and survives Churchill: even before this decision, unreasonably refusing a genuine invitation to mediate has long been a factor tribunals and courts can weigh when deciding costs, following the multi-factor approach in Halsey itself and its subsequent refinement in cases such as PGF II SA v OMFS Company 1 Ltd [2014] 1 All ER 970, where silence in the face of an ADR invitation was itself treated as unreasonable. A taxpayer or adviser who refuses a genuine HMRC ADR offer without good reason risks that refusal counting against them if costs become an issue later.

Applying for ADR

An application is normally made via HMRC's online ADR application form, setting out the dispute, what has been tried already, and why a facilitated process is likely to help. HMRC assesses applications for suitability rather than accepting every request automatically, and cases that are purely legal, policy-driven, or already listed for a near-term tribunal hearing are less likely to be accepted. Where accepted, the process typically moves considerably faster than tribunal litigation, often concluding within a matter of weeks rather than the many months a contested appeal can take to reach a hearing.

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Frequently asked questions

What is HMRC's ADR process?

A facilitated mediation process using an independent HMRC facilitator not connected to the original dispute, aimed at narrowing or resolving it without formal litigation. It can be used before or alongside a tribunal appeal, and does not affect underlying appeal rights.

Can the tax tribunal force me into mediation?

Following Churchill v Merthyr Tydfil CBC [2023] EWCA Civ 1416, tribunals can lawfully stay proceedings or order engagement with non-court dispute resolution, provided this doesn't impair the essence of the right to a judicial hearing and is proportionate. It doesn't make mediation automatically compulsory, but confirms the power exists.

Is ADR suitable for every type of tax dispute?

No. It works best for fact-heavy disputes. It's a poor fit for pure points of law, cases driven by fixed HMRC policy, or disputes that can only be resolved by hearing contested evidence under oath.

Does applying for ADR affect my appeal deadline?

No, not automatically. Protect your review or appeal deadline independently and in writing, before or alongside any ADR application, unless HMRC expressly agrees in writing to hold the deadline open.