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Last updated: 3 Feb 2022
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Is remote ADR mediation the (only) way forward?

In response to COVID-19, Alternative Dispute Resolution (ADR) mediations were switched from face-to-face (F2F) meetings to being held online. This ensured ‘business as usual’ during lockdown, but has HMRC become a little too comfortable with this new way of working?
HMRC's stance on ADR

HMRC's Stance on ADR

For those of you who have participated in successful ADR mediations, either while representing your clients or as mediators, I’m sure you recognise the value of the ADR process as a cost-effective method of resolving tax disputes. Additionally, following the latest changes to the ADR process whereby ADR applications can now be made at any stage of tribunal proceedings (motivated, no doubt, by the backlog of cases caused by the pandemic), ADR is, more than ever, a viable and cheaper alternative to litigation.

HMRC recently announced its longer-term approach to the ADR process whereby mediations are only to take place F2F when dealing with large or complex cases. In taking this blanket approach, HMRC are failing to consider the merits of F2F meetings on individual cases which may, in turn, impact the potential success of ADR.

About the author

Barbara Bento

+44 (0)20 3972 6606
bentob@buzzacott.co.uk

HMRC's Stance on ADR

For those of you who have participated in successful ADR mediations, either while representing your clients or as mediators, I’m sure you recognise the value of the ADR process as a cost-effective method of resolving tax disputes. Additionally, following the latest changes to the ADR process whereby ADR applications can now be made at any stage of tribunal proceedings (motivated, no doubt, by the backlog of cases caused by the pandemic), ADR is, more than ever, a viable and cheaper alternative to litigation.

HMRC recently announced its longer-term approach to the ADR process whereby mediations are only to take place F2F when dealing with large or complex cases. In taking this blanket approach, HMRC are failing to consider the merits of F2F meetings on individual cases which may, in turn, impact the potential success of ADR.

The risks of virtual mediations

The risks of virtual mediations

Factors such as body language and eye contact/movement, which enable the mediators to make judgements and intervene at the appropriate time creating momentum, are harder to assess virtually. Whereas we primarily use words to communicate, ‘nonverbal’ messages provide valuable insight with regards to what people are really trying to convey. Holding discussions in a virtual environment sacrifices this key benefit that would be available in F2F mediations.

While I recognise some of the benefits of virtual mediations, such as being able to meet with parties in different geographic locations, less logistics with regards to time and space, it’s undoubtedly more difficult to mind map ideas, have in-depth discussions, exchange information and ensure that there are no confidentiality breaches. Parties regularly enter into mediation due to a break down in relationships, and often after a series of protracted correspondence through email exchanges and meetings. F2F ADR mediations change the whole dynamic and create opportunities to hold without prejudice and explorative discussions that gives both parties the sense of a full and fair hearing. Therefore the importance of F2F discussions to the potential success of any mediation cannot be overstated.

Given that HMRC’s change in policy has not yet had time to bed in, it may be too soon for HMRC to assess whether the success rate of virtual ADR mediations is comparable to when discussions are held F2F. However, my own experiences would render me extremely surprised if the success rate of ADR hasn’t dropped somehow.

Whereas I was initially sceptical about remote ADR mediations, I can now appreciate some of the benefits, having had the opportunity to mediate a number of cases remotely. However, I still hold the view that the marginal benefits of remote mediation do not outweigh its shortcomings. As an example, I recently acted as a joint mediator with HMRC during a virtual ADR and parties did not reach a settlement on the day. I believe the outcome would have been different had the ADR mediation taken place F2F. ADR mediations can take several hours and parties can often become discouraged and tired. Part of the role of the mediator, through a set of mediations skills, is to ensure everyone attending mediation is motivated throughout the day and remain determined to settle. In order to promote this, it is crucial for the mediator to be able to observe behaviours and action cues involving positive and uplifting discussions during F2F private meetings. Retaining momentum through a computer screen, when parties are exhausted and frustrated, is considerably more challenging and can result in parties becoming even more entrenched in their opening positions.

I believe the best and most effective way to service my clients is through F2F advice and support. My hope is that HMRC also understands the value of these interactions and, at the very least, considers each case on its own merits. My suggestion would be, that during the preparation stage of ADR mediation, mediators assess which cases are more likely to be settled at a F2F mediation. This could be achieved by carefully considering the facts, the issues at dispute, the parties’ convictions and personalities during the preparation stage, rather than making a judgement at the outset, based purely on the size and perceived complexity of the case.

I’m aware that HMRC is considering technical and procedural changes to the ADR process, with a view to simplifying the process and the rules of engagement within ADR for all parties. Regrettably, the proposed changes do not give any indication that HMRC is also willing to consider the impact of denying taxpayers a chance to resolve their dispute F2F.

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