The consultation was published on 28 April 2025 as part of the government’s tax administration and simplification update. It follows the publication, in February 2024, of a call for evidence on a wide range of issues as part of HMRC’s tax administration and framework review. ICAEW’s Tax Faculty responded to the call for evidence in May 2024. 

The consultation will run until 7 July 2025. If you have any feedback that you would like ICAEW to consider for inclusion in its response, please contact Richard Jones by 13 June 2025. 

The current processes 

HMRC may carry out a compliance check into a tax return to make sure that the taxpayer is paying the correct amount of tax. During the compliance check, the taxpayer and HMRC may disagree about a tax liability. The taxpayer can request to use ADR if that disagreement cannot be resolved. This involves a trained mediator from HMRC working with the taxpayer and the HMRC caseworker to help resolve the dispute.  

HMRC will make a decision at the end of the compliance check. The taxpayer can appeal against the decision if they disagree with it. If the dispute cannot be resolved, HMRC will offer the taxpayer a statutory review. The review will be carried out by an officer from HMRC’s Legal Group. The officer will check that the decision is correct and in line with HMRC policy. They can uphold, vary, or cancel the decision. 

The ADR and statutory review processes differ for direct and indirect taxes. Key differences include at what stage in the process the taxpayer can make a request for ADR and is offered a statutory review by HMRC.  

The taxpayer has the option of appealing against HMRC's decision to the First-tier Tribunal. However, if the taxpayer has requested a statutory review, the review must be concluded before the taxpayer can appeal to the tribunal.    

Simplifying and aligning processes 

As recommended by ICAEW in its response to the call for evidence, HMRC would like to explore the benefits of simplifying and aligning the processes for direct and indirect taxes. The options under consideration include: 

• adopting the indirect tax ‘pre-decision letter’ approach for direct taxes. Currently, HMRC may provide a ‘pre-decision’ letter’ to explain its position before a final decision is made. HMRC believes that this approach can “trigger further discussion between the taxpayer and HMRC” and help both parties reach agreement;
• improving access to ADR for indirect taxes by adopting the direct tax approach. This would allow for an application for ADR to be made at any time during the compliance intervention; and
• aligning the notification of decisions for direct and indirect taxes and offering statutory review at the same time, ie, alongside a formal decision.  

Improving access to ADR and statutory review 

HMRC says that ADR has a positive impact on over 80% of cases accepted into the process, by fully or partially resolving the dispute or enabling the taxpayer to make an informed decision on how to move forward. 

However, a relatively high number of applications for ADR are rejected. HMRC recently reviewed its ADR exclusion list and is developing a principle-based approach for cases coming into the ADR process. HMRC hopes that this will “widen the net for more taxpayers to be accepted into ADR”. 

HMRC will improve taxpayer awareness of ADR by offering and signposting to ADR more actively. Building on this, HMRC is exploring requiring taxpayers and HMRC to have considered ADR prior to appealing to tribunal. HMRC says this “could be particularly effective where a case is suitable for ADR and could provide earlier resolution”. 

HMRC is exploring the scope for streamlining the online process for applying for ADR and statutory review to make them more accessible. This could mean that taxpayers are able to track progress directly within their tax accounts. HMRC is asking for views on how digital appeal routes could be designed and integrated with other digital services.