London-headquartered law firm RPC, which analysed the statistics, also noted that the number of successful HMRC tax dispute settlements through alternative dispute resolution (ADR) increased by 23% from 370 in 2016-17 to 455 in 2017-18.
Adam Craggs, partner and head of tax disputes at RPC, said: “HMRC seems to have realised the value that mediation can offer to both sides in a tax dispute. It can provide a speedy and effective method of resolving tax disputes, which benefits both taxpayers and the Treasury.
“With the Treasury continuing to exert pressure on HMRC to increase the tax yield, mediation offers an opportunity for long-running and complex disputes to be resolved without the need for formal litigation and the inevitable delay that can bring.”
RPC said that HMRC seemed “increasingly willing” to use ADR to settle disputes with taxpayers. The firm noted that this method has several “advantages” over pursuing cases through the legal system, including:
- Speed – mediation can be a speedy process and a great deal quicker than the formal litigation process;
- Cost – settling a tax dispute through mediation is less expensive than formal litigation, which is a key concern when HMRC is under significant pressure from the Treasury to save costs;
- Confidentiality – the mediation process is completely confidential and neither the terms of any settlement or the name of the taxpayer concerned will be disclosed, unlike in publicly reported tax appeal cases; and
- Ability to settle long-running disputes – mediation can present an opportunity for HMRC to clear tax disputes that may have been ongoing for several years and, unlike formal litigation, mediation can be used at any stage in the dispute resolution process.
Craggs added: “Mediation provides an excellent forum for taxpayers and HMRC to discuss their dispute while sat around the table rather than in an adversarial litigation environment when positions can become entrenched.
“Taxpayers who are looking to enter mediation with HMRC should always take appropriate professional advice before doing so.
“There can be significant sums of tax at stake and, while mediation can provide an excellent mechanism for taxpayers to end a dispute on terms that make commercial sense, there are pitfalls for the unwary.”