HMRC are continually reviewing their enquiry process and have made a number of changes recently that practitioners should be aware of.

The ongoing trial of the Alternative Dispute Resolution (ADR) process has been further extended. The ADR trial provides Small and Medium Enterprise customers with an alternative way of resolving tax disputes in compliance checks.

As a reminder, ADR involves an independent person from HMRC (called a ‘facilitator’), who has not been involved in the dispute before, and who will work with both the taxpayer and the HMRC case owner to try to broker an agreement between them. HMRC advise that so far ADR has proven to be an effective way of resolving tax disputes in a quick and efficient way, not just for tax but in the commercial world as well.

In this stage of the trial, ADR will be available to SME customers, where a tax issue is in dispute, but before an appealable tax decision or assessment has been made by HMRC. ADR covers both VAT and direct taxes disputes, and entering into the ADR process will not affect the customer's existing review and appeal rights.

Initially this stage of the trial is limited in geographical coverage and Northern Ireland is not currently included.

More information on the ADR is available at http://www.hmrc.gov.uk/adr/index.htm

HMRC have also issued a reminder about the contractual disclosure facility (CDF) which starts on 31 January this year and is used to admit to fraud. The process can help avoid criminal prosecution.

The online guide to CDF explains what happens and what to do if a taxpayer receives a letter and a Code of Practice 9 from HMRC saying that they suspect tax fraud has been committed, and offering a CDF contract. It also explains what to do if a taxpayer wants to own up voluntarily to committing fraud.

CDF is only suitable for tax fraud situations and does not apply in error or mistake situations or avoidance schemes where there isn't a fraud. More information is available at http://www.hmrc.gov.uk/admittingfraud/owningup.htm