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Alternative dispute resolution (ADR) is widely used in the commercial world as a cheaper, more time efficient and effective way of dealing with issues and disagreements than formal litigation. ADR can come in a number of different formats including mediation, arbitrations and third party negotiation.

In tax disputes with HMRC, ADR takes the form of mediation, where an independent mediator acts as a facilitator in order to try to resolve the dispute without binding the parties in advance of any outcome. The mediator will give directions for how the parties are to engage in the process. If ADR fails, the parties can still decide to adopt the litigation route. See the Appealing an HMRC decision ― outline guidance note.

For more information on the interaction between ADR and the HMRC litigation and settlement strategy, and the other issues to consider in relation to ADR, see the HMRC policy on alternative dispute resolution guidance note.

This guidance note considers the ADR process in more