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Alternative dispute resolution (ADR) has been available as a method of settling tax disputes between taxpayers and HMRC since 2013. ADR is widely used in the commercial world as a cheaper, more time efficient and effective way of handling issues and disagreements than litigation. There are a number of different formats which ADR can take, including mediation, arbitrations and third party negotiations. In tax disputes, ADR takes the form of mediation.

The most detailed HMRC internal guidance on ADR can be found at ADRG01000.

For further information on how ADR is used to settle cases, see 'The rise of alternative dispute resolution' by Patrick Cannon in Taxation, 12 March 2020, 8. See also 'ADR meetings: trust the process or steer clear?' by Waqar Shah in Taxation, 27 April 2023,16, which discusses whether ADR is still worth pursuing given HMRC's view of whether the process takes place on a 'without prejudice basis' (also discussed below).