HM Revenue and Customs (HMRC) has said there was decline in use of mediation to settle tax disputes in the past year, according to a freedom of information request by law firm RPC.
The number of cases entering mediation fell 25% to 417 in the 2018/19 financial year, from 553 in 2017/18.
Only £45m ($59m, €53m) in additional tax was brought in by the UK tax collector through alternative dispute resolution (ADR) in 2018/19.
RPC said fewer taxpayers are applying to use ADR to settle with HMRC because the tax authority refuses to mediate in far too many cases.
Requests to use mediation fell 19% to 1,144 in 2018/19, from 1,411 a year earlier.
Under-utilised
ADR in tax disputes typically involves mediators who work with the taxpayer and HMRC to find a settlement.
The aim is to reach an agreement without the need for the case to proceed through litigation before the tax tribunal.
Robert Waterson, partner at RPC, said: “It is a concern that ADR is still so under-utilised, as it can work very well when HMRC agrees to it.
“Far too often, however, HMRC refuses to actually sit down at the table with taxpayers and discuss a sensible compromise. HMRC can be very inflexible – in most disputes, you can have full information on its case or you can have mediation, but not both.
“That leaves some taxpayers having to enter ADR without full knowledge of HMRC’s actual position. If HMRC took a more sensible approach to mediation, it could bring in a lot more tax and avoid formal litigation before the tax tribunal.”
