by  Emily Taylor, Innovation Funding Consultant at ABGi UK

HMRC has significantly increased its scrutiny of R&D tax relief claims in recent years. As part of this compliance focus, more companies are finding themselves subject to HMRC enquiries.

While the enquiry process itself can be complex, Alternative Dispute Resolution (ADR) offers a structured route to resolve disputes, especially when communication has broken down or both parties seem entrenched in their views. If handled well, ADR can lead to fair and timely outcomes without needing to escalate to a full tribunal hearing.

In this article, we explore the purpose and process of ADR and provide insight into how the ADR process works and how businesses can best prepare.

What is ADR and when is it used?

ADR is a mediation-based process offered by HMRC to help resolve disputes. It involves a neutral HMRC mediator—trained in conflict resolution techniques—facilitating discussions between the taxpayer (and their representatives) and the HMRC case team. The goal is to find common ground and resolve the enquiry more efficiently.

ADR is particularly useful where:

• Communications have stalled on HMRC’s part
• here is misjudgement or lack of technical knowledge to fully understand facts or technical interpretation
• A misunderstanding is causing ongoing delays

It is not appropriate in cases involving payment issues, criminal investigations, procedural complaints, or statutory penalty disputes.

Each application is considered on a case-by-case basis. If ADR is accepted, both parties attend a formal session—often conducted online—aimed at reaching agreement or clarifying the route forward.

The ADR Process in Practice

ADR typically takes place in two parts.

Part 1: Fact-Finding Session

This stage is typically conducted via a full-day Teams call (This is project number dependent -1-1.5hrs per project) and involves:

• HMRC’s Decision Maker and Technical Writer
• An impartial HMRC Mediator (from a separate department)
• Agent representatives (e.g., ABGi UK)
• The client and relevant Competent Professionals (CPs)

Important steps include:

1. Preparing the client

Review all correspondence and highlight key discussion points and trial questions that will strengthen the points being made.

2. Confirming CP status
The first step is to agree on Competent Professional(s) status & assess HMRC’s background position—sets the tone and scope for our argument (GOL Ltd vs HMRC).

3. Managing direct questioning
HMRC Decision Maker will question the client/CPs directly— we ensure the client is prepared and in agreement to provide the answers with ABGi acting as an area for legislation only. ABGi will also address areas missed to direct the client and summarise client responses in laymen’s terms to HMRC to fit the guidelines.

4. Project-by-project discussions
We seek to push for an outcome after the discussion of each project—though not always possible in Part 1.

5. Timeline commitments
We push for clear timeframes for HMRC’s written response, helping prevent cases from stalling post-session.

After the session, HMRC issues a letter summarising their view. The client then decides whether to accept HMRC’s conclusions or proceed to Part 2.

Part 2: Negotiation, Agreement & Final Questions

This stage focuses on any projects still under dispute:

• Further discussion of rejected projects to seek resolution.
• If unresolved, the case may proceed to Tribunal.
• If a resolution has been agreed upon, HMRC will issue us and the client a letter with the final agreed decision. ABGi will then be required to attach this and email the tribunal stating that an agreement has been made and that we withdraw the appeal. HMRC will also contact the tribunal office.

Supporting Clients Through ADR

At ABGi, we provide full support throughout the ADR process:

• We meticulously prepare each case, ensuring your business is not only compliant but also fully prepared for HMRC questioning. Our method gives HMRC no choice but to substantiate their claims, significantly weakening their rejection stance.

• We navigate the conversation, set the agenda, and ensure HMRC must justify their position.

• Our team sits alongside your competent professionals (CPs) during ADR, providing support, shaping counter arguments, and ensuring HMRC’s questioning doesn’t leave room for misinterpretation or points get dismissed.

• We combine R&D tax expertise with a proven track record in handling Alternative Dispute Resolution (ADR) cases. We don’t just guide clients—we shape the narrative to put HMRC on the back foot.

• Recent Tribunal cases show that when HMRC fails to properly substantiate their position, their rejections are frequently overturned. We apply case law and prior rulings to weaken HMRC’s argument and highlight inconsistencies.

In Conclusion…

A growing number of legitimate R&D claims are now facing compliance checks—some of them lengthy and difficult. ADR gives companies an opportunity to move forward constructively, but success depends heavily on how well-prepared you are going into the process.

At ABGi UK, we provide full enquiry defence as standard on every claim we prepare. That means we stand behind the quality of our work and are fully committed to supporting you if HMRC challenges your submission.