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Mediation can be an effective means for resolving tax disputes, but how do you know if it’s the right step for you?
Firstly, it’s important to be aware that in tax disputes, mediation is used in two separate contexts; disputes which do not directly involve HMRC, and those which do.
Examples of disputes covered in the first category include disputed tax liabilities arising out of the tax warranties and indemnities given by the parties to each other on the sale of a company. Disputes as to liability for negligent tax advice where a client is claiming against his tax adviser for bad tax advice is also included within this first category.
The second context is where a taxpayer and HMRC are seeking to avoid litigation, and instead choose mediation to achieve an agreed outcome for their dispute.
Mediation services can be utilised by any number of parties who want to voluntarily solve a dispute relating to tax in their own time, and by their own means – without the judgement of a third party.
It’s important to note that mediation services can start before legal proceedings have begun or part way through a court case.
The length of the mediation process is entirely dependent on the parties involved. Factors including the sincerity of the dispute, the number of parties involved and the cooperation levels of each of the parties will affect the length of the process.
On average UK mediation sessions last for approximately 2 hours, however in some cases sessions can extend to a day’s length.
Unlike in legal proceedings, a mediator does not act as a third party in deciding the outcome of the dispute. Instead, a mediator acts as a facilitator of discussion. Ultimately, the final decision has to be made by both parties; the mediator simply tries to get each party to understand the other’s point of view, in order to reach a satisfactory conclusion.