Settlement Negotiation

Settlement negotiation in the ADR context involves formalising an agreed outcome once both sides have identified acceptable compromises. At this stage, you shift from broad discussions to detailed drafting of settlement terms. These terms cover what each party will do: HMRC might agree to adjust an assessment, waive penalties or modify interest calculations while you commit to paying a revised sum by a specified deadline. 

Precise language is crucial to avoid future misunderstandings. For example, if HMRC agrees to drop a penalty, the agreement must cite the specific penalty code and the period it covers.

To manage settlement negotiations effectively, first draft a settlement document based on the mediator’s summary of agreed points. Share this draft with HMRC’s legal advisers for their feedback. You may need to revise it several times. In this phase, it’s a good idea to involve tax counsel or a senior advisor to ensure the document is legally sound and accurately reflects the discussed terms. 

Once both parties sign the document, the settlement becomes binding, and HMRC will update or issue new assessments. If either party claims a breach, the tribunal process is available, so clear and complete documentation is essential. Completing the settlement negotiation marks the end of your ADR journey, turning mediated discussions into enforceable outcomes.