New HM Revenue & Customs (HMRC) powers that require taxpayers using avoidance schemes to pay the disputed tax up front through the use of “Accelerated payment notices”, (APN’s) were introduced on receipt of Royal Assent to the 2014 Finance Bill, in July this year.
APN’s can be issued where there is an open appeal or enquiry, and either the taxpayer is using certain arrangements that have been disclosed under the Disclosure of Tax Avoidance Scheme (DOTAS) rules, a “Follower” notice has been issued or a general anti-abuse rule (GAAR) counteraction notice has been issued.
These rules have been introduced to remove the potential cash advantage enjoyed during an avoidance dispute.
The new rules apply to arrangements entered into in the past, not just new arrangements, and HMRC issued a list of (DOTAS) tax avoidance schemes in July, on which users may be charged an accelerated payment. The list was updated as at October 2014.
Where an APN is issued, settlement will be due within 90 days of the date of issue of the notice, unless “representations” are made to HMRC within that 90 day period. In these circumstances, if later, the payment date will be 30 days from the date of HMRC’s decision on the representations. However, it should be noted that there is no right of appeal against an APN, and representations can only ask HMRC to review the notice on procedural or computational grounds.
Turning to interest charges, no interest will be charged for late payment of tax included within an APN, until the case is ultimately settled. However, penalties will be charged for late payments of tax included in the APN as follows:-
5% of tax unpaid after 90 days (the penalty day)
5% of tax unpaid 5 months after the penalty day
5% of tax unpaid 11 months after the penalty day
HMRC – Settlement Opportunity
Separately, HMRC are inviting some participants in certain schemes to settle their tax liabilities by agreement, without the need for legal action.
In brief, HMRC may, on request, provide a computation of the liability due under their settlement opportunity, which in no way obligates the taxpayer to accept the offer, but does provide additional information, that can help in the process of deciding whether to settle with HMRC, or pay the APN.
Needless to say, any client facing an APN should liaise with their usual contact at Saffron, so that HMRC’s entitlement to issue a notice can be reviewed, any settlement opportunity can be considered and dialogue with HMRC can be entered into if “time to pay” arrangements are required.