HM Revenue & Customs (HMRC) has started issuing Accelerated Payment Notices (APNs) to individuals and corporates who previously participated in certain tax avoidance schemes.
Introduced in the Finance Bill 2014, an APN forces the taxpayer to make payment to HMRC of tax currently under dispute within 90 days of being issued with a notice. APNs are being introduced to counteract the perceived cashflow advantage for the taxpayer of holding onto the disputed tax during an avoidance dispute.
HMRC anticipate issuing some 43,000 (33,000 to individuals and 10,000 to corporates) APNs in 2014/15 and 2015/16 and has confirmed that they will seek to issue around 2,500 APNs per month over the next 18 months. The tax authorities believe that this will raise an estimated £7.1 billion.
However, Dominic Arnold, Head of Tax Investigations and Disputes, warns: “One of the most controversial features of APNs is the absence of a right to appeal against HMRC’s decision.
“Whilst the taxpayer has the ability to make representations to HMRC, it remains to be seen whether or not these will hold any real weight in practice”.How could this impact your client?
Any client who receives an APN may be required to make an upfront payment to pay tax currently in dispute with HMRC. For many clients who do not have the means to pay HMRC this could result in financial hardship and in the most serious cases, lead to personal bankruptcy and business insolvency.
It is important that you and your clients understand APNs and, where appropriate, the best way to secure a time-to-pay arrangement. There may also be an opportunity to settle with HMRC before an APN is issued and a number of settlement opportunities remain open for certain schemes.
Dominic highlights that any client who has received or is likely to receive an APN should consider their options sooner rather than later. He says: “Individuals who participated in schemes notifiable under the Disclosure Of Tax Avoidance Schemes rules can be almost certain that HMRC will be issuing them with an APN.”
In terms of corporates, David Elliott, Restructuring and Insolvency Partner, notes “Where tax has been withheld and funds have subsequently been distributed to director/shareholders, we may find that HMRC seeks to treat the distributions as an illegal dividend and individuals could be forced to repay the funds back to the company.
“This will worry a lot of clients who have participated in such schemes and are concerned that their personal assets are at risk”.How can Moore Stephens help?
Moore Stephens tax investigations and insolvency specialists can help you understand the proposed measures and how they may impact you and your clients. We can also explore the possibility of resolving open disputes through existing HMRC settlement opportunities.
For more information please contact Dominic Arnold
or David Elliott.
ContactsDominic ArnoldDavid Elliott
Related linksTax investigationsRestructuring & insolvency