BUDGET 2014: Accelerated payment in tax avoidance cases
Some of you may have seen reference to accelerated tax payments mentioned in this week’s Budget. I believe that HMRC is gearing up for issuing notices which in effect request a full payment on account of a tax settlement.
At the moment Royal Assent is being sought and although I do not know the mechanics of the future HMRC processes I believe HMRC is gearing up to serve thousands of notices.
The Autumn Statement 2013, announced legislation to be introduced in Finance Bill 2014 to change tax administration to require taxpayers who have used avoidance schemes which are defeated in another party's litigation, and who do not settle the dispute, to pay the disputed amount to HMRC on demand.
Following consultation, further legislation will be introduced in Finance Bill 2014 to extend accelerated payment of tax to users of schemes disclosed under the Disclosure of Tax Avoidance Schemes (DOTAS) rules, and to taxpayers involved in schemes subject to counteraction under the General Anti-Abuse Rule (GAAR), so that the amount in dispute is held by HMRC while the dispute is resolved. These changes will take effect from Royal Assent to Finance Bill 2014.
This means the government is legislating to provide that HM Revenue & Customs (HMRC) may issue a notice to the user of a tax avoidance scheme that they should settle their dispute with HMRC when the claimed tax effect has been defeated in other litigation. If the taxpayer does not settle they risk a penalty and must make upfront payment of the tax in dispute.
The consultation (mentioned above), carried out from 24 January to 24 February 2014, proposed the extension of accelerated payments to schemes falling within DOTAS and schemes that HMRC counteracts under the GAAR.
Following Royal Assent, HMRC will issue a ‘Notice to Pay’ to any taxpayer for whom there is an open enquiry, or the matter is under appeal, and who has claimed a tax advantage by the use of a scheme.
The notice will require the taxpayer to pay the tax in dispute within 90 days, or a further 30 days where the taxpayer requests that HMRC should reconsider the ‘follower notice’ or the amount of the payment notice. Where the matter is under appeal, the measure will operate so as to remove any postponement of the disputed tax. Penalties will apply for late payment.
Naturally, I will be monitoring developments about the Budget announcement and will keep you posted.
Yours sincerely
Chris Leslie
For and on behalf of Tax Networks Ltd
