Tax Scheme Fever and HMRC Accelerated Payment Notices
HMRC must have a substantial task with the sheer volume of ubiquitous tax avoidance schemes out there, because I believe the Accelerated Payment Notices (“APNs”) work is being centralised by the new Counter Avoidance Directorate.
Relevant schemes have already been selected by HMRC and the preliminary list of schemes being targetted is located here!
When this controversial proposal takes effect after Royal Assent in July 2014 HMRC will need to prioritise and serve APNs according to certain criteria.
What is the Criteria?
1. HMRC is enquiring into the taxpayer’s return or claim, or the taxpayer has made an appeal against a closure notice or discovery assessment that has not been determined;
2. The taxpayer made the return, claim or appeal on the basis that a particular tax advantage arises from the tax arrangements implemented; and
3. One of the following requirements is met:
(i) HMRC has given the taxpayer a "follower notice" in relation to the same return, claim or, as the case may be, appeal by reason of the same tax advantage arising from the same tax arrangements;
(ii) HMRC has allocated a DOTAS reference number for the tax arrangements, which is required to be notified; or
(iii) HMRC has counterpointed against the GAAR Advisory Panel have suggested that entering into the tax arrangements was not a reasonable course of action.
APNs Priority List?
I am suggesting that those who already have conceded to participating in ineffective tax avoidance schemes may be lower down HMRC’s priority list of APNs, because there is no dispute about eventual tax settlement. In terms of settlement offers, in the case of Litman & Newall v HMRC TC03229, the taxpayers' appeal was dismissed but the judge did decrease the penalties from 40% to 10%, so HMRC's general threats of 50% penalties should be rebutted.
However, back to APNs, those DOTAS registered schemes and/or taxpayers under enquiry will probably be early on HMRC’s APNs list. I believe that is why APNs have been introduced to stop deferral of tax, even though interest accrues – it is apparently a Treasury cash flow thing.
What about late payment after the APN is served?
Even if I am wrong and Just after July 2014 HMRC does issue an APN in an ongoing enquiry case and the taxpayer fails to make the payment of the accelerated amount by the penalty date (the day following the payment date) the taxpayer will be liable to a penalty of 5% of the APN amount. A further 5% penalty applies if any amount of the APN remains unpaid five and 11 months after the penalty date - to me, it resembles a late payment surcharge rather than a behavioural penalty.
Time To Pay Arrangements
I understand the normal TTP arrangements will be available and a statement of assets and liabilities may ultimately be required by HMRC. Importantly, HMRC should be reminded that it is highly debateable if a bank will loan money on a fixed asset if when answering the question - "what is the loan for"!
But let us consider that there are no assets liquid or otherwise and the taxpayer is made bankrupt by HMRC APNs before a Tribunal case is heard. Now that is simply not British HMRC, is it? That is why proper advice is needed.
Objecting to an APN
There are 90 days from the date of the APN to send HMRC representations giving reason for object
