It has been reported that, since late August, HMRC has issued more than 600 accelerated payment notices relating to a total of more than £250m of disputed tax in respect of certain tax-avoidance schemes. Apparently, HMRC intends to send APNs to around 33,000 individuals and 10,000 businesses by the end of March 2016.
The circumstances in which an APN may be issued are described in CC/FS24 (HMRC compliance check series).
Broadly speaking, they can be issued to a person who has used an avoidance scheme if a) there is a current compliance check into their return or claim or there is an open appeal or b) the return, claim or the appeal is made on the basis that there is a tax advantage from the avoidance scheme used, and one or more of the following applies:
- HMRC has given the taxpayer a follower notice (this is explained in factsheets CC/FS25a and CC/FS25b)
- The taxpayer has used an arrangement disclosed under the Disclosure of Tax Avoidance Schemes provisions
- The taxpayer is subject to a counteraction notice under the General Anti-Abuse Rule.
The tax legislation that deals with accelerated payments refers to a compliance check as a “tax enquiry”.
Broadly speaking, an APN requires an effective “payment of tax in advance” within 90 days of its receipt. Late payment could generate a penalty of at least 5 per cent of the tax stated in the APN.
While there is no appeal against an APN (although the taxpayer can ask for more time to pay), the normal appeals process applies in relation to the assessment or enquiry. If the taxpayer is successful, then the tax paid under the APN will be repaid with interest.
Given one of the conditions (that, if satisfied, would “put a taxpayer in the frame” for an APN) is that the arrangement has a Dotas reference number, it is no surprise HMRC is enthusiastic to increase the number of schemes that require one.
There is currently a consultation aimed at increasing the number of schemes for which such a Dotas reference number will be needed. This is especially so in relation to inheritance tax-focused avoidance schemes.
Representations have been sought on the proposals that are potentially very wide ranging.
It is expected many of the representations – and especially those from the financial services sector – will be strongly focused on achieving clarity over what types of arrangement will and, perhaps more importantly, will not be caught.
This clarity is especially desirable given the proposed removal of the grandfathering rules if a “caught” scheme continues to be promoted after the implementation date, which has not yet been decided.
It must be remembered, however, that a Dotas reference number a) does not mean the scheme will inevitably fail to achieve its tax-saving objective, b) does not represent a “clearance” from HMRC and c) may (but not necessarily) result in an APN being issued – but only if an HMRC enquiry is opened.
Although this may all seem a bit peripheral to advisers, it is essential a close eye is kept on developments. These proposals may certainly affect the sort of arrangements advisers are happy to promote and clients are comfortable to participate in.
For some consumers, it may be understandable if a Dotas reference number makes a scheme (possibly unjustifiably) unbuyable due to the risk of an APN.
The very real possibility of this reaction makes the need for clarity and certainty essential. Let’s hope the consultation gives us this.
Tony Wickenden is joint managing director at Technical Connection
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