Accelerated Payment Notices: What are they and When are they Used?
Since their introduction in 2014, HMRC have used Accelerated Payment Notices to recover several billions of pounds of taxes, but what are they and when are they used?
Accelerated Payment Notices (APNs) are notices stating that HMRC believes that the recipient has partaken in a tax avoidance scheme and that require the recipient to pay the amount of wrongfully avoided tax stated in the notice to HMRC within 90 days of its receipt.
Their purpose is two-fold – firstly, HMRC has been taking an increasingly tough stance on its approach to tax avoidance and this is a continuation of that method. Secondly, it removes the cash-flow advantages companies partaking in tax avoidance schemes used to enjoy when the tax could remain unpaid until a successful ruling was gained by HMRC in the courts.
It’s expected that by the end of 2016, 64,000 notices will have been sent out since the scheme’s introduction, bringing forward the payment of over £5.5 billion of taxes by March 2020. HMRC have already recovered an estimated £3 billion in tax using APNs to date.
What Schemes can be Subject to an APN?
Accelerated Payment Notices can be issued where the taxpayer has been involved in a tax avoidance scheme disclosed under the Disclosure of Tax Avoidance Schemes (DOTAS) rules, caught by the General Anti Abuse Rule (GAAR) or has received a Follower Notice arising from their participation in the scheme.
In order for an APN to be issued, two other criteria need to be satisfied: firstly, that there is an open tax enquiry relating to a return or claim submitted by the taxpayer, or an open appeal relating to the same. Secondly, this return or appeal must have been made on the basis that the taxpayer has received a tax advantage from the scheme.
One of the ways that HMRC can issue an APN is if they have issued a Follower Notice in relation to the same scheme. Follower Notices are issued to a taxpayer where HMRC has received a judicial ruling in its favour that it thinks will also apply to tax avoidance arrangements undertaken by that taxpayer. If a person receives a Follower Notice and doesn’t make payments in response to the notice, they may face a penalty of up to 50% of the disputed tax.
What can I do on Receipt of the Notice?
There is no right to appeal an Accelerated Payment Notice. You cannot negotiate with HMRC on the amount stipulated by the Accelerated Payment Notice, nor will they be flexible about the 90 day time period for payment.
Although there is no right to appeal Accelerated Payment Notices, you do have the right to make representations on a limited number of grounds. These grounds are: either that the basis that the conditions required for the issue of an APN have not been met or that the amount specified within it is incorrect. You must make representations within the 90 day period and HMRC has a duty to consider the representations and let you know its decision on whether it will be withdrawing, amending or confirming the APN in response to them.
HMRC have made errors in the past by issuing APNs where they should not have – they had to withdraw over 2,000 issued APNs earlier this year after a judicial review showed that the scheme for which they were issued was not notifiable under DOTAs as HMRC had claimed. So if you think that the requirements have not been met, it is important that you make the representations within the specified period.
If HMRC do not withdraw the APN, you have 30 days from the date of their decision to pay the amount specified in the APN, or, if they revised the amount, the revised amount.
How do I Know Whether I will Receive an Accelerated Payment Notice?
As Accelerated Payment Notices are generally only used in situations where the taxpayer has used a scheme to avoid paying the full amount of tax, in most situations, you will know if you are likely to be affected.
You will also be alerted to your forthcoming APN, either through the receipt of a Follower Notice, or a letter that HMRC send a few weeks in advance of the issue of the APN to tell you that you will be receiving one and what it means.
Received a Follower Notice or an Accelerated Payment Notice?
If you’ve received a Follower Notice or an Accelerated Payment Notice and want to discuss options available to you, call us on 0208 444 3400 or Contact Us.