Published: June 18th, 2019
Accelerated Payment Notices were introduced in the Finance Act of 2014. These notices are issued by HMRC to taxpayers, demanding the immediate payment of tax and national insurance contributions that it believes are owed due to tax avoidance.
An APN can be issued when a tax avoidance arrangement is currently under enquiry or appeal, where in the past no tax would be considered payable until the enquiry or appeal had concluded.
This change in legislation is, HMRC claim, an attempt to negate the cash flow advantage gained through use of tax avoidance schemes, which would still be in effect whilst an enquiry or appeal is underway.
HMRC have invested heavily in recent years to detect those it believes are involved in tax avoidance, and this is yet another step designed to deter businesses and individuals from avoiding tax either within this country or through the use of offshore accounts.
You can be issued with an accelerated payment notice in respect of:
- Income tax
- Capital gains tax
- Inheritance tax
- Corporation tax
- Stamp duty land tax
- Annual tax on enveloped dwellings
- A follower notice has been issued
- A general anti-abuse rule (GAAR) counteraction notice has been issued
- A disclosure of tax avoidance schemes (DOTAS) reference number has been issued
There will also need to be an open tax enquiry or appeal relating to a tax return or claim that you have submitted for the APN to be issued, on the basis that you have received a tax advantage from a tax avoidance scheme.
What is a follower notice?
A follower notice will be sent out in advance of an APN and asks you to amend your tax return in the event that it does not adhere to stipulations set out by HMRC regarding tax avoidance. You are expected to comply with the advice set out in the follower notice or risk a penalty of up to 50% of your taxes, as well as having an APN sent out.
What happens when you get an APN?
The APN issued will state the details which HMRC believe make your case suitable for an accelerated payment notice, the amount payable and how it has been calculated, and how you can make a representation to HMRC if you disagree with the notice.
If you decide to accept the APN then you need to pay the full amount within 90 days. HMRC may be willing to accept a payment plan in which you pay back the money in instalments, but the full amount is expected within the 90 days without exception. If you do not make active arrangements to pay what is owed, and your debt exceeds £1000, APNs are included under HMRC’s direct recovery of debt (DRD) provisions.
How does DRD work?
Direct recovery of debt arrangements are used as a last resort by HMRC, when they have attempted to make arrangements with you and been unsuccessful in getting any response. In this case, DRD powers allow HMRC to retrieve the money owed directly from your bank accounts, either business or personal. HMRC also have the power to retrieve this money from joint accounts shared between you and another person, up to 50% of the credit balance in the account to reflect your half.
HMRC has issued assurances that no debtor will be left with less than £5000 across all of their accounts, and this measure is only undertaken as a very last resort in the event that the money is available to take.
How to challenge the APN
There is no right of appeal with an APN, so the only option available to those who have received an accelerated payment notice, and wish to dispute it, is to make a representation to HMRC. This requires you to dispute either the amount demanded or the conditions under which the APN has been issued, in writing, within the 90 day period.
HMRC must then look at the representation and make a decision about whether they want to confirm or withdraw the APN. If HMRC decide that they have met all of the conditions for the APN, and confirm the amount, then you are still liable to pay the full amount described within the 90 day period set out in the APN. Alternatively, you may be able to pay within 30 days of the second letter.
With no appeals process, if you still do not accept this response, a judicial review is the only option left, meaning that you will need to take the issue to court to continue to challenge it.
Late payment penalties will apply after the 90 days listed on the notice, and enforcement action may be taken. Late payment interest is charged starting from the date that the payment should have originally been paid, right up to the date of payment, so the amount will change depending on the amount due. This will be charged at 5% initially, rising to 10% after 5 months and 15% after 11 months.
You may appeal a payment penalty, if you have a reasonable excuse, and this payment will be refunded at a later date if HMRC agrees. If you do not appeal a payment penalty, but later win your case, HMRC will not pay back the penalty charges. For this reason it is important for you to set up a payment plan right away with HMRC on receipt of an APN, if you agree with it.
What happens next?
Once HMRC are in receipt of the disputed tax, this does not conclude the tax enquiry or appeals process. The case still goes ahead and if you win your case then the payment will be refunded to to you.
If you win your case then HMRC is liable to pay you interest, calculated as Base Rate less 1% (with a minimum of 0.5%). Late payment penalty charges are not paid back. However, HMRC are notorious for dragging out cases with appeals and it may take a long time for you to see your money back.
If, on the other hand, you lose your case, then there may be additional tax charges over and above the amount already paid via the APN.
Talk to TFMC
TFMC experienced and fully qualified accountants help businesses and individual everyday with tax matters and are on hand to assist you if you are unfortunate to be subject to one of these invasive and distressing investigations.
Sometimes HMRC get it wrong and when they do you need someone in your corner who can fight your corner and set the record straight. Call us on 0800 470 4820 or email [email protected] to find out more.