However, not all tax schemes are designed solely to avoid tax or are unreasonable and it is this difficult balance, between a legitimate scheme which has different tax consequences and a tax scheme solely set up to avoid tax. This has led to the complex plethora of tax legislation, numerous finance acts and ongoing annual changes in response to schemes created to circumvent new tax legislation.
To combat perhaps the resourcing difficulties and ongoing risk that delays lead to when engaged in such tax disputes, from 2014 tax legislation was introduced to require that payments on account of tax liabilities arising under such disputed schemes should be made up front, referred to as Accelerated Payment Notices (“APNs”), which may also have application to other tax schemes including those in respect of Stamp Duty.
When is an APN likely to be received?
- where the taxpayer has participated in a tax scheme which has been recommended by a tax advisor and which may already be subject to settled dispute between HMRC and another taxpayer (perhaps via an appeal to the Tax Tribunal or the Courts), then a “Follower Notice” may be sent to other participants following the same (or a similar) scheme (perhaps provided by the same tax advisor); or
- where disclosure of a tax arrangement has been made or where the appropriate notices have been issued pursuant to anti-abuse regulations an APN may also be issued to the taxpayer whilst the negotiations are ongoing.
How much is the APN likely to be?
The APN will usually be equivalent to the amount of “understated tax” as determined by HMRC. This will be payable even if there is an appeal ongoing to a tax tribunal.
There is no right of appeal against an APN and the APN is payable within 90 days, although if negotiations are initiated then a further 30 days’ extension is permissible (if the 90 day period is due to expire) or alternatively HMRC may agree to withdraw the APN.
Can the APN be negotiated?
Yes – you can negotiate tax liabilities. At Francis Wilks & Jones we have extensive experience of negotiating such matters.
However, if you choose to negotiate yourself, you must be aware of HMRC’s internal procedures for doing to and this is particularly important when considering appeals against tax negotiations which may have been concluded by HMRC, as any such appeal may trigger the issue of an APN.
What if the APN is not paid?
If you are unable to pay the APN, it is critical that you engage and negotiate with HMRC as soon as possible. Otherwise, if the APN is not paid within the stated 90 day period (and it has not been withdrawn and there is no extension) then penalties and surcharges will accrue in addition to the sum payable on the APN.
- On post 2010 arrangements, these penalties will be between 5-15% of the sums due, with 5% becoming due immediately upon expiry of the 90 day deadline;
- HMRC will listen to any reasonable excuses for late payment but, as stated above, this will depend upon early engagement and negotiation of the sums payable under the notice.
At Francis Wilks & Jones we are able to assist with all HMRC negotiations with a view to limiting your obligations under the APN and best developing a strategy to assist you in resolving any such dispute. Please call any member of our expert tax disputes team today for your consultation