Accelerated Payment Notices to be challenged

HMRC GAINS NEW POWERS WITH ACCELERATED PAYMENT NOTICES (“APN’S”)

HMRC gained new powers in 2014 to issue Accelerated Payment Notices (“APN’s”) across a range of circumstances.

APN’s demand an advance payment of tax even in circumstances where HMRC are continuing to investigate the question of whether the tax ought to be paid or where an appeal to a tax tribunal remains outstanding.  It really is a question of ‘pay first and argue later’

WHAT TAXES DO APN’S APPLY TO?

APN’s now apply to a range of taxes including income tax, capital gains tax, corporation tax and inheritance tax.

WHEN MAY AN APN BE MADE?

Ordinarily, an APN will be issued by HMRC where a taxpayer has entered into arrangements which give rise to a ‘tax advantage’, where that ‘tax advantage’ is subject to an ongoing enquiry or appeal, and one of the following applies –

1. A “follower notice” is issued to the taxpayer; or

2. The arrangements are subject to a counteraction notice under the General Anti-Abuse Rule (“GAAR”); or

3. The arrangements come inside the Disclosure of Tax Avoidance Schemes (“DOTAS”) regime

WHEN MUST A PAYMENT BE MADE?

Ordinarily, a payment must be made within 90 days of the date of the notice.  Representations can be made to HMRC within this 90 day period.

Following a decision released by HMRC on those “representations” a payment must be made within 30 days.

NO RIGHT OF APPEAL

The legislation implementing APN’s contains no right of appeal to an independent tax tribunal.  This is unusual and reflects the a hardened approach by the Government to the collection of tax revenues.

JUDICIAL REVIEW

The Courts have already seen Judicial Review proceedings taken against this new regime in the case of Ingenious Films.  Those proceedings were taken on the basis that APN’s were unreasonable, beached “natural justice”, and offended rights to fair trial and protection of property (as guaranteed by the European Convention on Human Rights).  It was also claimed by Ingenious that they held a legitimate expectation that payment of tax would not have to be made until any potential tax controversy with HMRC was determined by an independent tribunal.

The Upper Tier Tax Tribunal found in HMRC’s favour on all submissions.

There remain other unexplored arguments that ought to be put before the Courts in the near future.