Accelerated Payment Notices and Tax Avoidance

What are Accelerated Payment Notices?

Accelerated Payment Notices (APNs) are a relatively new weapon in the war against tax avoidance. Introduced in 2014 for companies and expanded to include National Insurance Contributions in 2015.

Tax avoidance is the practice of using existing tax laws to reduce the amount of tax which is owed. This is distinct from Tax Evasion, which is deliberately failing to pay the tax which is owed. The former is legal, the latter is illegal albeit the two are often confused.

Individuals and companies who take part in tax avoidance schemes must, as per The Disclosure of Tax Avoidance Schemes Regulations (DOTAS) declare that they are doing so and HMRC can then subject such schemes to intense scrutiny as soon as such declarations are made. If HMRC decides that it disapproves of a particular scheme it can demand that the scheme be closed and appropriate tax paid by those taking part in it.

Pay first, dispute later

With there being tax and cashflow advantages from both taking part in tax avoidance schemes and for drawing out appeals, APN’s allow HMRC to make demands for upfront payment from any person or company who has taken part in a scheme which HMRC has shut down.

Additionally, if HMRC has previously taken another user to court over their use of a particular scheme and succeeded, HMRC can make payment demands of any other user of that scheme or even different schemes if they’re substantially similar.

If the taxpayer chooses to appeal the decision of HMRC, the disputed tax must still be paid. The taxpayer is reimbursed should the appeal be successful. This removes the cashflow incentives for launching appeals that have little or no chance of success.

I’ve received an Accelerated Payment Notice, what now?

While recipients of Accelerated Payment Notices have a few avenues of appeal once one has been issued, it’s clear that a demand for a large sum of money, to be paid upfront, may well cause significant financial difficulty.

If you’ve taken part in a tax avoidance scheme which has been since declared unworkable by HMRC and subsequently received an APN for an amount you’re unable to pay, you’ll need to seek help straight away.

Speak to HMRC first and let them know if you’re unlikely to be able to pay. Despite their reputation, HMRC can be reasonable to deal with within certain limits. Secondly, speak to us. We offer a free consultation and as experienced insolvency practitioners, we’re used to assisting companies and individuals who are experiencing financial difficulty and are likely to have successfully dealt with situations similar if not identical to yours.

Speak to us, we can help.