Understanding Accelerated Payment Notices

Urgent support for Accelerated Payment Notice and Follower Notice recipients

There has been much made of the Government’s clampdown on what it considers to be corporate tax avoidance in recent years and Accelerated Payment Notices (APNs) are viewed as being a key weapon in HMRC’s battle to deliver increased revenue to the Treasury via a ‘fairer’ taxation system.

Accelerated Payment Notices are designed to inform companies that they owe taxes which they might otherwise have believed to be beyond the reach of HMRC. The notices amount to demands for payment of monies owed within a period of no longer than 90 days and they do not include any scope for negotiation or appeal on the part of the recipients.

And, with only three months for the associated payments to be made, the consequences of receiving an APN for some can mean serious financial problems.

Background to APNs

Issues relating to tax avoidance have become more prominent in the UK leading to the Treasury giving HMRC permission to send out demands relating to unpaid taxes that were part of tax avoidance schemes.

HMRC was then given “the power to issue a notice to a taxpayer to the effect that a previously decided case also determines their dispute, and that they should therefore settle their own dispute”.

Follower notices

Another aspect the taxation process that more and more companies are becoming aware of are Follower Notices, which HMRC sends out alongside or before it issues an APN. The notices are designed as a deterrent against using tax avoidance schemes with a variety of stipulations outlined to which a recipient must adhere.

Follower Notices also force taxpayers to amend their tax returns where judicial rulings have not been adhered to. Penalties worth up to 50 per cent of taxes due can be charged when a taxpayer does not act properly in response to receiving an official Follower Notice.

Who stands to be affected by APNs?

Tens of thousands of APNs have been sent out around the UK, both to individuals and businesses. HMRC’s position on the issue is summed up by a statement that says the notices will have “no impact on business and civil society organisations who are undertaking normal commercial transactions”.

Or, in other words, those people and companies that have not been seeking to hide their money from the taxman will have nothing to worry about. Although, there are always likely to be grey areas whereby businesses might have believed they were dealing properly with their taxes but in fact find themselves under scrutiny.

Direct Recovery of Debts (DRD)

Another aspect of the APN regime now in place and in the armoury of HMRC is the Direct Recovery of Debts (DRD), which is another way of saying that money owed to the taxman can be taken directly from your company’s or your personal bank accounts.

DRD powers are only used as a last resort when all other encouragements and instances that payments should be made have gone unheeded. So there should never be a situation in which money is removed from your bank account without prior warning.

However, there are clearly still reasons why an individual or an organisation might be concerned by the prospect of seeing HMRC take money directly from their bank accounts. Not least because it could be that the monies owed cannot be found.

From the perspective of the Government and the Treasury, DRD is an important tool and a vital means of making good on its threats to clampdown on tax avoiders in the same way as already happens in other parts of Europe and in the US.

What to do if you receive an Accelerated Payment Notice

The number of companies being hit with Accelerated Payment Notices continues to rise at pace across the UK and the effects are being felt by businesses across a wide range of industry sectors. Understandably, company directors are becoming more and more worried by the prospect and fearful of what might happen if they receive a notice unexpectedly.

The key to successfully dealing with issues around APNs and Follower Notices is to communicate as effectively as possible with HMRC about the details of the situation. The sooner you can get good advice and open up lines of dialogue with the relevant parties, the better your chances are of overcoming any problems.

BTG Begbies Traynor’s team of corporate insolvency experts are currently advising numerous company directors and sole traders on the subject of Accelerated Payment Notices.