HMRC Tax Avoidance – A 2017 Update on Accelerated Payment Notices

Updated: 12th March 2021

HMRC announces Accelerated Payment Notices reform to tackle tax avoidance

Tax avoidance can be described as bending the tax rules rather than breaking them, or exploiting loopholes in the tax laws. HMRC has been instrumental in recent years in bringing about significant change to the tax avoidance landscape using a range of measures and actions.

In the Autumn Statement 2016, the government announced further measures to tackle tax planning schemes and tax avoidance. HMRC state that such schemes provide a tax advantage to members when compared with other taxpayers, and have been targeting scheme members in a concerted effort to stop their use.

The government’s aim to raise more than £450 million by 2021/22 demonstrates a firm commitment to tackling this issue. Additional funds to investigate these schemes have been made available, and financial penalties also now apply to those who enable any schemes later closed down by HMRC.

Tax planning or tax avoidance?

The government clampdown on tax avoidance has left some companies and individuals unexpectedly owing large sums of money in tax. In relation to tax avoidance schemes, payments are backdated to when the member entered the scheme - in some cases many years previously.

This is a relatively new hard-line attitude from HMRC, who have given some of these schemes little attention in the past. The new measures have left some businesses in such a poor financial situation that they have been threatened with insolvency.

Although some scheme members were aggressively attempting to avoid paying tax, others assumed they were reducing their liabilities legitimately, and have been unprepared for the adverse effect on their company’s financial situation.

What are Accelerated Payment Notices?

The vehicle used by HMRC to enforce these tax avoidance measures is called an Accelerated Payment Notice, or APN. This document has already been the subject of various unsuccessful judicial challenges over the last few years, and the High Court has found in favour of HMRC on all occasions.

This lends weight to their actions, and has encouraged some scheme members to come forward before an APN is despatched – HMRC have declared their commitment to helping taxpayers ‘disentangle’ themselves from complex anti avoidance schemes.

How do APNs work?

Accelerated Payment Notices are letters issued to companies and individual taxpayers. They demand the repayment of tax when the recipient has been involved in a disputed tax avoidance scheme, and offer only 90 days in which to pay.

HMRC’s reason for enforcing upfront payments in this way is to place the scheme user in an equal position when compared with a non-scheme member, so removing their tax advantage.

No automatic right of appeal exists against an APN, but if you have received one and believe that it does not apply to you, or that the amount stated is incorrect, you can present your case to HMRC in writing within 90 days.

Using insolvency to escape corporate tax liability

Tax avoidance bills can cause serious financial hardship for some companies, and have known to be the precursor to insolvency. It has come to light that some companies have attempted to further avoid paying their tax bill by claiming an inability to pay, however, rather than unwillingness.

On occasion, this has resulted in the company declaring insolvency, and using a formal insolvency procedure to escape their newly increased tax liability. HMRC are aware of this practice, and always take an active interest in insolvency procedures when they suspect the company can pay.

In these cases, HMRC insolvency specialists investigate whether any business assets have been transferred prior to the company entering insolvency, as well as scrutinising the company’s affairs for other signs of assets being ‘hidden.’

HMRC success in reclaiming tax

HMRC claim to win around 80% of tax avoidance cases, and have been successful in all the judicial reviews that have challenged their right to claim back tax in this way. It is clearly a worrying issue for the company directors who believed they were acting in the best interests of their company, rather than aggressively avoiding tax.    

Begbies Traynor can offer professional advice if you have received an Accelerated Payment Notice and cannot afford to pay, or are concerned about your involvement in one or more tax avoidance schemes. Call one of our team for a free same-day consultation to establish your situation.

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