Tax avoidance and accelerated payments – faster payments for HMRC

HMRC

28th June 2023

In 2014, the Government introduced anti-avoidance provisions to combat the advantage of tax avoidance schemes. HMRC can give follower notices (FNs) and accelerated payment notices (APNs) or partner payment notices (PPNs) to taxpayers involved in tax avoidance schemes under the disclosure of tax avoidance schemes rules.

What is a follower notice?

An FN may be issued to a taxpayer who has used an avoidance scheme that has been shown in another person’s litigation to be ineffective.

HMRC may give an FN to a person if certain conditions are met, as below:

  • A tax enquiry is in progress, or an appeal has been made against a closure notice, assessment or determination.
  • A tax return, claim or appeal is made on the basis that a particular tax advantage results from a particular tax arrangement.
  • HMRC believes there is a judicial ruling which is relevant to the particular arrangement.
  • For tax and National Insurance Contributions (NIC), no previous FN has been issued for the same scheme, tax advantage, tax period and judicial ruling.

The FN tells the taxpayer that they may be liable to pay a penalty of up to 50% of the disputed tax or NIC if they do not amend their return or settle the dispute. With an FN, HMRC is effectively pointing to a similar case which has been defeated and is insisting the taxpayer’s will be too.

What is an accelerated payment notice?

An APN is a requirement to pay an amount on account of tax or NIC. The APN gives HMRC powers to receive taxpayers’ unpaid tax before any legal determination is proclaimed. APNs follow the same conditions as FNs and often are preceded by the issue of one.

APNs are received in relation to an ongoing enquiry, dispute or appeal  regarding the taxpayer’s tax affairs.

Both FNs and APNs are tools used by HMRC to retrieve tax in the dispute process, by pushing taxpayers into agreeing with HMRC’s view of the outcome of another taxpayer’s litigation case, involving similar tax arrangements. These notices change the economics of tax litigation in favour of HMRC.

An APN requires full payment of the tax HMRC considers has been lost from the use of avoidance arrangements. They allow the collection of tax before litigation is settled, removing the perceived cash flow advantage for the taxpayer, and addressing the perceived loss to the Exchequer.

If a taxpayer receives an FN and an APN, and decides not to settle their affairs as requested by the FN, the taxpayer will be required to pay the disputed tax or NIC to HMRC, as outlined in the APN.

When a taxpayer is requested to pay an APN, HMRC will hold this payment until the enquiry is complete or the appeal is resolved. The taxpayer will get their money back if HMRC finds the taxpayer does not owe it.

What is a partner payment notice? 

A partner payment notice (PPN) is issued to members of a partnership. In effect, it functions the same as an APN, requiring the partners to rectify any disputed tax upfront, rather than awaiting the outcome of litigation, thus reversing the cashflow advantage in HMRC’s favour.

Payment, penalties and appeal 

When HMRC sends a taxpayer an APN or PPN, payment is due within 90 days. Failure to pay by the due date will lead to late payment penalties or surcharges, and potential enforcement action being taken to recover the tax or NIC.

There is no right of appeal against an APN or PPN in the traditional sense, however the underlying tax and NIC can be appealed and representations can be made. Representations should be made within the payment due date of 90 days and can only be made on the basis of an inaccuracy in the APN or PPN, where for example, the amount quoted is incorrect or the conditions of the notice have not been met.

Payment of an APN or PPN does not equate to settlement

Even though the taxpayer may have paid an APN or PPN, it does not mean they have settled their tax affairs. Any enquiries, appeals or assessments remain open – the amount paid is simply an advance payment of the disputed tax or NIC, and does not cover any late payment interest or penalties which may be included within the final settlement.

The APN will only cover the disputed tax or NIC advantage relating to the specific avoidance scheme covered by the notice.

Any payment received by HMRC will be treated as payment on account towards the final liability and this will stop interest accruing. Payments are held in an HMRC SAFE account and are not visible on the taxpayer’s HMRC online account.

Seek professional help 

If a notice is received, we would advise that you to speak to a professional tax advisor. Following receipt of an FN, APN or PPN, there is a short window where action can be taken, and the penalties for non-compliance can be significant.

haysmacintyre’s Tax Disputes & Resolutions team has expert knowledge of HMRC procedures. To discuss any of the above measures, or for any queries related to disputes with HMRC, contact Danielle Ford, Partner and Head of Tax Disputes & Resolutions.

Danielle Ford

Partner, Head of Tax Disputes & Resolutions
+44 20 7969 5591
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