Tax avoidance and accelerated payments – faster payments for HMRC

There are a significant number of old enquiries outstanding with HMRC. We have seen the earnings capacity of a number of taxpayers change significantly based on when the enquiry was first issued compared to where they are now. This can be a cause of concern financially when a HMRC settlement is likely and an anxious time for the taxpayer. It is important to not bury your head in the sand and to address the enquiry and settlement directly. For more, watch our video here, and get in contact with Danielle Ford or Riocard Hoye for further support.

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.

Euro Pacific Bank – HMRC arrest two with further action to follow

We previously addressed HMRC’s use of nudge letters sent to UK taxpayers who were believed to have held or controlled accounts with Euro Pacific Bank (EPB), which can be found here. On 20 February 2023, HMRC issued a press release announcing that two arrests had been made in the UK, for suspected tax evasion and money laundering, in respect of this.

HMRC are in possession of detailed information regarding those believed to have used EPB; we expect these arrests to be the start of HMRC’s action against those who have not yet come forward. It is likely HMRC will not make arrests in all cases, but criminal investigations and fraud enquiries are expected.

When the nudge letters were first sent, HMRC recommended the use of the Worldwide Disclosure Facility (WDF) to make a disclosure, in order to bring a taxpayer’s affairs up to date. In our article, we also suggested the Contractual Disclosure Facility (CDF), under Code of Practice (COP) 9, as an option for those who may have committed tax fraud and would benefit from the immunity it offers from criminal prosecution.

Interestingly, HMRC’s press release has now also suggested both the WDF and CDF as options for making a disclosure. This is a clear sign of HMRC’s intention and assessment of the behaviour of those who have used EPB.

Further action to follow from HMRC

As part of the press release, Zoe Gascoyne, Deputy Director of HMRC’s Fraud Investigation Service said: “When we launched this probe, we were clear that customers of this bank should come to us before we came to them. These arrests prove we’re true to our word. Anyone who is not sure they paid the right amount of tax, must come forward and tell HMRC as soon as possible.”

The time to bury your head in the sand has now gone. If you have previously interacted with EPB, but have not yet been contacted by HMRC, or have previously received a communication from HMRC, but have not yet taken action, it is essential to act now – please contact Danielle Ford, Head of Tax Disputes or Riocard Hoye, Senior Manager.

At haysmacintyre, we have a wealth of experience in making successful disclosures to HMRC, under the CDF and WDF. We have a proven track record of obtaining the most favourable result for clients, allowing them to draw a line under the matter and move forward, without further intrusion from HMRC.

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