Since the launch of accelerated payments notices (APNs) in 2014, HMRC has raised £3bn by forcing those under investigation for tax avoidance to pay up disputed tax immediately, although the notices have come under fire in the courts and thousands have been withdrawn
Around 60,000 APNs have been issued since the new rules were introduced in 2014, which force tax avoidance scheme users to pay upfront while their tax affairs are investigated by HMRC. The average APN payment is £50,000 although some taxpayers will receive refunds if the scheme is subsequently viewed as acceptable tax avoidance.
HMRC has faced a number of legal challenges to APNs. In May, it was forced to withdraw hundreds of APNs issued to taxpayers with employee benefit trust arrangements after a judicial review was lodged to challenge the notices.
Last December, HMRC was forced to withdraw an estimated 2,000 notices issued to clients of Isle of Man-based Montpelier, which related to an IR35 avoidance scheme. At the time, HMRC admitted the notices should not have been issued in the first place.
Under the APN scheme, which deters people from taking part in tax avoidance by forcing taxpayers to pay up first and dispute later, a taxpayer with an outstanding tax bill has 90 days once an APN is received to pay up or make representation to HMRC if they consider the notice incorrect.
To date, HMRC has won five judicial review challenges. Most recently, the Nigel Rowe and Alec David Worrall and Ors challenge ([2015] EWHC 2293 (Admin)), involving 156 claimants, who invested in the Ingenious Media plc film schemes, was overturned at the High Court. It ruled that the partner payment notices (PPNs) were lawfully issued and the principles of natural justice had been adhered to by the statutory scheme and by HMRC in exercise of the discretion conferred by Finance Act 2014.
In this case, the judge stated that ‘in my judgment, the legislation is not retrospective in the true sense of the word: the requirement to make accelerated payments on account of tax applies only with effect from 17 July 2014.
‘For anyone who has had a repayment of disputed tax in the past, that benefit has been enjoyed and the legislation makes no attempt to claw it back (by requiring such a person to account for interest etc)’.
A number of other appeals have also been heard at the High Court, with similar outcomes, including the cases of Walapu, William Graham, Sword Services and Vital Nut.
Speaking at HMRC’s stakeholder conference, Jane Ellison, financial secretary to the Treasury said: ‘I’m delighted to announce that we’ve collected £3bn upfront since 2014 from people using avoidance schemes as HMRC puts its new powers to use.
She added: ‘The vast majority of avoidance schemes just don’t work. We’re determined to change the economics of tax avoidance by making it harder for the dishonest minority to cheat the system - collecting disputed tax upfront and tough new sanctions for enablers of tax avoidance will mean people will think twice.’