Accelerated Payment Notice (“APN”) Regime

BLOG4th Sep 2014

The Finance Act 2014 introduces new tax legislation allowing HM Revenue & Customs (“HMRC”) to issue a demand for an accelerated payment of tax they believe to be due: Accelerated Payment Notice (APN). The effect is to oblige the taxpayer to pay tax to HMRC upfront, thereby removing the cashflow advantage to the taxpayer of any lengthy dispute with HMRC. We expect this regime will affect taxpayers who took part in HMRC identified tax schemes, whether DOTAS registered or not, for example Excalibur, Nelson and some film partnerships.

The APN legislation is retrospective and HMRC estimate that around 43,000 taxpayers will receive an APN over the next six months to two years. An APN can be raised where the following conditions are met:

  • Condition A: An enquiry or appeal is in progress; and
  • Condition B: The tax return, claim or appeal relates to a tax advantage resulting from a tax arrangement; and
  • Condition C: One or more of the following applies:

– A “Follower Notice” has been issued; or

– The arrangements are considered “DOTAS” arrangements; or

– A General Anti-Abuse Rule (“GAAR”) notice has been issued.

HMRC can also use “Follower Notices” to target schemes which are not DOTAS registered where HMRC deem obtaining a tax advantage to be the main purpose of the scheme. In this scenario, a notice can only be issued where HMRC has succeeded in the courts against at least one other scheme user, where that scheme user has no further right of appeal through the courts. The purpose of the notice is to force taxpayers to amend their return, or settle their ongoing enquiries, by withdrawing their claim for tax relief. Non-compliance with a follower notice can result in penalties of up to 50% of the underpaid tax, which will be quantified by the accompanying APN.

On receipt of an APN, taxpayers have 90 days to settle the tax or appeal. An appeal can only be made if the taxpayer believes they do not meet Conditions A through to C or if the amount of tax in the APN is incorrect. As the appeal process will be managed by HMRC, a high success rate for appeals is not anticipated. Non-payment of the requested tax within 90 days will attract penalties which can be as high as 15% of the tax due.

HMRC have intimated that in cases of genuine hardship, they will consider alternative payment arrangements and presumably will allow taxpayers to settle the tax in instalments over a specified time frame.

If you think the Accelerated Payment Notice regime will affect you, please contact Jill Walker or your usual AAB contact.

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