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APNs remain an issue for a huge number of businesses and individuals across the UK. In this article we set out the options open to those who receive an accelerated payment notice from HMRC, and how Schofield Sweeney’s Complex Financial & Tax Disputes Team can assist.
Accelerated Payment Notices
The Finance Act 2014 gave HMRC the power to issue APNs to taxpayers to make them pay disputed tax prior to any independent court or tribunal ruling. The power is designed to remove the “cash-flow advantage” that HMRC says participants in tax avoidance schemes currently benefit from.
Since their introduction, APNs are being issued to thousands of businesses and individuals across the UK. This is a concern to companies and their directors, across all sectors, who could be left with an unexpected tax bill.
On receipt of an APN a taxpayer has a number of options, separate to the challenge of the tax position itself (which would still remain to be dealt with by the tax tribunals in the first instance).
There are three preconditions to an APN, broadly that:
a) there is either an open enquiry or outstanding appeal;
b) the return, claim or appeal results in a particular tax advantage from particular arrangements; and
c) any of: (i) a follower notice, (ii) the Disclosure of Tax Avoidance Scheme Rules or (iii) a GAAR counteraction notice applies.
Arguments that the issued APN is invalid through failing to satisfy these conditions (or that it has been issued for the wrong amount) can be made to HMRC within 90 days. Whilst HMRC is obliged to consider representations and respond, that response will be final, without a right of appeal.
Our team has experience of advising recipients of APNs of whether HMRC has satisfied the conditions and how to most effectively make representations to HMRC.
Because there is no right of appeal against the issue of an APN, many taxpayers are instead forced to resort to proceedings against HMRC in the administrative court. Attempts by the recipients of payment notices to defer payment pending the outcome of judicial review have (on the published decisions thus far) been unsuccessful. However, judicial scrutiny of the decisions around an APN can increase pressure on HMRC.
Given the interests at stake these disputes look likely to rumble on for some time yet.
Our team has several lawyers with specialist knowledge of administrative law. We are familiar with bringing claims of this nature against HMRC and also other public bodies.
The issue of an APN can force taxpayers to turn the spotlight on the advisors who steered them into the relevant tax scheme in the first place. Whilst some advisors have been entirely proper and appropriate in the guidance which has been given, this is not universal.
Our lawyers have extensive experience of bringing claims for professional negligence against advisors, and have seen an increasing number of cases involving a tax element.
Some taxpayers may have the cash reserves to pay an APN whilst still maintaining their dispute about the tax itself. If a company accepts the principle of the issue of the APN, but will struggle to make the payments required, one option would be to enter into negotiation with HMRC to seek time-to-pay arrangements. However, whether HMRC can be flexible enough to allow for a given taxpayer’s cash-flow will be uncertain.
Insolvency and restructuring
Some directors will therefore be forced to conclude that receipt of an APN marks the end for their company. Recognising a company’s insolvency is always a difficult decision to make, but early and proper advice can ensure the company utilises the most appropriate insolvency process and that profitable businesses and jobs are saved. Similar advice can also help individuals in addressing bankruptcy or similar arrangements.
If you have received an APN, or have been notified that you are involved in a scheme which could attract an APN, you should seek legal advice urgently. Whilst an APN can have serious implications, there remain a number of options open to taxpayers.
Our team of lawyers has significant experience of dealing with complex financial and tax disputes, which we think is unique outside of the London legal market. If you would like to discuss the issues raised above in greater detail, please do not hesitate to contact one of our team on 0113 220 6270.