Those involved in marketed tax avoidance schemes will be cringing in anticipation of the new ‘Accelerated Payment’ rules that are about to come into force. New powers will enable HMRC to issue advance tax demands to individuals or businesses who are under investigation because of their use of a tax avoidance scheme, rather than waiting for a tax tribunal ruling.
Where an ‘Accelerated Payment Notice’ is served on a person, then the disputed tax has to be paid within 90 days. No right of appeal exists other than the ability to make representations to HMRC. Should HMRC not relent however then it is not possible to advance an appeal to the courts.
Notices can be issued in three circumstances:
Where HMRC score a victory at a tax tribunal or the Courts, the ruling of which can be applied to an ongoing dispute, then the Revenue can issue the taxpayer with a ‘Follower Notice’. This notice will require a person to amend their tax return or agree to settle on the basis that the likelihood of the taxpayer’s scheme succeeding is remote. Again, rights of appeal are limited and to add insult to injury failing to comply could result in a penalty of between 10 – 50% of the tax in dispute, where a person continues with litigation and loses.
The Treasury estimates that potentially 33,000 individuals and 10,000 businesses could be handed such notices, with some as early as July.
The rules will apply retrospectively to any existing dispute that involves a scheme registered under DOTAS.
These draconian powers could lead to enforced bankruptcies or insolvencies according to David Elliott, restructuring partner at top ten accountancy firm, Moore Stephens, when speaking to ‘Accountancy Age’.
The media and some members of the public have been baying for the blood of tax avoiders but is this what we really want – to hand further powers to HMRC so that they can ride roughshod over businesses and individuals, some of whom have acted in innocence and ignorance?