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Avoidance: Accelerated Payments Are Go

HMRC New Powers Cemented by Royal Assent

Finance Bill 2014 was given Royal Assent on 17th July and now transforms into the Finance Act 2014. This now means that HMRC officially have the new powers bestowed upon them that enables the department to force individuals, involved in disputed tax avoidance schemes, to pay up early.

Follower Notices

Follower notices can be issued to taxpayers who have used a tax avoidance scheme which has been shown in another taxpayer’s litigation to be ineffective. The notice tells the person they may be liable to a penalty of up to 50% of the tax in dispute if they do not amend their tax return or settle their dispute.

Before HMRC can issue a follower notice however, four conditions must be fulfilled:

Condition A

A tax enquiry is in progress into a tax return or a claim made by a person or that person has an unresolved tax appeal.

HMRC cannot issue a follower notice unless an enquiry into a return or claim is in progress or there is an outstanding appeal.

Condition B

The return, claim or appeal is made on the basis that a particular tax advantage results from particular tax arrangements – defined as those where it is reasonable to conclude that the obtaining of a tax advantage is the main, or one of the main reasons for the arrangements.

Condition C

HMRC is of the opinion that there is a judicial ruling which is relevant to the tax arrangements.

Condition D

No previous follower notice has been served on the same person in respect of the tax arrangements.

Accelerated Payment Notice (APN)

Like the follower notice, certain conditions have to be met:

Conditions A & B

Are the same as for the follower notice above. Again, without there being a tax enquiry or appeal in progress HMRC cannot issue an APN.

Additionally, the tax arrangements must meet one of the criteria in Condition C below.

Condition C

  1. A follower notice has been issued in relation to the same return, claim or appeal.
  2. The tax arrangements are DOTAS (Disclosure of Tax Avoidance Schemes) arrangements.
  3. A GAAR (General Anti-Abuse Rule) counteraction notice has been given in relation to the same tax advantage.

HMRC has recently published guidance on follower notices and accelerated payments which can be downloaded below:

HMRC Guidance – Follower notices and accelerated payments

Promoters of tax avoidance schemes will also be subjected to conduct and monitoring notices, as well as being “named and shamed” by HMRC if they fail to provide adequate information.

By Andy Vessey

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