The introduction of the Accelerated Payment Notice (“APN”) process is part of HMRC’s ongoing regime to tackle certain planning arrangements that aim to avoid taxation and which HMRC perceive as being “abusive”. An APN can be issued to a variety of entities including individuals, companies, and trustees if they have participated in this type of arrangement.
However, an APN does not exist in isolation; rather, it is part of a wider legislative process that is now being implemented by HMRC. The process may commence when a court, or tribunal, finds in favour of HMRC, and HMRC believe the ruling supports their view in respect of the application of tax to a certain set of circumstances.
HMRC can then issue “Follower Notices” to taxpayers whose tax affairs would be covered by the scope of the ruling and where there is an ongoing enquiry into a return or claim. If the taxpayers decide to continue their dispute with HMRC, rather than settle the issue in line with HMRC’s interpretation of the judicial ruling, then they will be issued with an APN. In essence, an APN is intended to remove the cash flow advantage that might otherwise be obtained by a taxpayer in respect of the time taken to resolve a dispute.
APNs may also be issued to participants of avoidance arrangements where:
HMRC have published a list of DOTAS registered schemes, and stated that users of schemes on the list may receive an APN from HMRC requiring an accelerated payment to be made.
With regard to the sums sought by HMRC when an APN is issued, HMRC’s guidance states this will be:
“…the amount which the taxpayer has asserted as a tax advantage but which HMRC considers will not ultimately be a tax advantage when the enquiry or appeal is finally resolved.”
In practice this should mean HMRC issue an APN to the entity that has previously received assessments and for the sums identified in those assessments. However, we are also aware of APNs being issued to individuals in respect of PAYE liabilities that strictly would appear to be those of their employer (it is far from clear, at present, what legislative conditions would permit HMRC to enforce these APNs, but it is indicative of the “broad brush” approach being pursued by HMRC where the issue of APNs is concerned).
Once an APN has been issued, the taxpayer has 90 days in which to send a written representation to HMRC. At present, a representation (which may include a request for a judicial review if a matter of law is at stake) can only be made on the grounds that:
Once the 90 day period has elapsed, and assuming a representation has not extended this period, if payment has not been made then interest (running from the date the APN was issued), and potentially penalties, will be sought in respect of the outstanding amount.
With regard to timescale, HMRC’s current intention is to issue the majority of APNs based on the above DOTAS list through a phased programme of work which will run through to the end of March 2016. We understand that scheme promoters will be given 6 weeks’ notice by HMRC that an APN is to be issued to scheme participants.
HMRC do recognise an alternative payment strategy once an APN has been issued. Their guidance notes state that:
“The taxpayer may want to enter into a settlement agreement, accepting HMRC’s views of the tax results of the scheme, with a payment plan because he cannot pay all the tax due at once. Having entered into this settlement agreement, HMRC may withdraw the APN.”
It Is not clear from the above whether such an approach would only be accepted where the taxpayer cannot pay all the tax due at once (HMRC have not issued any further clarification on this point to date), and neither is it clear whether a “formal” settlement agreement such as the EBT Settlement Opportunity (“EBTSO”) would fall within the scope of this option. Certainly, on the facts available, this would appear to be an option, and one that could resolve all the outstanding tax issues, but it must be borne in mind that the 2015 UK Budget Statement indicated that the current range of settlement opportunities is to be withdrawn.
There will be a significant number of APNs being issued to taxpayers throughout 2015 and they are likely to cover a wide range of taxes and planning arrangements.
Although there are mechanisms under which an APN can be “appealed” against, the timescale for doing so is very short (typically no more than 30 days). It is therefore vital that a taxpayer takes immediate action upon receiving an APN to: