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HM Revenue & Customs current position on Advanced Payment Notices to Investors of Tax Schemes

To date, HM Revenue & Customs (HMRC) have collected over £3bn by forcing those under investigation for tax avoidance to pay up disputed tax immediately.

We have learnt that over 60,000 accelerated payment notices have been issued since the new rules were introduced in 2014. These notices force users of so called tax avoidance schemes to pay up the disputed tax upfront whilst their tax affairs are investigated by HMRC. It is a tough line being taken by HMRC with a pay up first and dispute later attitude.

These notices are often coming out of the blue for the individuals or companies involved and are taking people by surprise.

One of HMRC’s investigations involved thousands of high profile individuals who invested in film funds between 2002 and 2010. High net worth individuals, in particular, professional footballing personalities, were offered an opportunity to invest while taking advantage of significant tax relief.

There is no suggestion of criminality on the part of the investors but HMRC has declared that the individuals involved will have to repay their tax liability on 100% of the amount that was invested, along with interest and legal costs. The investor is made aware of this liability by way of an Accelerated Payments Notice (APN).

As a matter of course HMRC send out a letter some weeks in advance of the APN being issued, to let the investor know that the notice is on its way. Once the APN is received you have 90 days to pay the amount shown on the notice, unless you make representations, in which case the period may be longer. The payment for the determined liability doesn’t have to be made in one go but it does have to all be paid by the due date.

As much as you might not agree with the liability, do not ignore it

Failure to pay an APN by the due date could lead to late payment penalties or surcharges becoming due and potential enforcement action being taken to recover the tax. It is important that any person on the receiving end of an APN deals with the matter promptly.

Rights of appeal

Investors have a right to make representations against the APN. They also have a right to appeal against the underlying tax that is in dispute.

You can raise objections to an APN under specific circumstance. If you feel the amount quoted is incorrect or the conditions have not been met, then you may make a representation to HMRC, which they have said they will consider. These representations should be made in writing to the address shown on the notice and must be made within the 90 days before payment becomes due, be mindful that if you send this appeal elsewhere it might not be processed in time.

If you do make a representation, HMRC will write to you setting out the results of their review. Their response to your representation will tell you what you need to do next.

Difficulties in paying the liability

Many who receive an APN do not have the funds to hand to deal with the payment within the timescales involved.

Here at Portland we have experience of dealing with HMRC to pay the debt over a period of time. Through our discussions with HMRC, and this is subject to change at any stage, they have advised us that they tend to only agree payment plans over three months unless they are provided with a statement of assets and liabilities together with an income and expenditure account.  If they receive these then they will then they may consider a longer time to pay the debt over, we anticipate this to be a maximum of 12 months.

In addition to the above, we believe that if a time to pay is negotiated at an earlier time in the process, whilst the APN is still with the Counter Avoidance team, then they are more likely to agree to a longer term payment plan without needing all of the information.

Despite this, there appears to be limited wiggle room with HMRC on the APN’s. Our advice to investors is to ensure that you start any negotiations with HMRC as early as possible after receiving the initial letter.

At Portland we are experienced in dealing with these matters and we have a number of clients, corporate and individuals, who we are assisting in dealing with HMRC on their behalf.

If you receive a notice of this type, and you do not have the funds available to settle the calculated liability, please do call the team at Portland for some free initial advice.

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