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Accelerated Payment Notices – How HMRC is continuing its tax avoidance clampdown

The HMRC and government are continuing their clampdown on tax avoidance scheme users and expanding the use of Accelerated Payment Notices (APNs), sending out hundreds of such notices in recent months. The Treasury signalled its intent to take a proactive line on tax avoidance earlier in 2014 after a string of high profile cases made the news. Resulting in hundreds of individuals, businesses and sole traders on the receiving end of HMRC letters demanding payment of tax debts within 90 days.

For most, these notices should not come as a complete surprise because the individuals and businesses targeted should have already been issued with ‘Follower Notices’, which effectively gives a relevant party a heads up that their tax affairs ought to be readdressed in light of recent legal rulings. An APN should always be preceded by a Follower Notice, which serves as a warning that further action could be taken and is designed in part as a deterrent against the future use of tax avoidance schemes. With new powers the HMRC can demand unpaid taxes without a right of appeal therefore aiming to recover millions and eventually billions of pounds in disputed amounts on behalf of the Treasury.

APNs are evidence of a tougher approach adopted by the HMRC and their unwavering attitude towards payment demands. Although comments from George Osborne last week indicated that such powers will be reviewed so that the HMRC will be required to conduct meetings with debtors and give them the chance to appeal any decision in the courts. The new and most controversial power that HMRC has is their ability to recover debts owed by tax avoidance scheme users directly from their bank accounts. This new policy of Direct Recovery of Debts (DRD) is perhaps one of the most extreme elements of the current crackdown, with companies and directors effectively unable to prevent debts from being reclaimed by the powers that be in the UK. However, the DRD approach is only expected to be used as a last resort and when numerous requests for payment have gone unanswered. “HMRC is making good progress in tackling marketed avoidance. If anyone is concerned about being able to pay the notice they should contact us as soon as possible to discuss their options,” said Jennie Granger, director general of enforcement and compliance at HMRC, in a recent statement. “Accelerated Payments are changing the economics of avoidance by removing the cash-flow advantage that avoidance scheme users have had until now,” said Financial Secretary to the Treasury David Gauke. Who will be targeted? Not every business will be under scrutiny as both the government and HMRC has been keen to stress that only individuals and organisations who have been implicated in tax avoidance schemes will be issued with APNs. But plans are in place for HMRC to issue as many as 2,500 APNs each month by January 2015, with notices set to be sent to roughly 45,000 individual tax avoidance scheme users before the end of March 2016

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