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Out-Law News 3 min. read

HMRC publishes list of almost 1200 tax schemes where accelerated payments of tax will be required

The UK's HM Revenue and Customs (HMRC) has published a list of the reference numbers of tax avoidance schemes where it will require payment of tax before any dispute over the efficacy of the scheme is resolved.

Provisions expected to become law this week will give HMRC the power to demand upfront payment of any disputed tax associated with avoidance schemes by issuing an 'accelerated payment notice'. Until now HMRC has had to win a tribunal case before it can demand disputed tax in respect of these schemes.

Jason Collins, a tax expert at Pinsent Masons, the law firm behind Out-law.com, said that the issue of accelerated payment notices will lead to taxpayers facing sudden demands for cash payments from HMRC that they may not be able to afford. He said “This is inevitably going to lead to immense financial stress and even insolvency amongst the individuals targeted by these accelerated payment demands.”

However, Collins pointed out that the list is of schemes where users will receive accelerated payment notices "at some stage". He said that it does not mean they will receive an accelerated payment notice straight away. 

For schemes entered into before the provisions become law, HMRC has two years from Royal Assent to the Finance Bill to issue accelerated payment notices. HMRC said that "starting in August 2014, HMRC will phase the issuing of notices to current users over approximately 20 months". 

If a notice is issued, a taxpayer has 90 days to pay the tax, unless they make representations that the notice should not have been issued to them. If they make representations and are unsuccessful they have a further 30 days from being notified of HMRC's decision, provided that this time limit expires after the end of the original 90 day period.  Jason Collins said that it is understood that HMRC is also considering whether to issue 'warning letters' a few weeks before they issue the notice itself.

Collins said that it is helpful that HMRC has framed the schemes where it plans to issue APNs, but it now needs to publish its timetable for the issue of notices in relation to the individual schemes.  He said that those affected "need to know whether they have a few months or a couple of years to come up with the tax."

Collins said that it is "not just high net worth individuals and celebrities" that have invested in these tax planning schemes. He said "There are a lot of modestly well off self-employed contractors who have been sold tax planning schemes that will face these demands for money.”

“HMRC need to take into account the fact that many of these individuals will not have fully realised what they were buying into," he said. "Whilst HMRC will say it warned users back in 2007 that it would use all its litigation firepower against scheme users with a view to discouraging people from entering into the schemes in the first place, this strategy was buried away in the detail of a document on their website. I very much doubt promoters brought it to their customers' attention when encouraging them to sign on the dotted line.  HMRC needs to consider offering beneficial settlement terms in order to bring this tsunami of litigation to an end."

The new rules will allow HMRC to issue a notice where a scheme has been notified to HMRC under the Disclosure of Tax Avoidance Scheme (DOTAS) rules, even though the scheme was entered into and notified under DOTAS a number of years ago.

Collins said “What has really concerned the legal and accountancy community is that HMRC is changing the law retrospectively. That has completely upended the rules that govern these tax disputes.”

The list gives the DOTAS reference number (SRN), rather than the name of the scheme as HMRC said that taxpayers will have used this to identify their use of an avoidance scheme when completing their tax return. HMRC said that it will consider "whether it is possible to compile and publish a list of scheme names alongside the SRNs". HMRC said that scheme participants who cannot remember their SRN, should contact their agent or advisor or a dedicated HMRC number.

HMRC said that the list "is under continual review to ensure that only current and newly disclosed schemes whose users may receive an accelerated payment notice are included". The next update of the list will be published in October 2014.

Other changes in law being made at the same time as the introduction of accelerated payment notices will enable HMRC to issue a 'follower notice' to a taxpayer who has entered into a scheme where HMRC have won a ruling against a taxpayer in another similar case. A follower notice will require the taxpayer to either settle their dispute or face a large penalty if their dispute with HMRC is ultimately unsuccessful.

HMRC will also be able to issue an accelerated payment notice where it has issued a follower notice or for a scheme where a counteraction notice has been given under the General Anti Abuse Rule (GAAR), which was introduced last year.

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