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In recent months, HM Revenue and Customs (HMRC) have been clamping down on undeclared income and also many tax-avoidance schemes which sought to gain a tax advantage for its schemes’ users. The recent introduction Accelerated Payment Notices (APNs) and Follower Notices by HMRC has raised some cause for concern amongst many taxpayers who may have participated in one or more of these schemes. Therefore it is more important to seek the advice and opinion of qualified tax consultants to assist you if happened to receive one of these notices. Follower Notices Once HMRC have succeeded against one scheme user, they will target those marketed avoidance schemes and users. HMRC have the ability to issue a follower notice where the tax enquiry or appeal is ongoing in relation to any ‘arrangements’ that sought to obtain a ‘tax advantage’ as the main purpose of the scheme. Upon receiving a follower notice, it is advised that you seek the advice of your scheme provider as well as a qualified tax consultant to seek their opinion on HMRC’s ruling. However, HMRC do expect either payment within 90 days of the notice, or a response in relation to this. Although there is no right to appeal, taxpayers can send written representations to object to the follower notice. Failure to comply with a follower notice could yield an additional 50% of the tax due. This can be reduced if you cooperate with HMRC fully and quickly. Unlike the actual notice, it is possible to appeal against any penalties that are incurred. APN Introduced in the Finance Bill 2014, the new legislation allows HMRC to issue these APNs to taxpayers and ultimately demand an upfront payment of the tax which is in dispute. These notices can be issued well before a tax enquiry has been launched. An APN can only be issued if: - A follower notice has been issued in relation to the same tax return or tax advantage - HMRC have issued a DOTAS reference number in relation to the arrangements - A GAAR counteraction notice has been given. One appeal of this for HMRC is that rather than waiting for a case to be resolved, they can receive the tax liability upfront (even though no decision has yet to be made). Another strong appeal of these APNs is that HMRC will be able to issue these to all individuals and taxpayers who have participated scheme that is currently under investigation. This means that even if you / your company is not directly being investigated by HMRC, they still hold the power to request the tax from you by issuing an APN. Within an APN, the total amount of tax that must be paid will be specified and this will be determined to the best of the HMRC officer’s information and belief. If the scheme under investigation is later proven to work and therefore the APN was wrongly issued, repayment will be made with interest. Just like follower notices, it is not possible to appeal an APN directly. Instead, a taxpayer can send a written representation to object to the APN. For both Follower notices and APNs, if the taxpayer is unable to pay the tax liability determined by HMRC, there will be late payment interest surcharges applied. The following penalties apply on late payment of the tax liability due: - Up to 5 months late – 5% penalty - 5 months to 11 months – a further 5% penalty - More than 11 months – another 5% penalty. As these APN notices and follower notices are relatively new, many scheme users are still awaiting correspondence from HMRC. It is advised that if you have any questions or queries relating to APNs and follower notices that you seek advice from a qualified tax consultant. Wisteria’s tax specialists can be contacted on 020 8952 0140 or on [email protected]. Alternatively click here to contact us.
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