Accelerated tax payments – Update

August 2014

The Finance (No2) Bill 2014, which has now received royal assent, contains legislation which will enable HMRC to demand payment upfront of disputed tax. The rules will apply where either:

  • There is a ruling by the tribunals or courts in a case that is similar to the position of the taxpayer and the taxpayer does not accept that result, or
  • The disputed tax relates to a case where a DOTAS (disclosure of tax avoidance schemes) number has been issued.

In the event that a taxpayer receives an accelerated payment notice, HMRC will expect payment of the disputed tax within 90 days.

Any taxpayer (corporate, individual or trustee) who has entered into any arrangements that they believe constitutes a “scheme” in order to save tax should seek advice, as to whether or not these rules could apply to them. 

These new rules, which have caused great consternation amongst taxation professionals, could see up to 43,000 taxpayers receiving a demand for the disputed tax. It is expected that the first demands are likely to be issued as early as September 2014.

In the event that a taxpayer receives an accelerated payment notice, the due date for the tax will be 90 days from the date of the notice. If the taxpayer disagrees with the calculation of the payment, the payment may be delayed by a further 30 days. The taxpayer is free to continue to dispute the tax if they wish, and if successful the amount will be returned to them with interest.

The taxpayer will have no right to appeal the notice itself other than the calculation of the tax due. As such, it is very important that they consider their options as early as possible. This may include negotiating a settlement with HMRC, or if the tax savings have been reinvested in the business, attempting to negotiate a time to pay arrangement.

In some cases taxpayers who have entered into tax “scheme” arrangements will have been given assurances by the scheme provider on the level of service they receive post implementation. In those cases taxpayers may have received advice from the provider itself.

Alternatively, many taxpayers were advised by their scheme provider that the arrangements being offered were not caught by DOTAS.  Even if no DOTAS number was provided, if the scheme is found to be caught by the new General Anti-Abuse Rule, an accelerated payment notice may be issued.

There is no possibility to appeal against the issuing of an accelerated payment notice (although legal challenges to the law itself are expected), therefore, taxpayers who believe they will may be affected by these new rules should contact one of our specialist tax advisers now in order to consider their position as early as possible.

To discuss this topic with a member of the Tax team, please e-mail Tim Adcock, Tax Partner at tim.adcock@mitchellcharlesworth.co.uk

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