Since July 2014, HMRC has been able to issue an accelerated payment notice (APN) to require upfront payment of tax within 90 days where an avoidance scheme has been used, before any formal hearing. There is no procedure for appealing an APN, and the payment must be made before the case has been fully resolved or even heard by a tribunal.
Tax expert Paul Noble of Pinsent Masons said that HMRC was clearly "determined to persist" in its use of APNs, despite "increasingly strong resistance from those receiving such notices" which has included a number of legal challenges.
"HMRC and the government have already 'booked' the revenue that they anticipate [the APNs] will generate, and therefore will continue with their strategy of issuing notices," he said. "Challenges in the courts appear to be having little impact on their approach - HMRC is continuing to employ the tool aggressively, adding more and more targets to the list."
"Concerns over the use of these powers are justified. They allow HMRC to demand and receive payment in advance before arguments are heard and determined. Recipients can end up facing bills for many millions - some may even face the prospect of bankruptcy as a result. It is logical and fair to establish for certain whether the conditions for issuance are fully met before sending these out," he said.
HMRC is able to issue an APN where a scheme demonstrates certain 'avoidance hallmarks', such as being subject to disclosure requirements under the Disclosure of Tax Avoidance Schemes (DOTAS) rules. APNs can also be issued in relation to schemes that were entered into before the powers came into force. Previously, HMRC had to win a tribunal case before it could demand disputed tax in these cases. Accelerated payments will be repaid with interest if the scheme is ultimately proven to work.
HMRC had issued around 60,000 APNs under the new rules, worth an estimated £3 billion, as of the beginning of this month, according to official figures. According to the tax authority, the "vast majority" of individuals issued with an APN choose to settle rather than challenge HMRC in the courts. HMRC is successful in almost 90% of the avoidance litigation cases brought against it, according to the latest figures.
However, tax expert Paul Noble said that there were "genuine concerns" over the lawfulness of some of the APNs issued by HMRC, pointing out that the tax authority was recently forced to withdraw a number of notices issued in relation to two schemes which did not meet the conditions for their issue.
"These successes are noteworthy – they show that genuine concerns over the lawfulness of these notices are being taken seriously, and are likely to encourage further legal challenge," he said.
"They do not, however, provide any real cause for complacency, as the growing list of schemes covered by the measures show. Anyone who suspects that an arrangement which they have entered into constitutes avoidance should be wary – HMRC is quite clearly adopting a policy of issuing a notice and then asking questions later," he said.