The £943 million worth of corporation tax collected from large businesses via accelerated payment notices (APNs) over the year to 31 March 2016 is "a signal that HMRC is continuing to employ the tool widely", according to tax expert Heather Self of Pinsent Masons. The payments are likely to relate to the use by large businesses of a range of suspected avoidance schemes and arrangements to reduce their tax liability, including employee benefit trusts (EBTs), she said.
HMRC is currently reviewing a range of EBT arrangements, including those used by Rangers FC in a high-profile case which reached the Supreme Court last month. EBTs are trusts set up by companies in the UK or offshore to hold cash and other assets. HMRC has viewed their use in some cases as 'disguised remuneration', artificially reducing income tax and national insurance contributions as well as generating corporation tax deductions for payments into the trust.
"All large companies should be aware of the conditions under which APNs can be used, and prepare or seek professional advice accordingly," Self said. "The sums involved can be substantial, and without the right of appeal, the notices present the potential for significant disruption."
"It is also, of course, sensible to question the validity of any notice received. The use of APNs in a number of circumstances has now been subject to judicial review, with the Court of Appeal due to hear in July the Rowe case challenging the circumstances in which APNs were issued to film scheme users. Seeking professional advice at an early stage is essential," she said.
Introduced in July 2014, APNs can now be used against the users of over 1,000 different types of tax planning scheme as a means of requiring them to pay any disputed tax up front within 90 days of issue and with no right of appeal. These accelerated payments will be repaid with interest if the scheme is ultimately proven to work by a court or tribunal.
APNs can be issued against individuals and businesses using schemes which demonstrate certain avoidance 'hallmarks', such as being subject to disclosure requirements under the Disclosure of Tax Avoidance Schemes (DOTAS) rules. They 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.
The new power has been subject to a number of legal challenges since its introduction, particularly since there is no right of appeal. Pinsent Masons is acting for over 80 investors in the Ingenious Media film partnership schemes in the Rowe case, which will be heard by the Court of Appeal shortly. HMRC has also been forced to withdraw a number of APNs issued in relation to schemes which did not meet the conditions for their issue.