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The 2014 Finance Act introduced the power for HMRC to issue Accelerated Payment Notices (APNs) to taxpayers who had become involved in tax avoidance schemes. However recent evidence suggests that HMRC is also using this power to target more moderately well off individuals. More than 12 months on, we look at the impact of these powers and what to do if you receive one of these notices.

What is an Accelerated Payment Notice?

APNs are used to demand that a taxpayer makes a payment UP FRONT of disputed tax amounts BEFORE a final decision has been issued on whether the tax is actually due. APNs should be viewed as being like a deposit or payment on account, and are intended to remove the cash advantage for taxpayers of raising a dispute and retaining the money until the outcome of the dispute has been determined. An APN will normally demand payment within 90 days of the date of the notice.

How widespread is the use of APNs?

The use of APNs is growing. 10,000 APNs arrived through taxpayers' letterboxes during the year to 31 March 2015 for alleged unpaid tax totalling £1.7bn and a further 50,000 APNs will be received by taxpayers during 2015-16 for a total of £8bn in alleged unpaid tax. HMRC have also recently had a victory in the Murray Holdings case aka the Rangers Football Club 'Big Tax Case', which has given them encouragement to widen the scope of APNs further to include some Employee Benefits Trusts (EBTs).

Can I appeal against an APN?

A key feature of APNs is that they can only be objected to on very limited grounds: either that the amount claimed is incorrect, or that the proper procedures have not been followed in relation to the issuance of the notice. In 2015 a group of 150 tax payers did mount a challenge but the court dismissed it and held in favour of HMRC.

What should I do if I receive an APN?

We would suggest taking the following step-by-step approach when considering what action to take after receiving an APN:

1. Consider whether there are grounds to object:

Check with your tax advisor whether any of the following grounds to object apply:

• The APN does not meet Conditions 'A', 'B' and 'C' under the HMRC Guidance Document "Follower Notices and Accelerated Payments"
• The amount specified in the APN does not match the amount of tax which is in dispute
• This step requires technical understanding of tax legislation and practice and will in most cases require professional advice.

2. Consider paying the sum demanded

If there are no grounds for disputing the APN or the sum demanded, and funds are available to make the payment, it is likely to be the best course of action. The sum payable will be a deposit or payment on account and if the dispute is resolved in favour of the taxpayer, HMRC will have to refund the amount paid.

3. Consider asking HMRC for a Time To Pay (TTP) agreement to pay the sum demanded over a period of time

TTPs can be a very effective method of dealing with HMRC liabilities where these can be paid in full over a period of time. TTPs will usually last no more than one year, unless exceptional circumstances can be demonstrated. Payment by Direct Debit is now mandatory for TTPs.

4. If you are unable to pay in full, seek advice from a Licensed Insolvency Practitioner

Advice should be obtained at an early stage, as HMRC will commence enforcement action for recovery of the sums demanded. Where appropriate, a Voluntary Arrangement or other formal insolvency process can be used to pre-empt enforcement action and enable you to pay a percentage of what is owed to HMRC and your other creditors in full and final settlement.

In every case, there will be a limited window of time to deal with the APN before HMRC's attitude moves to one of enforcement. It is therefore wise to seek early advice on the options available, and take a pro-active approach to dealing with APNs.

If you would like to discuss this with a member of our team, please contact Leona Leonard, Head of Tax Planning or Brian Hegarty, Head of Business Recovery & Insolvency.