It is now two years since Finance Act 2014 gave HMRC the power to demand payment of tax in dispute in alleged avoidance cases without waiting to settle open appeals. New readers can find a summary of the provisions here.
Readers might be interested in the current position regarding APNs and their cousins Partner Payment Notices (PPNs) and the available options when faced with one.
Some 50,000 APNs and PPNs have now been issued, covering some £2.5bn in tax. So from HMRC’s perspective the legislation has delivered what was intended. Furthermore, the need to pay the tax will have swayed some taxpayers to throw in the towel on their planning and bring their tax affairs up to date with a monetary settlement. Again this will be viewed by HMRC as a success as it not only swells the coffers but helps clear the backlog of open cases.
Where people have chosen not to settle with HMRC, they have been faced with either having to pay the APN, by whatever means possible, or consider other legal avenues. With no appeal right as such the only legal basis of challenge has been to seek Judicial Review – essentially showing that HMRC have in some way exceeded their authority in issuing a notice or have exercised their powers in an unreasonable way. Judicial Review has been successful in some cases where Notices have been thrown out by the courts on the basis that the arrangements in question were (although notified to HMRC under the DOTAS rules) not strictly speaking required to be notified under DOTAS, and therefore were not within the scope of the APN/PPN regime at all. Challenges to the fundamental validity of the entire APN / PPN regime have not so far met with success: and in the most recent case to be reported (Sword Services) the court has taken a very broad-brush approach, dismissing fine legal points as matters of mere detail and focussing instead on the underlying purpose of the legislation.
So – if you get an APN or PPN what are your options?
First, note that you have 90 days to make “representations” to HMRC that the Notice has been incorrectly issued or the quantum of the APN is incorrect. If you make representations, payment is deferred until 30 days after HMRC notify their final decision; otherwise payment has to be made within 90 days of the issue of the Notice. Recognising this, many people may choose to buy a little more time by making representations just before the expiry of the 90 day limit. If the Notice is upheld (as it almost always is) but payment is a problem it may be possible to secure a “time to pay” arrangement with HMRC but this is not something which can be guaranteed. If it comes to it, it may be advisable to seek the services of an Insolvency Practitioner who may be able to advise further.
Second, consider the possibility of settling with HMRC. If you are going to be forced to pay the tax anyway (with only a distant prospect of getting it back if at some date long in the future the case trundles through the courts and it ends up being one of the 20% that HMRC lose) it may be attractive to regularise matters now so as to avoid future costs and obtain peace of mind.
A third option is the possibility of challenging under a Judicial Review. This is unlikely to be sensible for one taxpayer in isolation but if a number of individuals are in a similar type of arrangement and there are reasonable grounds to challenge the issue of APNs, it may be worth considering. But independent advice is highly desirable lest you throw good money after bad: sometimes resistance must yield to pragmatism and admitting defeat may be the only sensible option.
For more information on how BKL can assist you when an APN has been issued, please get in touch with your usual contact or use our enquiry form.
