Since 2014, thousands of individuals and businesses have been issued with an HMRC ‘accelerated payment notice’ (APN), or are expecting one in response to ‘disclosure of tax avoidance schemes’ (DOTAS). But what exactly is an APN? What could it mean for your business? And how should you react to one? We discuss APNs in more detail.
If you have received an APN, it means that HMRC expects payment for taxes that it thinks you are trying to avoid paying. Accelerated payment is part of legislation introduced in July 2014 to confront tax avoidance schemes.
According to HMRC, tax avoidance schemes are ‘arrangements that try to use tax legislation to gain a tax advantage that is not intended by the legislation’.
Essentially, in HMRC’s view, if you are undertaking ‘normal commercial transactions’, you’ll be making statutory tax and NIC contributions and therefore not liable for an APN.
If you have received an APN, the payment terms are 90 days and these are non negotiable.
The APN is based on a calculation that HMRC makes in relation to the advantage that it thinks the tax avoidance scheme you are using is trying to achieve.
The total amount that you could ultimately be liable for can therefore change according to HMRC’s investigation or enquiry into your taxes, in response to appeals, or the settling of a dispute; this is what is called a ‘compliance check’.
Once it has issued an APN however, HMRC will expect you to make payment for the amount shown on the original notice, to be rectified once an appeal or dispute has been settled.
You can apply to a court for the right to make representations against the PAN on the basis of appealing against underlying tax or NICs if you feel the amount quoted is incorrect or conditions have not been met but there is no right of appeal against the APN itself.
You are appealing some of the amount only.
This also means that because you don’t automatically have a right to appeal, even if you intend to dispute the APN, once it has been issued HMRC will expect you to make payment within 90 days regardless. This 90 day window can be especially threatening to businesses that are asset rich but not cash rich.
If you’re unable to make the payment in full within 90 days, you can be charged 5% interest on the full amount. This will increase by a further 5% if you haven’t made a payment within 5 months of the payment due date, and it will increase by 5% again (i.e. on top of or additional to the previous increments) if you haven’t made payment within 11 months.
There may be several reasons that you disagree with an APN:
There have been instances where HMRC has withdrawn previously issued APNs due to its own failure to follow correct process. There are certain statutory conditions that HMRC must adhere to in order to issue an APN, such as issuing a follower notice (see below) prior to or alongside the APN. Where it has failed to adhere to these conditions, there have been occasions where APNs have been withdrawn.
Whether you intend to dispute an APN will most likely depend upon what any potential litigation outcomes might be, what your ability to pay is, or whether you can reach an agreement with HMRC with regards payment. In some cases, a Time To Pay agreement might be appropriate, for example, depending on your circumstances.
When HMRC has a number of similar cases, it will often investigate and litigate against ‘representative cases’. Once the ruling has been made against such cases, those who are using the same or similar arrangements are known as followers.
HMRC must issue a follower notice either alongside or before an APN.
In many cases, followers will settle their disputes following the judicial ruling, however others may argue that their case is not in fact similar or the same as the representative case. In these cases, where there is a dispute, if HMRC issues an APN, it expects the individual or business to pay the disputed tax and/or NICs under the accelerated payment rules.
Ideally, the best time to try to make a representation to appeal against an APN or follower notice is as soon as you become aware that you are going to be issued with one.
In order to issue a follower notice, HMRC must for example,
If you are concerned about an APN and/ or have other debts or tax arrears, it is worth getting overall financial advice. In the meantime, have a look at other helpful topics, such as:
Or for more tailored advice, contact one of our business rescue experts directly.