Death and taxes… But what Benjamin Franklin did not know when he expressed his view as to the two certainties in life, well at least I don’t think so, was what Her Majesty’s Revenue and Customs would be given the power to do from this year. This isn’t a history lesson so read on…
Does anybody really enjoy paying tax? I mean, really? Probably not. After all, a person is only required to pay the amount of tax they are lawfully required to pay. The issue has always been reconciling the difference between what tax collector and tax payer believe is actually payable.
Tax planning schemes are not just the preserve of successful singers, millionaire comedians or DJ’s who moonlight as used car salesmen. They are used by people of less significant means too. They really are.
Some tax planning schemes are more adventurous than others and the problem, more acutely felt by the Treasury at the moment, is that less tax than expected is flowing into the Treasury’s coffers.
So what is happening? Well, all tax avoidance schemes need to be notified to HMRC. This is not new.
So what is new? Well, broadly speaking, when HMRC is challenging a tax planning scheme, or if it successfully challenged a scheme against a tax payer, HMRC can now issue what is called an ‘Accelerated Payment Notice’ to every person that HMRC is aware of who is, or was, a participant in that scheme or any similar scheme.
An Accelerated Payment Notice is issued to the tax payer (or, non-tax payer, I suppose must be HMRC’s view). HMRC will calculate the tax in reference to their own assessment of the tax that would be due assuming that the tax planning scheme was unsuccessful. The tax will be payable within 90 days from receipt of the Accelerated Payment Notice. You can complain (in writing) and ask HMRC to reconsider, but there is no substantive appeal process. If the tax avoidance scheme is ultimately held to be lawful then the tax paid will be treated as a payment on account of tax.
But what do you do if you receive an Accelerated Payment Notice? Well, the very first thing to do is seek professional advice. If a tax avoidance scheme is considered more likely than not to fail then it would seem pointless to continue the tax planning and risk incurring further penalties and fines.
What if you cannot pay the tax even if you wanted to? Well, the sudden arrival of an Accelerated Payment Notice is likely to cause significant cash flow problems. After all, 90 days is not a lot of time to find what could be a significant amount of money, particularly if a tax payer’s assets are in illiquid investments, such as land. This becomes more of a problem because a bullish HMRC could use an unsatisfied Accelerated Payment Notice to issue a bankruptcy petition against an individual or a winding up petition against a company. Yes, it is that serious. The Courts have recently made clear that they will wind up a company, even where the petition debt is the subject of outstanding appeals in the tax tribunals*.
Whatever the predicament, the earlier you get professionals involved the more likely it is that they can guide you through the process.
*Parkwell Investments Ltd, Re  EWHC 3381