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Advance Payment Notices (APNs) are here to stay!

Advance Payment Notices (APNs) are here to stay!

The High Court has heard a Judicial Review that was looking to challenge whether APNs are lawful. Taxpayers who had received APNs argued that the notices were unreasonable, breached natural justice and contravened the EU Convention on Human Rights. The Court dismissed these arguments and decided in favour of HMRC.

How do APNs work?

HMRC can issue an APN where a taxpayer has used a disclosable tax avoidance scheme and HMRC has either opened an enquiry into the taxpayer’s relevant return or has made an assessment that is under appeal. The APN forces the tax saved by the tax scheme to be paid in advance of the issue being decided by a tax court. The tax must be paid 90 days after the APN is issued.

There is no right of appeal against an APN. It is possible to make representations to HMRC within 90 days of the notice, which will be reviewed by an independent officer. However, such representations are only likely to be successful in dealing with obvious errors e.g. incorrectly computed liabilities, factual errors, etc.

There are significant consequences for failing to pay on time. A penalty equal to 5% of the tax will be charged if the APN is not paid by the 90 day deadline with additional penalties of 5% charged after a further 5 and 11 months.

What does it mean for you?

Are any of your clients likely to receive an APN? HMRC has threatened to issue 64,000 notices by April 2016 worth £5.5 billion. Will clients who are affected be ready?

Clients will face significant financial costs that could be disastrous. The client will turn to their accountants and tax advisors for help. The issues posed by APNs will be difficult to resolve and could place a strain on relationships.

How can we help?

  • The validity of any APN should be tested. Has HMRC followed the correct procedures in its enquiry and in issuing the APN?
  • Would settling the tax be a better option? Is the enquiry holding up repayments or access to any relief?
  • Does the client need time to pay? An arrangement would prevent the late payment penalties being charged. Time to pay arrangements can be difficult to secure and so starting the process early will offer more chance of success.

If you would like to discuss any of the above in more detail then please contact a member of the team.