Theaccelerated payments regime is included in the Finance Act (which gained RoyalAssent on 17 July 2014). These newpowers allow HMRC to demand payment of the tax in dispute where it relates to adisclosed tax avoidance scheme. Paymentscan also be demanded where HMRC challenges the tax treatment of arrangementsunder the GAAR or where a case involving essentially similar principles hasbeen decided in HMCR’s favour. If the dispute is ultimately decided in thetaxpayer’s favour, the tax will be refunded with interest. The policy intent is to limit the appeal oftax avoidance schemes be depriving scheme users of the cash flow benefit of thedisputed tax until the case is resolved one way or another.
Not allschemes disclosed under the Disclosure of Tax Avoidance Schemes (DOTAS) areaffected, but the list now published includes nearly 1,200 such schemes. HMRCnotes that the list is of those schemes where an accelerated payment demand maybe issued, so it does not necessarily follow that because a scheme’s referencenumber is on the list, that its users will automatically receive acceleratedpayment notices. We expect HMRC to startissuing payment demands shortly after Royal Assent. However, scheme users may have some time towait and see if they will be affected as HMRC have announced they will phasethese notices in over a period of 20 months. This is not surprising given thehuge number of taxpayers potentially affected. HMRC will write to affected taxpayers before a tax demand isissued. It will nevertheless be sensiblefor any taxpayer who has used a scheme on the list to prepare to have to meet atax demand. For some taxpayers who arepresented with accelerated payment notices, this could create solvency problems,as the tax will have to be paid within 90 days. In these cases, advantage should be taken of HMRC’s Time to Pay arrangements;otherwise it may be possible to agree a settlement with HMRC.
Taxpayershave very little opportunity to challenge accelerated payment notices. There isno right of appeal, but taxpayers can make representations to HMRC about thebasis of HMRC’s calculation of the tax demanded, or if they believe theconditions required for HMRC to issue a notice are not met. HMRC will consider those representations anddecide whether to confirm or withdraw the accelerated payment notice. If it is confirmed, which we anticipate themajority will be, the taxpayer will have a further 30 days in which to pay thetax, if this is later than the original 90 day period. Note, however, that HMRCcan only issue an accelerated payment notice if an enquiry is open, unless HMRCare able to make a ‘discovery’ and reopen past years.
Thesenew powers have been met with huge concern by tax advisers because of theirretrospective impact on taxpayers, who may have entered into disclosed taxavoidance schemes some years ago when the climate was considerablydifferent. This is a far cry fromdeterring prospective investment in tax avoidance schemes.
Anupdate to the list is promised in October 2014.
If a taxpayer hasinvested in a DOTAS scheme but cannot recall the DOTAS number they shouldcontact their tax agent or advisor, or the promoter from whom they bought thescheme. Alternatively, taxpayers can call HMRC on 03000 530435.