HM Treasury outlay during the Covid-19 pandemic has reached historic proportions, and no doubt HMRC will seek to maximise recovery post-pandemic using all the tools at their disposal. HMRC investigations on tax avoidance will likely increase, leaving those who have used tax avoidance schemes facing severe consequences.
HMRC will send an accelerated payment notice (APN) if you have been involved in any schemes that are disclosed under the Disclosure of Tax Avoidance Schemes (DOTAS) rules or counter-acted under the General Anti Abuse Rule (GAAR).
If you find yourself on the receiving end of an APN from HMRC, it can seem daunting; first things first, do not panic.
Allan Cadman, a partner at insolvency specialist Poppleton & Appleby and North West chair of R3, the insolvency and restructuring trade body, answers frequently asked questions regarding receiving an APN.
So, what is an APN?
An APN is a notice that a taxpayer with an ongoing tax or National Insurance contributions (NICs) issue may receive from HMRC (typically following their involvement in a tax scheme). The demand requires the taxpayer to pay the amount first, within 90 days, and resolve the dispute later.
Payments will likely be backdated to when the individual or company first entered the scheme; this can amount to years of unpaid tax.
If you are in multiple schemes, you may not get all of the APNs that HMRC plans to issue at the same time. These are issued on a scheme by scheme basis.
What do I do if I receive an accelerated tax payment notice?
Please do not ignore it. By failing to pay for an APN by its due date, you could increase the amount owed with late payment penalties or surcharges, and there is no right to appeal an APN. However, there are possible (but limited) grounds to make a representation during the 90 days notice. Such as:
- The incorrect amount specified within the APN
- The required conditions for the issue of an APN have not been met
If you think you will have problems paying the APN, you should contact the HMRC telephone number shown on the notice or any previous correspondence which informs you in advance of an APN.
Can I negotiate the terms of an accelerated tax payment notice with HMRC?
There are two methods in which to engage with HMRC:
- Negotiating the amount
- Applying for additional time to pay
Suppose you believe that the amount quoted on the APN is incorrect. In that case, representations (as mentioned above) may help with any negotiation to lower the amount owed to a more satisfactory one, or even zero in some (limited) cases.
Requesting additional time to pay the notice would require you to work with an advisor to put together a recent monthly statement of income and expenses over a recent period which demonstrates any hardship that would occur if the tax were to be paid in a large sum.
Once your enquiry or appeal is received, HMRC will consider your application and respond by accepting, rejecting or proposing an alternative.
There is always the chance of further legal proceedings if your negotiations fail. It is important to remember that simply receiving an APN is not necessarily the end of the road, as the case could continue with a taxpayer victory, resulting in tax paid under the APN being refunded.
Allan Cadman, Partner at Poppleton and Appleby, said: “When you unexpectedly receive a large tax bill, it can cause a problem for individuals and companies already struggling with finances. This can often push business owners to breaking point if they struggle to improve cash flow.
“In some cases, when a substantial tax bill is received, a director may use an insolvency procedure to escape any liabilities. However, suppose HMRC suspects that the company can pay its tax liabilities. In that case, the insolvency procedure is often scrutinised and investigated to see whether any assets have been transferred before the company entered insolvency.
“Where necessary, if you have received an APN, it’s always best to arrange payment by the due date or in instalments. If you’re struggling to pay any tax bill, in addition to contacting HMRC as soon as possible, you should also contact your accountant or a licenced Insolvency professional to plan your next step.”