APNs are issued to individuals and businesses who are suspected of having engaged in tax avoidance, and require full payment of the disputed tax within 90 days
Over the last year, HMRC’s Large Business Directorate collected £943m from large businesses through Accelerated Payment Notices (APNs), according to international law firm Pinsent Masons.
APNs are issued to individuals and businesses who are suspected of having engaged in tax avoidance, and require full payment of the disputed tax within 90 days. APNs have been subject to controversy as they are issued without the right of appeal, and HMRC has previously had to withdraw several APNs following a number of legal challenges, including judicial review.
The figure of £943m is surprisingly high, according to Pinsent Masons, and draws to attention the prevalence of tax avoidance schemes, particularly through the use of Employee Benefit Trusts (EBTs). EBTs are trusts set up by companies either in the UK or offshore to hold cash and other assets. While these schemes are legitimate, they can be used to reduce income tax and national insurance contributions and generate corporation tax reductions for payments into the trust.
While the misuse of EBTs has been on HMRC’s radar for some time, the department is cracking down in an attempt to quash tax avoidance schemes.
This includes the Rangers FC tax case, which was heard by the Supreme Court last month. During the course of the seven-year long tax saga, HMRC alleged it lost £46.2m due to such misuse of EBTs.
Heather Self, partner at Pinsent Masons, said: “The amount collected from large businesses via APNs is surprisingly high – and a signal that HMRC is continuing to employ the tool widely.
“The tax will relate to a wide range of schemes and arrangements utilised by large businesses over recent years to reduce corporation tax payments. All large companies should be aware of the conditions under which APNs can be used, and prepare or seek professional advice accordingly.
“The sums involved can be substantial and without the right of appeal, the notices present the potential for significant disruption.
“It is also, of course, sensible to question the validity of any notice received. The use of APNs in a number of circumstances has now been subject to judicial review, with the Court of Appeal due to hear in July the Rowe case challenging the circumstances in which APNs were issued to film scheme users.
“Seeking professional advice at an early stage is essential.”