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AS2013: ‘Pay now’ regime set for tax avoidance disputes

THERE WILL BE no more “sitting and waiting” during tax avoidance arguments, with rules to be introduced that will force taxpayers to pay up during the dispute.

The government will remove the cashflow advantage of what it describes as “sitting and waiting” during a tax avoidance dispute. Announced in the Autumn Statement, this regime will initially target taxpayers who are using avoidance schemes that have already been defeated in the courts.

However, it is already looking to widen the net, with a consultation to be launched that will discuss increasing the breadth of criteria for taxpayers that could be issued with ‘pay now’ notices.

“This could seriously undermine the tax avoidance industry, where the funds are held onto for years during a dispute,” said Reeves tax partner Geraint Jones.

Advisers also suggested that a code of practice would have to be considered, to make sure the enquiry process is not dragged out by the taxman.

There will also be new powers requiring taxpayers to amend their tax returns in cases where a tax avoidance scheme they have used is shown not to work in another party’s litigation – and to face a new penalty if they pursue litigation on the same scheme and are unsuccessful.

“It will be important that HRMC are not heavy-handed with this, it places a responsibility on their shoulders – not all tax cases are identical to each other,” added Jones.

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