Accelerated payments and follower notices – are you up to speed on the new rules?

AAT Tax Policy Adviser Brian Palmer talks us through new measures to help tackle mass tax avoidance.

HMRC will have more power to collect undisputed tax from taxpayers. It’s important that all taxpayers and those running a business are aware of the proposed rules.

Why the new rules?

HMRC are tightening their grip to deal with the backlog of tax avoidance schemes with the introduction of follower notices and accelerated payment notices. In a nutshell, these new rules will mean that HMRC will be able to demand funds up front from businesses and taxpayers that they believe are in tax disputes related to tax avoidance cases. HMRC will now receive money they believe to be owed to them at the start of a legal enquiry.

An accelerated payment notice will be issued by HMRC to UK taxpayers that have entered into certain arrangements covered by DOTAS (the Disclosure of Tax Avoidance Schemes) or the GAAR (General Anti-Avoidance Rule) in which there is an open enquiry into that scheme. No longer will the taxpayer be able to hold on to the disputed tax which is currently allowed in the tax system through such schemes.

The follower notice and accelerated payment proposals, (expected to come into full force next month), have been met with much criticism from our industry for a number of reasons. Not least the lack of right to appeal (other than on technical grounds) if a taxpayer gets issued with such notices. HMRC will have the power to determine if a taxpayer is linked to a current tax dispute and then have a case against that tax payer. This amount could be hundreds of thousands of pounds.

The problem

It could be that HMRC will have a busy summer ahead of them, issuing these notices. HMRC claim there to be around 65,000 people and businesses that have used marketed tax avoidance schemes that need to be investigated and litigated.

The concern

While we all agree that aggressive tax avoidance has to be dealt with in order to ensure a fair system and to deal with those that are deliberately delaying the appeal and payment of tax that quite rightfully should go to HMRC, we must remember that each case is different and that many of the notifications under DOTAS might have been made purely for compliance reasons and that in reality there is no “scheme” involved.

Of course, if the taxpayer has their day in court and wins HMRC will have to cough up and pay the taxpayer.  However, in the intervening period the taxpayer has lost their use of the funds whilst they are being collected by HMRC.

If you receive such a notice, you’ll need to act quickly and seek professional advice and help. AAT have responded to this consultation.

We work hard to ensure that our members, and their views, are represented at all levels of government and public life by engaging with individuals, government, public and private sector bodies who make and shape policy. You can see all our policy work here.

You can also  read the full document ‘Tackling marketed tax avoidance’ issued by HMRC’ to find out more about the new rules.

Brian Palmer , former tax policy adviser for AAT..