Accelerated payment notices - is your client prepared?

As HMRC plans to issue upwards of 64,000 accelerated payment notices, are your clients prepared?

Accelerated payment notices (APN) are high on the agenda for businesses, individuals and their advisers.

Large numbers of marketed tax avoidance schemes were originally designed for corporates and high net worth individuals to shelter tax, and relate to income tax, corporation tax, CGT, stamp duty and inheritance tax. Using these schemes was not generally illegal, and many entities entered into them.

The tax landscape has changed significantly in recent years, and tax avoidance is now very much on the public and political radar. HMRC has set up a Counter Avoidance Directorate specifically to deal with marketed tax avoidance schemes, and is looking to issue upwards of 64,000 APNs at a rate of approximately 2,500 per month in respect of tax avoidance schemes previously notified under the disclosure of tax avoidance scheme (DOTAS) rules. APNs require that the taxpayer pays the tax that was sheltered, usually within 90 days of the APN being issued, on basically a ‘pay now, argue later’ principle.

In addition, HMRC’s 2014-15 annual report indicated it had already issued 379 Follower Notices (FN) by 31 March 2015. These notices relate to taxpayers that have entered similar arrangements to those considered in tribunal or court cases where the tribunal or court has ruled in HMRC's favour.

Why is this relevant to advisers?

Some of your clients may receive APNs and FNs. Some may be able to pay the tax due, and some may not. Most certainly they will require professional advice regarding their options. If the client wants to pay the tax but is unable to do so, their options may include seeking to raise additional finance or re-finance, or to look to agree a ‘Time to Pay’ arrangement with HMRC, who have recently announced that, from 3 August 2015, all Time to Pay arrangements must be paid by direct debit. Any Time to Pay arrangement request must be supported by robust forecasts. In certain instances, there may be a need to consider insolvency options, for example a Company Voluntary Arrangement.

There may also be accounting issues to consider regarding going concern, and providing for liabilities in the client’s financial accounts, which may impact on banking covenants. A shareholder's ability to draw dividends may also be affected.

For further information regarding APNs, FNs and Time to Pay arrangements, please contact your local RSM adviser.