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HMRC tightens grip on tax avoidance schemes

Businesses and individuals must remain vigilant despite successful legal challenges

19 September 2016

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HM Revenue and Customs (HMRC) has continued its crackdown on tax avoidance by widening the scope in which it can issue accelerated payment notices (APNs).

Since 2014, HMRC has collected £3bn under APNs from people and businesses suspected of using tax avoidance schemes. They must pay the disputed amount within 90 calendar days prior to any formal hearing with no right of appeal.

According to Pinsent Masons, 15 more tax planning schemes have now been added to a APN list , bringing the total to 1,181 schemes.

Paul Noble, tax director at Pinsent Masons, commented: ‘HMRC is determined to persist when it comes to use of APNs, despite increasingly strong resistance from those receiving such notices. HMRC and HM Government have already “booked” the revenue that they anticipate that these will generate and therefore will continue with their strategy of issuing notices.’

In May, the Financial Times reported that HMRC withdrew hundreds of APNs after users of a scheme involving employee benefit trusts brought a legal challenge arguing that they should be exempt as the trust did not meet the definition of an avoidance scheme.

In January, up to 2,000 individuals who used employment tax schemes also won a reprieve but Noble said the court appearances were having little impact on HMRC’s ‘aggressive’ approach.

‘Concerns over the use of these powers are justified,’ added Noble. ‘They allow HMRC to demand and receive payment in advance before arguments are heard and determined. Recipients can end up facing bills for many millions – some may even face the prospect of bankruptcy as a result.

‘It is logical and fair to establish for certain whether the conditions for issuance are fully met before sending these out.’

Noble also noted that while the lawfulness of these notices was being taken seriously, complacency must not set in among businesses and individuals.

‘Anyone who suspects that an arrangement which they have entered into constitutes avoidance should be wary – HMRC is quite clearly adopting a policy of issuing a notice and then asking questions later.’

HMRC’s clampdown on tax avoidance is showing no signs of abating. A consultation aimed at strengthening tax avoidance sanctions has proposed a fine of up to 100 per cent of the tax avoided for accountants and advisers who encourage tax avoidance.

Meanwhile, a separate consultation has sought views on passing legislation that would require non-UK domiciled residents to pay inheritance tax on property held in overseas trusts.

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