There is no legal possibility that our government and more importantly HMRC could be unreasonable. It must be obvious to every measly taxpayer that accelerated payment notices (APNs) are wholly wonderful for the greater good of our nation. There is no possibility of contending that HMRC have fairly introduced new legislation that “changes the underlying economics of tax avoidance”. This view has been demonstrated in a recent judicial review case where users of an avoidance scheme challenged APNs.
In the case between Nigel Rowe, Alec David Worral & Others and The Commissioners for HM Revenue and Customs heard between the 14th and 17th July 2015, it was claimed that HMRC’s action in issuing the accelerated payments notices were unreasonable, breached natural justice and represented an abuse of their rights under the European Convention on Human Rights to a fair trial and protection of property. It was also claimed it took away the legitimate expectation they had when they joined the avoidance scheme that they wouldn’t have to pay tax before the dispute had been resolved.
I can wholly understand the upset and disappointment at the legislation, in particular where the tax planning (or avoidance as it is now known) was largely considered acceptable at the time implemented. It may even be considered grossly depressing where HMRC had been aware of the avoidance for a decade or more. This is the position for those who entered into film schemes, research and development schemes, business property renovation allowance schemes, employee benefit trusts and countless others.
Broadly, the following was found:
- The APNs had been lawfully issued
- The statutory scheme for giving accelerated payment notices was not unfair or insufficient to achieve justice
- The accelerated payment did not involve any determination of final liability, but addressed whether the tax should be held pending resolution of the dispute
- The APNs did not deprive the taxpayers of their statutory right to challenge the underlying tax liabilities
- There had been no breach of the taxpayers’ procedural or substantive legitimate expectations
- The decision to give the APNs is a lawful exercise of the statutory discretion conferred by the Act
Referring to my earlier comment on the upset and disappointment of those faced with APNs, it’s clear that the courts don’t sympathise. There was no evidence to support the contention that practice had been ambiguous, widespread, established and recognised sufficiently to demonstrate that taxpayers could continue accepting the treatment. Even if the taxpayers could have identified an expectation based upon previous legislation or practice it could not give rise to a common law right constraining Parliament’s constitutional power to enact primary legislation which changed the previous position.
Really? So it is completely fair in law that HMRC took one or nearly two decades to do something about planning they were fully aware of before doing something about it. HMRC will contend that under the then law, they had enquired into situations and therefore equally taxpayers would have been aware of a potential view such planning was not considered acceptable. Stop press, the courts have favoured the taxpayer in most Employee Benefit Trusts (EBT) cases although we have recently had the EBT settlement opportunity, which is effectively HMRC in some cases ignoring previous case law and seeking tax anyway. Furthermore, taxpayers currently consider that the courts will find a way of denying tax advantages due to the political environment. The reality is where APNs are issued or on their way, the pain and upset needs to be set aside and the issue at hand dealt with.
The affordability of APNs is the main issue: lots of people never expected the legislative change and considered the tax planning effective (especially where implemented a number of years ago) so spent or invested the tax that would have otherwise been due (and paid a lot in fees).
Payment will be due 90 days after the date you receive the accelerated payment notice. Where there are representations objecting to the accelerated payment notice, the date the payment is due may change. Although given the recent Judicial Review, the possible reality is that payment will need to be made and not paying results in penalties.
If there are going to be problems paying, it may be possible to negotiate a payment arrangement with HMRC. Also, if success through litigation is considered futile, the proactive and most effective proposition would be to take forward a disclosure to HMRC of the tax irregularities. Often however, the representative managing communications with HMRC is the promoter or provider of the planning. This instantly results in warning alarms since there are conflicts of interest. I am not in any way suggesting that it is unfair for such a provider to charge for example going to Judicial Review although I suspect the client will hate the incurrence of further fees merely to be left in a position of having to incur more professional fees on future representations with HMRC.
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