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HMRC withdraws APNs issued in error

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Follower and accelerated payment notices (APNs) were introduced in FA 2014 (ss 199–233 and Schs 30–33). Under these provisions, taxpayers can be required to amend their returns, or withdraw their appeals and pay the amounts in dispute to HMRC, in advance of the dispute being determined by a tribunal or court (or risk penalties).
 
In order for HMRC to be able to issue an APN to a taxpayer, a number of conditions must be satisfied. In particular, s 219 provides that one of the following requirements must be met:
 
  • HMRC has issued to the taxpayer a follower notice in relation to the same return, claim or, as the case may be, appeal by reason of the same tax advantage arising from the same tax arrangements; 
  • the arrangements are notifiable under the disclosure of tax avoidance schemes (DOTAS) regime and HMRC has allocated a DOTAS scheme reference number; or
  • HMRC has issued a counteraction notice under the GAAR and at least two members of the GAAR advisory panel have opined that entering into the tax arrangements in question was not a reasonable course of action.
In practice, the second of the above conditions (arrangements notifiable under the DOTAS regime) is the one most commonly relied upon by HMRC when issuing an APN. 
 
HMRC has wasted little time in utilising its new power. In the first year since the new legislation was introduced, more than 30,000 notices have been issued and more than £1bn collected. 
 
Given the scale on which HMRC is issuing APNs and the financial hardship which APNs can cause (in extreme circumstances, taxpayers may face bankruptcy if unable to pay the amount demanded in the APN), it is important that HMRC, when exercising its discretion, considers all relevant circumstances. Parliament has provided conditions which must be satisfied before HMRC can issue an APN; and HMRC must be confident that these have been met. This is emphasised by the fact that there is no right of appeal in relation to the issue of an APN. (The only way the lawfulness of an APN can be challenged is by way of an application for judicial review.)
 
In the author’s experience, HMRC appears to be issuing APNs on an industrial scale, with little or no consideration being given to the accuracy of the sums notified in the APN, or indeed whether the conditions necessary to permit the issue of an APN have been met. 
 
It is perhaps not surprising therefore that HMRC has recently been forced into a humiliating climbdown in relation to around 2,000 APNs which it issued to individuals who participated in the Montpelier IR35 Manx Partnership arrangements. The APNs were issued in April 2015. Shortly before Christmas, some eight months later, HMRC finally admitted that the APNs should never have been issued because although the arrangements were ‘notified’ to HMRC, no doubt out of an abundance of caution, they were not ‘notifiable’ under the DOTAS regime. 
 
HMRC has written to the taxpayers concerned withdrawing the APNs. In its letter, HMRC apologises and states that it is ‘sorry for the inconvenience caused’. What it perhaps fails to appreciate is that many recipients of the APNs which have now been withdrawn will have doubtless suffered a great deal of stress and anxiety, incurred professional fees and been forced to dispose of assets in order to raise sufficient funds to enable them to pay the amounts demanded in their APNs. It is incumbent upon HMRC to ensure that when issuing APNs, it has carried out a rigorous exercise to ensure that the necessary statutory conditions have been satisfied and when it gets it wrong the APNs are withdrawn without undue delay.   
 
Issue: 1293
Categories: In brief
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