HMRC proposals on tax avoidance receive Royal Assent

Proposals by HM Revenue & Customs (HMRC) to crackdown on tax avoidance received Royal Assent earlier this month, meaning that the taxman will be able to issue Follower Notices, where it considers principles established in one case as apposite to another, and can require individuals to pay disputed tax in advance of agreeing the final position in a case.

The achieving of Royal Assent gives HMRC three out of four of their objectives in the latest round of the battle against tax avoidance, with the only bit missing being the ability to remove funds directly from bank accounts. However, this remains an aim for the department for the next Finance Bill.

Under their new powers, HMRC may issue Accelerated Payment Notices (APN) to tax scheme users in order to demand tax upfront and Follower Notices to force compliance in cases where a similar tax dispute has already been ruled on by the courts.

An APN is a notice issued to taxpayers who have used tax avoidance schemes that fall within the Disclosure of Tax Avoidance Schemes (DOTAS) rules, or are counteracted under the General Anti-Abuse Rule (GAAR).

The notices will be issued to request upfront payment of the tax avoided under such schemes where the scheme arrangements are subject to dispute.
An APN may be issued with or after a Follower Notice.

Both measures act as deterrents to prevent taxpayers relying on schemes and will improve HMRC’s cash flow in cases that might otherwise take years to settle. These provisions apply to income tax, corporation tax, capital gains tax, inheritance tax, stamp duty land tax and annual tax on enveloped dwellings.

Investors receiving follower notices and APNs should realise how serious their position has become and anyone getting either or both should contact a professional adviser without delay.

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Nigel is the Managing Partner and Head of Litigation and Dispute Resolution in the London office of Mackrell Turner Garrett.