Accelerated payments backed by High Court

Tuesday 4 August 2015

The High Court has confirmed the legality of Her Majesty’s Revenue and Customs’ (HMRC) controversial Accelerated Payment Notices (APNs) by rejecting a case brought by a group of workers who had been subjected to the practice. The plaintiffs, led by Nigel Rowe and Alec David Worrall, claimed that APNS were a breach of the European Convention on Human Rights (regarding the right to protection of property), as well as against “natural justice”, pertaining to their right to a fair trial.

APNs are generally issued to those participating in schemes the government classifies as tax avoidance. They were introduced as part of the 2014 Finance Bill, and requires the recipient to pay a disputed tax within 90 days of being issued with the notice. An APN can be served when a tax enquiry is still in progress, or an appeal against an HMRC decision is pending.

If the amount is not paid in first 90 days, a penalty of five per cent of the total amount due is levied, with an additional five per cent added five months after the mandated day, followed by a further five per cent six months after that.

However, it can only be used after HMRC has issued a follower notice, or if the scheme in question is regulated by the Disclosure of Tax Avoidance Schemes (DOTAS) while it is under investigation. A person or organisation who has received an APN can apply for a Time To Pay (TTP) arrangement, although opening dialogue with HMRC as soon as possible is the best way to secure this.

In the two lead cases, Mr Rowe had invested £700,000 into the “Ingenious Partners Film” scheme between 2004 and 2005. He was subsequently issued with a tax demand for over £270,000, which he decided to dispute. Mr Worrall invested £267,638 in two similar schemes, called “Ingenious Partners Film 2” and “Ingenious Games”, which led to a tax bill of over £96,000. He also decided to challenge the decision.

Both cases have been rejected by the High Court, which ruled that APNs did not violate the plaintiffs’ right to a fair trial, or their right to protection of property.

In the wake of the ruling, HMRC’s director of counter-avoidance David Richardson said the decision was a vindication of the taxpayers who follow the rules. He added: “Those who use tax avoidance schemes need to know they can no longer hold on to the money while their affairs are investigated. They have to pay their tax up front like everybody else. “HMRC wins 80% of all avoidance cases that people litigate, and many more are settling before things get to that stage.”

After the decision was announced, an HMRC spokesperson said the organisation planned to extend its use of APNs. It was suggested that a further 64,000 would be issued by the end of next year, with an estimated value to the Treasury of £5.5 billion.

It is unclear whether the original plaintiffs plan to appeal the High Court’s decision.

By Victoria McDonnell

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