HMRC Wins Accelerated Payments Challenge

UK tax authority HM Revenue and Customs (HMRC) has won a challenge concerning the legality of its accelerated payments regime.

HMRC began sending Accelerated Payment Notices (APNs) to UK users of certain tax avoidance schemes in August 2014. The notices give recipients 90 days to pay the tax in question. APNs may be received by taxpayers who use a tax avoidance scheme disclosed by the promoter under the UK’s disclosure of tax avoidance schemes (DOTAS) rules. Disclosed schemes are assigned a scheme reference number (SRN), which can be used by the taxpayer to check HMRC’s online list of schemes to determine whether they could be liable to pay tax upfront while the scheme is challenged by HMRC.

A number of users of an avoidance scheme claimed that HMRC’s action in issuing APNs was unreasonable; breached natural justice; and represented an abuse of their rights, under the European Convention on Human Rights, to a fair trial and the protection of property. They also alleged that the issuance of APNs removed the legitimate expectation they had when they joined the scheme that they would not have to pay tax until the dispute had been resolved.

The High Court ruled that APNs were lawfully issued and the principles of natural justice (the right to a fair hearing) are adhered to. The court said there had been no breach of the claimants’ procedural or substantive legitimate expectations, and the decision to issue APNs was neither unreasonable nor irrational. Lastly, there had been no unlawful interference with the claimants’ possessions, and the claimants have had access to an independent and impartial tribunal on judicial review.

David Richardson, HMRC Director of Counter Avoidance, said: “This is an important result, and good news for the vast majority of taxpayers who do not try to avoid paying their fair share of tax. 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.”

“We expect to complete the issue of around 64,000 notices tax by the end of 2016 bringing forward GBP5.5bn (USD8.6bn) in payments for the Exchequer by March 2020. HMRC wins 80 percent of all avoidance cases that people litigate, and many more are settling before things get to that stage.”