Could you be forced to pay disputed tax up-front?

Further to the Budget in April 2014, where it was announced that from July 2014 HMRC could demand tax upfront for those taxpayers suspected to be involved with tax avoidance schemes, the plot thickens and progress continues to be made to strengthen their position of power. Related article: Tax avoidance schemes under further attack

Tax can now be demanded in advance

The process to demonstrate whether a tax arrangement is legitimate is battled between the taxpayer and their representative and HMRC and the courts. In September updated guidance was published that could result in thousands of tax payers paying an estimated £7 billion in up front tax.

An “accelerated payment notice” can be issued if the tax payer:

  • Has been given a “follower” notice – in short this is where a scheme has already been ruled out in court but other taxpayers continue to follow it
  • Is using a scheme under the Disclosure of Tax Avoidance Schemes (DOTAS)
  • Has been issued a notice under the General Anti-Abuse Rule (GAAR)
If an accelerated payment notice is issued, the taxpayer has 90 days to make payment. The notice can be appealed but failure to pay results in surcharges and penalties. Interest is not charged on the notice but if tax is due at the end of the day then interest will also be calculated. This process can indeed be costly. Refunds, plus interest, will be issued if the tax arrangement is found to be legitimate. All in all though, HMRC mean business with clamping down on tax avoidance and their powers around this matter are only expected to increase in time as they prove their process can reap back millions, if not billions of pounds in tax. Figurit focus only on robust, long-term tax saving strategies. To discuss your tax position with a professional advisor, call one of the team to arrange an appointment. T: 020 7376 9333.