The controversial scheme forces taxpayers to make upfront payments of tax liabilities to HMRC; that is, before the appeal process in tax disputes has begun.
“The Government will not tolerate tax avoidance and accelerated payments has been a real game changer,” said Gauke.
“This first £1 billion received in accelerated payments shows that we are turning the tables on those looking to avoid paying their fair share,” he added.
Introduced at the same time as APNs were the also-controversial ‘follower notices’, which make taxpayers concede on tax disputes where the tax authority has already won a case with a similar fact pattern.
APNs were introduced in the 2014 Finance Act and the 2015 National Insurance Contributions Act. HMRC has raised more than 20,000 – perhaps closer to 25,000 – assessments using the new rules, and is hopeful of an even greater number over the next 12 months.
“[The introduction of the rules] was obviously very controversial because it’s been argued that it was overstepping, or undermining, the existing appeal process,” said Richard Asquith, vice president of global tax at Avalara, a tax compliance software provider. “There are some challenges ongoing still.”
The most significant challenge to APNs and follower notices is that of Ingenious Media, which challenged the APN and follower notice regime.
The company’s challenge, however, was unsuccessful, with HMRC vindicated in its approach during a legal challenge in August 2015.
Rupert Shiers, tax partner at Hogan Lovells, said that the case showed APN legislation is “enforceable”.
‘Advanced accounting’
While the £1 billion figure of revenue raised in the first year of the APN regime sounds promising, it should be noted that this is revenue which HMRC would have made anyway, and it is essentially just being brought forward.
“Quite clearly, raising a billion is just bringing forward one billion,” said Asquith. “It’s a balance sheet exercise – HMRC are getting down payments on money they would’ve eventually got through the regular process.”
“Under government accounting rules HMRC are allowed to count that now through the profit and loss account,” he added. “So it’s advanced accounting. Let’s call it that.”
Another point to note is that HMRC wins approximately 80% of its cases, as confirmed by Jennie Granger, HMRC’s director general for enforcement and compliance, in the revenue authority’s press release on the subject.
Presuming it wins 80% of its cases (and assuming, for the sake of simplicity, that all cases have the same revenue value), around £200 million of the £1 billion gained under the APN regime will have to be paid back.
But Asquith warned: “These are very aggressive assessments, so the 80% target is very optimistic, and it may turn out to be 25%, 30% of cases which HMRC don’t win, so £250,000, £300,000 that may have to be paid back.”‘Game changer’ accelerated payment notices make £1 billion for UK in first year
HMRC, the UK revenue authority, has collected £1 billion ($1.54 billion) as a result of its accelerated payment notices (APNs) scheme, financial secretary to the treasury David Gauke claimed this week.
The controversial scheme forces taxpayers to make upfront payments of tax liabilities to HMRC; that is, before the appeal process in tax disputes has begun.
“The Government will not tolerate tax avoidance and accelerated payments has been a real game changer,” said Gauke.
“This first £1 billion received in accelerated payments shows that we are turning the tables on those looking to avoid paying their fair share,” he added.
Introduced at the same time as APNs were the also-controversial ‘follower notices’, which make taxpayers concede on tax disputes where the tax authority has already won a case with a similar fact pattern.
APNs were introduced in the 2014 Finance Act and the 2015 National Insurance Contributions Act. HMRC has raised more than 20,000 – perhaps closer to 25,000 – assessments using the new rules, and is hopeful of an even greater number over the next 12 months.
“[The introduction of the rules] was obviously very controversial because it’s been argued that it was overstepping, or undermining, the existing appeal process,” said Richard Asquith, vice president of global tax at Avalara, a tax compliance software provider. “There are some challenges ongoing still.”
The most significant challenge to APNs and follower notices is that of Ingenious Media, which challenged the APN and follower notice regime.
The company’s challenge, however, was unsuccessful, with HMRC vindicated in its approach during a legal challenge in August 2015.
Rupert Shiers, tax partner at Hogan Lovells, said that the case showed APN legislation is “enforceable”.
‘Advanced accounting’
While the £1 billion figure of revenue raised in the first year of the APN regime sounds promising, it should be noted that this is revenue which HMRC would have made anyway, and it is essentially just being brought forward.
“Quite clearly, raising a billion is just bringing forward one billion,” said Asquith. “It’s a balance sheet exercise – HMRC are getting down payments on money they would’ve eventually got through the regular process.”
“Under government accounting rules HMRC are allowed to count that now through the profit and loss account,” he added. “So it’s advanced accounting. Let’s call it that.”
Another point to note is that HMRC wins approximately 80% of its cases, as confirmed by Jennie Granger, HMRC’s director general for enforcement and compliance, in the revenue authority’s press release on the subject.
Presuming it wins 80% of its cases (and assuming, for the sake of simplicity, that all cases have the same revenue value), around £200 million of the £1 billion gained under the APN regime will have to be paid back.
But Asquith warned: “These are very aggressive assessments, so the 80% target is very optimistic, and it may turn out to be 25%, 30% of cases which HMRC don’t win, so £250,000, £300,000 that may have to be paid back.”
