The Chartered Institute of Taxation (CIOT) has voiced concern about HMRC’s proposal to extend accelerated payment proposals to existing schemes disclosed under DOTAS.
In a recent response to Finance Bill 2014 draft clauses for consultation, the tax institute said that this is in effect introducing retrospective legislation and that “the proposed legislation tips the balance excessively in HMRC’s favour”
“The fact that there has been disclosure indicates an intention to be open and transparent with HMRC. In a number of cases the disclosure has been made even if the promoter or taxpayer did not believe it to be strictly necessary ‘to be on the safe side’.
“In all of these cases there was no indication that this would lead to a retrospective change of law leading to an accelerated payment of tax. We do not believe there is any justification in this enormous extension of HMRCs powers without safeguards to taxpayers who by definition have been transparent with the tax authority,” the response document said.
The CIOT added that it would be fairer if these provisions were only applied to arrangements entered into after Royal Assent is given to the Finance Bill 2014.
To help accountants and tax advisers navigate the proposed changes Tolley has produced some technical content on accelerated tax payments.
In terms of background Tolley explained that last month HMRC published the consultation document on accelerated tax payments, which formed part of a number of measures designed to tackle avoidance. It was also published on the same day as the summary of responses to the August 2013 consultation on the new regime for high-risk promoters.
Accelerated tax payments are proposed in two circumstances:
- follower cases — open enquiries which HMRC decides turn on “the same or substantially the same grounds as a case already decided in the tribunal or court”
- enquiries into schemes which have been disclosed under the disclosure of tax avoidance scheme (DOTAS) rules or the general anti-abuse rules (GAAR)
The main driver behind these proposals is that HMRC is unable to disallow the disputed tax relief pending the outcome of the enquiry or litigation, which means the taxpayer has a low-interest loan from the government until the case is settled, which could be a number of years.
Tolley explained that once the payment notice is issued by HMRC, the taxpayer might have as little as 90 days to make the payment or challenge the notice.
“This may leave taxpayers only nine months away from having to make substantial payments to HMRC and investments may have to be cashed-in (with a potential knock-on tax liability) to release the necessary funds,” the guidance said.
For the full details and draft legislation, see the consultation document and the latest advice from TolleyGuidance.