As HMRC admits to issuing 6,000 Accelerated Payment Notices (APNs) in error since 2014, a law firm has questioned whether HMRC is “exercising this draconian power with sufficient care”.
Since APNs were introduced in the Finance Act 2014, HMRC has issued more than 79,000 to individuals using tax avoidance schemes.
But according to law firm RPC, the number of APN errors is likely to exceed the 6,000 HMRC has withdrawn because of the complex nature of the law.
The withdrawn APNs could be the result of arithmetical miscalculations or where the necessary preconditions are not satisfied, said the law firm.
Adam Craggs, a partner at RPC, said the high number of APNs issued in error does little to reassure taxpayers that HMRC is exercising its powers in a proportionate and lawful manner.
“HMRC has been issuing these in huge numbers on an industrial scale and you feel anecdotally that they're not concentrating on the fact of each individual case and carefully considering them as they should - especially considering the impact it has on people,” Craggs told AccountingWEB.
“It's not like getting a letter from the Revenue or the bank, which is mistaken and you can pick up the phone and get it sorted out, he said. “These APNs demand very large sums of money and unless you have the technical expertise a layperson would be hard pushed to understand.”
Highlighting the fact that many taxpayers hit by APNs face bankruptcy, Craggs said he was concerned that HMRC isn’t offering “proper due care and attention”.
In particular, he flagged the recent Rowe judicial review case where the court of appeal said a designated officer should consider the arrangements ineffective before HMRC can issue an APN.
Taxpayers who receive an APN have 90 days to pay or contest if they believe it was issued incorrectly. According to HMRC, it upholds 90% of decisions.
Craggs advises taxpayers that have received an APN to not assume that it is correct. “Clearly, HMRC doesn’t always get it right so businesses and individuals who feel they’ve been issued with an APN in error should not simply feel they have to accept it and pay up,” he said.
Last year, HMRC reported that it had collected more than £4bn through APNs, with the average bill for large companies trying to avoid tax at around £6m. Employee Benefit Trusts (EBT) is one example of a tax avoidance scheme now exposed to APNs after recent HMRC victories.
At the time of HMRC’s sixth judicial review victory last year, David Richardson, HMRC’s director general for customer compliance group, hailed APNs as levelling “the playing field by changing the economics of avoidance”.
“The vast majority of people play by the rules and pay their taxes on time – people who try to do otherwise place an undue burden on everyone else," he said.
About Richard Hattersley
Richard is AccountingWEB's practice correspondent. If you have any comments or suggestions for us get in touch.