Tax return 2014-2015 – Are you prepared for Upfront Tax Payments?

 In General

Recent changes to tax law mean that HMRC now has a number of new powers designed to crack down on tax avoidance. The 2014-2015 tax year is the second in which HMRC has been allowed to demand upfront tax payments from small businesses and individuals with the use of “accelerated payment” notices.

Businesses receiving accelerated payment notices will be expected to pay disputed tax in advance. By taking upfront payments, HMRC expects to prevent unscrupulous individuals shirking their responsibilities and underpaying their annual tax bill. A tax tribunal will then decide on incidences where people have over- or underpaid, with all repayments being made with interest.

The change is expected to bring in an additional £7.2 billion revenue for HMRC each year, and to prevent those engaged in tax avoidance from enjoying the benefits of any disputed sums before a final decision about dues can be made.

Who will receive an accelerated payment notice?

Those most likely to receive an accelerated are individuals and organisations who have declared participation in a tax avoidance scheme in the past. HMRC estimates that over the course of the last financial tax year and this, 43,000 such notices will be issued.

HMRC is targeting any individual or business who has lodged a Disclosure of Tax Avoidance Schemes (DOTAS) notice in the past, or those who have received a ‘follower notice’ after their scheme has been successfully prosecuted in court. HMRC may send accelerated payment notices to anyone who has an outstanding tax enquiry or tax appeal in progress, and who has been issued with a follower notice.

It is important to note that businesses may have to make accelerated payments in relation to an avoidance scheme they participated in several years ago – even before said scheme was ruled illegal.

What happens when an accelerated payment is received?

The accelerated payment notice will clearly specify the amount of ‘additional’ tax that will need to be paid on account. Upon receipt of said notice you have 90 days to pay the bill, or face prosecution.

You do not have the right to challenge or appeal the notice, but you can make a written representation under certain circumstances, such as where you believe the conditions of the notice were not fulfilled, or where the payment claimed by HMRC is incorrect. Obviously this representation needs to be made within the initial 90-day timeframe. HMRC will then issue a final decision and the payment must then be made within the next thirty days.

These provisions can, like most tax matters, be quite confusing. For any business, sole trader or individual receiving an accelerated payment notice, we would suggest seeking professional advice as soon as possible. This will then allow for a qualified accountant to review the situation and provide helpful guidance in how best to handle the demand.

If you or your business has ever been engaged in a tax avoidance scheme, you should begin setting aside some additional cash reserves to cover such an eventuality. Again, you will probably require professional advice about how much exactly you should be saving.

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