The Finance (No2) Bill 2014, which is due to receive Royal Assent in July, contains legislation which will enable HMRC to demand payment upfront of disputed tax in certain cases, principally involving tax avoidance or deferral. It is estimated that up to 43,000 taxpayers could receive such a demand. Those demands will be issued over an extended period but the first are likely to be issued as early as September 2014.
Taxpayers who have sought tax advantages through tax avoidance schemes that fall within the Disclosure of Tax Avoidance Schemes (DOTAS) are likely to be most affected.
Here is a link to the SRNs (Scheme Reference Numbers) affected – click here
Over the next 2 years HMRC estimates that it will rake in £7 billion through the use of these notices. Of this £7 billion, individuals will weigh in with £5.1 billion. This would equate to each person having a gross income of £262,000.
Last week the Financial Times reported that Ingenious Media, an investment company, warned 1,300 of its investors, including business leaders, entertainers and sporting celebrities, such as David Beckham, to expect substantial tax bills with interest, as reward for using its tax avoidance scheme. (Contractor Weekly)
This is a radical change and many might say its been a long time coming.
It has always struck me as slightly bizarre the DOTAS were registered and allowed to exist.
I suspect that this is the end of the road for DOTAS and many accountants and tax advisers will see this as a case of HMRC ‘breaking faith’ and so not to be trusted in future.
As mentioned in my earlier post https://business-accountant.com/2014/07/02/hmrc-aims-to-raise-further-5bn-in-tax-revenue/ the real issue here is that this legislation is to be enacted retrospectively which is never a good idea in my view.
We should also be aware that the Advance Payment Notices (APNs) that will be issued are not tax demands, but as the name suggests, ‘advance payments’ or deposits: the underlying dispute remains unresolved and untested in tribunal/ court, so the only effect is that HMRC is sitting on the disputed funds rather than the taxpayer holding onto his/ her/ its money.
This is a pure cash generation exercise.
And because it is not a tax payment there is little by way of grounds to challenge these notices – how can you challenge what is in effect HMRC’s ‘opinion’ …. and how often have you known HMRC’s opinion to be correct?
I hope that in due course this will be seen for what it is – bad legislation.