Demands for tax scheme payments are imminent

time for tax

In a major advance for the Treasury, MP’s have given their final support for radical reforms outlined in the Budget which will allow HMRC to issue tax demands to individuals and companies who have participated in tax planning schemes which are disclosable under the Disclosure of Tax Avoidance Schemes (DOTAS) rules, or subject to the General Anti-Abuse Rule (GAAR) or in circumstances where there is a final judicial ruling in another case which would reverse the tax treatment adopted in identical cases. This will be the first time that HMRC have been given powers to collect payments of tax in advance of a dispute being settled or even an enquiry being raised in some cases.

The first demands for tax payments in respect of schemes which have been closed down or disclosable under anti abuse rules could be sent out next month, with first payments due in November. The demands could relate to periods that go back 10 years in some circumstances.

The Treasury has acknowledged that the new measures to counter what in their opinion are aggressive and contrived tax avoidance schemes are likely to result in a flood of litigation and will require additional legal resources on their side. Indeed David Gauke, Exchequer Secretary to the Treasury, has said the new measures ‘are expected to prompt a range of legal challenges, including judicial review proceedings, an increase in closure applications to the tribunal and disputed enforcement activity.’  The Judicial Appointments Commission is to invite solicitors and barristers to apply for up to 39 full-time and part-time posts in the First Tier and Upper Tax tribunals to deal with extra appeals.

HMRC is expected to publish a list of the schemes affected by the changes before the Finance Bill becomes law and has said it estimates that accelerated payment notices will be issued to 33,000 taxpayers. HMRC estimates the notices will result in receipts of £340m this year, £1.3bnn in 2015-16, £1.3bn in 2016-17, £750m in 2017-18 and £385m in 2018-19.

Mr Gauke said that taxpayers could be made bankrupt if they took deliberate action to put their assets out of reach, but also indicated that it would be possible to make arrangements with HMRC to allow for extra time to pay the debt. ‘The priority in cases of genuine hardship will be to get people on to a payment track so that the debt is paid as quickly as possible.’

There is no doubt that the government and HMRC are getting much tougher with regards to unpaid tax and professional advice needs to be taken in all dealings with the tax authorities.

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