HM Revenue & Customs is to withdraw hundreds of accelerated payment notices (APNs) relating to tax demands issued to users of offshore trusts, following a legal challenge.
Since implementation of the controversial APNs scheme in July 2014, people and businesses that HMRC deems to be using tax avoidance schemes have been forced to pay the disputed amount up front.
The reforms have brought in revenue of more than £2.5bn, but have been widely criticised and in some cases the APNs have been overturned.
The latest case, brought by law firm RPC involved 260 parties, according to a report in The Financial Times. It relates to tax bills totalling millions of pounds served on company bosses and high-earning employees, who have used a scheme involving an “employee benefit trust” to reduce their liabilities.
Adam Craggs, partner at RPC, the law firm that brought the challenge, accused HMRC of taking a “shoot first and ask questions later” approach to the notices.
‘Potentially serious impact on taxpayers’
He said they had a potentially serious impact on taxpayers including the risk of “being made bankrupt or being forced to conduct a fire sale of their home or other assets in order to raise sufficient funds”.
The HMRC has moved to stop potential tax avoidance from companies that used employee benefit trust schemes to pay salaries and bonuses into offshore trusts for senior employees and members of their families. The schemes were designed to allow users to postpone or avoid paying tax while potentially benefiting from loans or property bought with the cash.
Since November 2015, new legislation means the tax office is able to collect a debt due as a result of an unpaid APN directly from taxpayers’ bank accounts.
HMRC told the FT that it did not comment on individual cases, adding that “just because a notice has been withdrawn it doesn’t mean there is no tax to pay. The underlying tax dispute remains until it is settled or taken to court.”
This U-turn is the second time HMRC has withdrawn accelerated payment notices. In January, up to 2,000 individuals who used employment tax schemes promoted by Montpelier Tax Consultants, an Isle of Man-based firm, also won a reprieve.
The FT added that Mr Craggs said he expected HMRC to “do the right thing” and withdraw payment notices issued to the other users of the employee benefit trust scheme that had been designed by Premier Strategies, a planning firm.
It said, however, that that relief for the 260 taxpayers involved may be short-lived as the UK government is aiming to implement new legislation that will wipe out the tax advantages of the trusts by 2019.