Businesses forced to pay taxman £1bn as part of controversial powers to battle tax avoidance schemes

 
Oliver Gill
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Accelerated payment notices must be paid within 90 days (Source: Getty)

The taxman has raked in nearly £1bn by using controversial powers to mandate payment of disputed tax prior to any hearing or right of appeal.

HM Revenue and Customs (HMRC) uses accelerated payment notices (APN) to force businesses or individuals to hand over cash where a tax avoidance scheme has been used. Full payment must be made within 90 days no matter of the circumstances.

According to data collected by law firm Pinsents Masons under a Freedom of Information Act request, HMRC's large business directorate collected £943m in the tax year 2015/16.

Read more: Taxman bagged more than £3bn from small businesses in the last year

The crack-squad from HMRC looks at 2,100 of the UK's largest and most complex companies. Its spokeperson said:

We are clear that large businesses must pay the tax that is due. Everyone must play by the same rules.

One such scheme that tax authorities have tried to clamp down upon is Employee Benefit Trusts (EBT), most recently hitting the headlines as being used by football clubs to reduce national insurance and income tax contributions.

"The amount collected from large businesses via APNs is surprisingly high and a signal that HMRC is continuing to employ the tool widely,” said Pinsent Masons partner Heather Self.

APNs were introduced in 2014 and have netted HMRC billions of pounds in the first two years of their existence.

Read more: Clubbing the taxman: Golf courses eye billion-pound VAT rebate

U-turn

Last year the taxman was forced into a u-turn over thousands of APNs because of the way in which they had been issued. Self added:

APNs have generated considerable controversy since their introduction, given the lack of any channel to appeal. A number of legal challenges have now been brought against their use, and HMRC has been forced to withdraw a number.

“The tax will relate to a wide range of schemes and arrangements utilised by large businesses over recent years to reduce corporation tax payments. All large companies should be aware of the conditions under which APNs can be used, and prepare or seek professional advice accordingly”

In February, the chair of the Treasury Select Committee Andrew Tyrie hit out at HMRC for the way it had pursued individuals that had utilised a film tax loophole, saying it had caused people "very severe financial distress".

Read more: Crest Nicholson's tax scheme crumbles on tribunal outcome

Tyrie's sentiment was echoed by Pinsent Masons. “The sums involved can be substantial and without the right of appeal, the notices present the potential for significant disruption," said Self.

“It is also, of course, sensible to question the validity of any notice received. The use of APNs in a number of circumstances has now been subject to judicial review, with the Court of Appeal due to hear in July the Rowe case challenging the circumstances in which APNs were issued to film scheme users."

A spokesperson for HMRC said: “We continue to ensure that tax payments genuinely reflect companies’ economic activity, with two thirds of the 800 largest and most complex businesses operating in the UK under enquiry by HMRC at any one time."

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