Accelerated payment of tax

Whilst these changes were announced in the Autumn Statement and subsequent consultation document, it was hoped the proposals would take into account the views of the respondents to the consultation.

The Budget 2014 has confirmed this will not be the case.

Whilst draft legislation is expected next Friday it is anticipated it will be far reaching and will significantly impact taxpayers who have obtained a cashflow benefit following participation in tax planning schemes. This will mostly be an issue for self-employed taxpayers, or those in Partnership who have withheld tax payments on their self-employed income.

The rules will also apply where a particular type of planning has been successfully litigated by HMRC, ‘follower notices’ could be issued by HMRC demanding taxpayers who have implemented similar planning to pay the tax in dispute, before their cases are determined.   They are also extended to cases with open enquiries which have been disclosed under DOTAS, enquiries where a taxpayer is appealing against a closed enquiry or discovery assessments and arrangements which fall foul of the GAAR (General Anti-Abuse Rule). We wouldn’t be surprised to see these powers extended to non-DOTAS based claims in the future, as people attempt to bypass the requirement for accelerated payment.

This is a dramatic change in tax law, effectively passing all of the power, discretion and incentives for settling enquiries to HMRC.  We would anticipate the draft legislation will continue to be lobbied as the bill passes through Parliament and HMRC even accept that the changes are likely to be met with Judicial Review and legal challenge so there is still a slim chance the proposals could change prior to the Finance Bill receiving Royal Assent in the summer, however this is just speculation and those caught by the proposals should consider their position carefully.

If you believe you have been caught by these rules and would like impartial advice on how they affect you please do not hesitate to contact us.