Follower Notices and APNs - What should the tax adviser do?

By Charlotte Barbour, Head of Taxation, Private Clients and Small Business

14 August 2014

The Finance Act 2014 has wide ranging powers that enable HMRC to bring forward the payment of disputed tax. ICAS has prepared a list of actions that the tax adviser may wish to consider.

The Finance Act 2014 has wide ranging powers that enable HMRC to bring forward the payment of disputed tax. This note lists actions that the tax adviser may wish to consider in relation to follower notices and advance payment notices that are, or may be, received by their clients.

There are two types of notice:

  • A follower notice, which is issued by HMRC where there has been a judicial ruling in a case that is very similar to the tax arrangements used by a person. A follower notice requires the person to amend their return or claim, or reach agreement with HMRC if there is an open appeal, which brings the possibility of disputing the tax bill to an end. If the taxpayer decides not to comply with the follower notice, for example to continue with an appeal, penalties may be assessed of up to 50% of the tax at stake for non-compliance with the follower notice. This is designed to deter continual delays in settling cases that have no likelihood of success.
  • An accelerated payment notice is just that, in that it brings forward the payment of tax in tax avoidance cases but without impacting on the procedures to finalise any dispute resolution. There are late payment penalties of 5% and a further 5% at 5 months and 11 months if still outstanding. 

What happens next? 

Timing - some uncertainty remains around when those who have used tax planning schemes with a Disclosure of Tax Avoidance Schemes (DOTAS) number or that result in a 'Follower Notice' may be asked by HMRC for accelerated payment of tax. Starting in August 2014, HMRC will phase the issuing of notices to current users over approximately 20 months. Note, however, that an accelerated payment notice may only be issued if there is an open enquiry or appeal.

The list of scheme reference numbers 

HMRC has published a list of those avoidance scheme reference numbers (SRNs) whose users may be issued with an accelerated payment notice (APN). HMRC has said that the list is to be continually reviewed to ensure that only current and newly disclosed schemes whose users may receive an accelerated payment notice are included and the list will be refreshed at quarterly intervals to take account of any updates.

Note that the list has been issued as numbers and not scheme names as taxpayers will have used this to identify their use of an avoidance scheme when completing their Self-Assessment return. Promoters of avoidance schemes are not required to provide the scheme name, but are required to send the scheme reference number to their clients. The SRN is all the user will need in order to identify whether their scheme is on the list. HMRC is considering whether it is possible to compile and publish a list of scheme names alongside the SRNs.

The list includes a full range of schemes that have been disclosed and issued SRNs since DOTAS was introduced in 2004. Those where HMRC agrees there is no additional tax due are excluded. The list covers a wide variety of schemes, including sideways loss schemes, SDLT schemes (post-2010), self-employment schemes, artificial loss deduction schemes, capital gains schemes and employment schemes.

Clients who may be expected to receive a notice but have not yet done so  

  • The tax advisor may wish to consider alerting the client that there may be a demand for payment in the near future.
  • The client may wish to consider how they plan to proceed in advance of receiving a notice, for example, considering cash flow and whether a Time To Pay arrangement may be needed.

Clients who have received a notice  

The tax advisor may want to consider:

  • Whether the HMRC calculation is correct. The legislation gives little detail on how this might apply if taxes interact, and there may be subsequent relief etc so much might be left open to negotiation
  • Whether representations should be made to HMRC within the 90 day limit
  • If the client may need to ask HMRC for a Time To Pay arrangement, in which case early contact with HMRC may be needed to facilitate this, and
  • Whether there are other consequences for the client's tax affairs.

There is no ability to appeal to a tribunal against an accelerated payment notice or a follower notice, although the taxpayer may put forward representations to HMRC within 90 days of the notice being given. Representations may object to the giving of the notice on the grounds that the conditions for its issue were not met; HMRC must consider any representations.

Practice points 

HMRC has indicated in its guidance (see below, para 2.2.14) that, where applicable, copies of correspondence will also be sent to the taxpayer's agent.

Members may wish to seek the assistance of another member who specialises in dealing with these matters and, if so, appropriate procedures need to be adopted, including obtaining the client's permission to do so.

It may be that some clients may make a claim against their adviser. The claim may or may not have merit, but members need to consider their obligations to notify their professional indemnity insurers at the earliest opportunity.

Professional Conduct in Relation to Taxation  

The guidance 'Professional Conduct in Relation to Taxation' PDF [834 KB] should be followed and, in particular, chapter 8 which addresses tax planning, tax avoidance and tax evasion.

Legislation in the Finance Act 2014, Part 4. 

The HMRC's guidance on these provisions.


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