UK and International Tax news

FB 2014 Follower Notices And Accelerated Payments

Wednesday 30th April 2014

As originally announced in the 2013 Autumn Statement [see our UK Tax News items of 11 December 2013 and 24 March 2014], legislation has been included in the 2014 Finance Bill to change tax administration to require taxpayers who have used avoidance schemes which are defeated in another party’s litigation, and who do not settle the dispute, to pay the disputed amount to HMRC on demand.

Following consultation, the 2014 Finance Bill now contains, within clauses 192 – 226 and Schedules 26 – 29, provisions which extend accelerated payment of tax to users of schemes disclosed under the Disclosure of Tax Avoidance Schemes (DOTAS) rules, and to taxpayers involved in schemes subject to counteraction under the General Anti-Abuse Rule (GAAR), so that the amount in dispute is held by HMRC while the dispute is resolved.

The above provisions may apply where there is an open enquiry or appeal into an arrangement and HMRC considers that a pre existing judicial decision applies to the arrangement. HMRC may issue a follower notice to the tax payer requiring it to amend the tax return, withdraw a claim or settle the open appeal on the basis that the tax advantage does not apply. Penalties of up to 50% of the tax in question may apply if no corrective action is taken.

There will be no formal right of appeal against a follower notice although the taxpayer can make representation to HMRC.

After a follower notice is issued, HMRC may issue an Accelerated Payment Notice where the tax arrangements are disclosable under the DOTAS rules or HMRC is taking counteraction under the GAAR.

The new provisions are to apply initially to IT, CGT, CT, IHT, SDLT, and ATED from Royal Assent to the Finance Bill. Further taxes may be added by subsequent Treasury Order.

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