Some contractors' APNs demand 'up to £100,000'

Britons who contracted in IT during the noughties seem second only to the rich and potentially famous in the voracity with which Accelerated Payment Notices are hitting them.

In fact, tax investigations experts confirmed to ContractorUK that the widely talked about APN recipient ‘Mr Adams’ – a former IT freelancer for London banks – is “not atypical.”

If anything, only his reported bill (£27,000) is unusual, as some contractors are facing APNs demanding payment of up to £100,000. Problematically, APNs must be paid within 90 days.

Advisory Moore Stephens, which is helping contractors who are being chased for such a hefty sum, said: “It is not uncommon for contractors to have entered multiple different schemes

“So whilst each one might be, say, only £10,000 a year [in calculated tax demanded on an APN], the exposure over a number of years clearly builds up.”

Similar to Mr Adams, one of the advisory’s clients was wrong to think that an initial interest in his tax affairs by HMRC had fizzled out, on the basis he didn’t hear back from officials.

In particular, the taxpayer received an enquiry notice each year in 2007, 2008 and 2009, none of which asked any questions and nor were they followed up.

“[He] then heard nothing [from the Revenue] until 2015 when he began receiving APNs for those years,” reflected Dominic Arnold, head of tax investigations at Moore Stephens.

“In many cases, the engagement…[from] HMRC over a number of years has been sporadic; even where enquiry notices had been issued…nothing was then heard for years on end.”

Lack of resources at HMRC, and its initial preference to pursue the scheme promoters (EBT users are among the current batch of APNs), may be behind HMRC’s inaction over the years.

Lack of proper powers (in HMRC’s eyes) to effectively tackle tax it suspects was avoided may have held things up too. The granting of APNs, as a power, then received a boost.

“The recent spate of tax-shaming press stories and campaigns for [everyone to pay] a ‘moral’[amount of] tax have added momentum to HMRC’s tax clampdown,” says Doug Sinclair of tax firm BKL.

“Ten years or so ago, you’d have been laughed out of a business meeting for talking about paying the ‘fair’ amount of tax… those individuals caught up in these drawn-out tax cases are unfortunately the casualties of this paradigm shift.”

Sinclair reiterated the ‘examine it carefully’ advice if you’re a contractor who receives an APN, and suggested that settling with HMRC should be seen as an option; not a necessity.

“It is absolutely essential that individuals do not simply accept HMRC’s initial assertions that the tax is due and payable.”  he said. “A second opinion is worth its weight in gold.”

Those second opinions are all the more worthwhile due to the inaccuracies that are plaguing APNs - still, indicates Richard Morley, a specialist in tax dispute resolution at BDO.

He says that the figures demanded by the Revenue on its ‘pay-up first’ anti-avoidance notices have been inaccurate by the “tens of thousands of pounds.”

“We have seen APN calculations with margins of error [as much as 25%]” agreed Moore Stephens’ Mr Arnold. “Either because the data HMRC has been given is inaccurate or in absence of any information they have made ‘best estimates’.”

Recipients of APNs who collect artwork; drive supercars or own other valuable assets will be aggrieved to learn that inaccuracies are rife on the 90-day demands, which cannot be appealed.

That’s because such wealthy taxpayers who want to pay but can’t are resorting to pawn brokers and short-term lenders who loan against luxury assets, the FT reported, notably at the “last-minute.”

Meanwhile, the Times reported that APNs bearing six-figure demands have hit the doorsteps of celebrities including comedian Sacha Baron Cohen, soap star Ken Roache and TV presenter Melanie Sykes.

Editor’s Note: Related Reading –

Deluged tax tribunals yet to shoulder AP cases

HMRC vindicated over APNs

Dividend users alerted to ‘pay-up first’ tax rule