Paying APN in instalments - penalties?

[webberg]

I mentioned on another thread that there is a question over whether a penalty might apply to an unpaid portion of an APN if you have agreed to pay in instalments.

Surprisingly HMRC has committed and answer in writing.

If a person is unable to pay an amount of tax and contacts HMRC before the point a penalty for late payment becomes chargeable (the penalty date) asking for time to pay the charge, the late-payment penalty is not charged provided that HMRC agree to the time-to-pay request and the taxpayer keeps to the terms agreed. If the request for time to pay is made later than the penalty date, the penalty is charged in the normal way irrespective of any time-to-pay arrangement. There is a full right of appeal against these penalties. The legislation dealing with this can be found in the Finance Act 2009 at section 108 or paragraph 10 to Schedule 56, depending on the tax charge at issue.

Interest is not affected by time-to-pay arrangements and runs as normal from the point a charge becomes due to the point it is paid. Interest is not charged on late payment of an Accelerated Payment Notice itself, but from the normal due date for the tax. Interest might be charged on late payment of a penalty, depending on which tax the penalty relates to (for example, interest is charged on late payment of penalties in income tax and capital gains tax).

I hope this answers your question, but please come back to me if there is anything you would like clarified.

There are some questions arising from this response but I think it's a rare shaft of common sense in an immense cluster shambles.

I will be going back with some questions. If you want to add some of your own, pile in please.

[LandRover]

I mentioned on another thread that there is a question over whether a penalty might apply to an unpaid portion of an APN if you have agreed to pay in instalments.

Surprisingly HMRC has committed and answer in writing.

If a person is unable to pay an amount of tax and contacts HMRC before the point a penalty for late payment becomes chargeable (the penalty date) asking for time to pay the charge, the late-payment penalty is not charged provided that HMRC agree to the time-to-pay request and the taxpayer keeps to the terms agreed. If the request for time to pay is made later than the penalty date, the penalty is charged in the normal way irrespective of any time-to-pay arrangement. There is a full right of appeal against these penalties. The legislation dealing with this can be found in the Finance Act 2009 at section 108 or paragraph 10 to Schedule 56, depending on the tax charge at issue.

Interest is not affected by time-to-pay arrangements and runs as normal from the point a charge becomes due to the point it is paid. Interest is not charged on late payment of an Accelerated Payment Notice itself, but from the normal due date for the tax. Interest might be charged on late payment of a penalty, depending on which tax the penalty relates to (for example, interest is charged on late payment of penalties in income tax and capital gains tax).

I hope this answers your question, but please come back to me if there is anything you would like clarified.

There are some questions arising from this response but I think it's a rare shaft of common sense in an immense cluster shambles.

I will be going back with some questions. If you want to add some of your own, pile in please.

Thanks for this post Webberg, it's helpful.

What is the maximum time period allowed?

12, 24, 36 60mths?

With some of the APN demands likely to be significant then are long periods available?

[webberg]

Thanks for this post Webberg, it's helpful.

What is the maximum time period allowed?

12, 24, 36 60mths?

With some of the APN demands likely to be significant then are long periods available?

Depends on circumstances.

I've seen a few over 12 months (£80k APN, £20k upfront and £5k a month) and some over 15/18 months on pretty much the same pattern.

HMRC will not commit a policy in writing on that.

I think the above pattern is seen as a start point perhaps.

Don't fret the numbers above, look at the profile.

Do percentages if you like - 25% up front, 8% an instalment.

The KEY is not agreeing something that you can't subsequently manage as breaking the agreement brings consequences.

[flamel]

Depends on circumstances.

I've seen a few over 12 months (£80k APN, £20k upfront and £5k a month) and some over 15/18 months on pretty much the same pattern.

HMRC will not commit a policy in writing on that.

I think the above pattern is seen as a start point perhaps.

Don't fret the numbers above, look at the profile.

Do percentages if you like - 25% up front, 8% an instalment.

The KEY is not agreeing something that you can't subsequently manage as breaking the agreement brings consequences.

Hypothetical numbers here:
First situation
I get an APN for £40k
I agree to pay 25% upfront (£4k) and agree time to pay over, say 2 years
I then get another APN for another year but can't afford to pay that in addition to the first APN.
Is it better to group the APNs and declare inability to pay?
What if HMRC take their time on issuing all APNs to an individual? I'm assuming that in their warped thinking if they issue them slowly one year at a time, then they think people will have more chance of paying them (or something like that) compared to issuing all at once.
Therefore is it possible to get HMRC to issue all APNs for all contested years in a reasonable timeframe for individuals to consider their total position?

Second Case
I sell everything and borrow some money to pay all APNs.
The case is lost and the HMRC want penalties, interest, IHT and any other tax they feel like applying in which case there is now an inability to pay and nothing left to sell.

This would have the effect of a second wipe-out for the same (or related) debt.

[webberg]

Hypothetical numbers here:
First situation
I get an APN for £40k
I agree to pay 25% upfront (£4k) and agree time to pay over, say 2 years
I then get another APN for another year but can't afford to pay that in addition to the first APN.
Is it better to group the APNs and declare inability to pay?
What if HMRC take their time on issuing all APNs to an individual? I'm assuming that in their warped thinking if they issue them slowly one year at a time, then they think people will have more chance of paying them (or something like that) compared to issuing all at once.
Therefore is it possible to get HMRC to issue all APNs for all contested years in a reasonable timeframe for individuals to consider their total position?

Second Case
I sell everything and borrow some money to pay all APNs.
The case is lost and the HMRC want penalties, interest, IHT and any other tax they feel like applying in which case there is now an inability to pay and nothing left to sell.

This would have the effect of a second wipe-out for the same (or related) debt.

The pedant in me says 25% of £40k is £10k.

You have no ability to "group" APN's nor force their issue. That is entirely within the gift of HMRC. I don't for a moment believe that HMRC has thought through the likely impact of issuing APN's in series in order to cause problems. Firstly, they have no particular policy in such matters and secondly they do not view this as a personal vendetta. It may feel like that - it's not.

Deal with this situation by taking the emotion out of it - make rational decisions, not knee jerk reactive ones.

If you have a plan for an APN and get another, then the plan for APN #2 will take that into account.

Your case B has been discussed on other threads. The unfortunate truth is that if you have no assets or savings that HMRC can persuade a Court to seize, then you will have some form of sequestration applied to future income (salary/profits/pension).

In a worst case, you might be paying HMRC an extra £10 a month for ever.

[dmuk]

This may be a silly question - but do you pay the APN with pre or post company; or personal money?

If you need to pay the APN with pre-tax company money - how is this treated? Would you be liable for tax?

Is any portion of the APN deductible? I am assuming no.

[webberg]

This may be a silly question - but do you pay the APN with pre or post company; or personal money?

If you need to pay the APN with pre-tax company money - how is this treated? Would you be liable for tax?

Is any portion of the APN deductible? I am assuming no.

I'm not sure I understand the question but I've answered the question I assume is meant.

Certainly paying a tax bill is not deductible.

If the APN is issued to a company then it's their liability. If you pay from your funds, you have lent the company money.

If the APN is issued to you, it's your liability. If the company pays it on your behalf you have either borrowed from the company which leads to a BIK charge and a need to repay it, or the company has given you remuneration which needs to be taxed.

There is no deduction available at company or personal level.

[flamel]

The pedant in me says 25% of £40k is £10k.

You have no ability to "group" APN's nor force their issue. That is entirely within the gift of HMRC. I don't for a moment believe that HMRC has thought through the likely impact of issuing APN's in series in order to cause problems. Firstly, they have no particular policy in such matters and secondly they do not view this as a personal vendetta. It may feel like that - it's not.

Deal with this situation by taking the emotion out of it - make rational decisions, not knee jerk reactive ones.

If you have a plan for an APN and get another, then the plan for APN #2 will take that into account.

Your case B has been discussed on other threads. The unfortunate truth is that if you have no assets or savings that HMRC can persuade a Court to seize, then you will have some form of sequestration applied to future income (salary/profits/pension).

In a worst case, you might be paying HMRC an extra £10 a month for ever.

Duh - I meant £10k of course!
I take it from what you are saying that the best course of action here is to arrange TTP, over a long period if necessary, making sure that the payments are within one's personal budget so as not to default.
By definition, if one has arranged TTP for one APN, then the next TTP arrangement for APN (2) will need to be arranged on the same basis, taking into consideration APN(1) and one's ability to pay for both?

[webberg]

Duh - I meant £10k of course!
I take it from what you are saying that the best course of action here is to arrange TTP, over a long period if necessary, making sure that the payments are within one's personal budget so as not to default.
By definition, if one has arranged TTP for one APN, then the next TTP arrangement for APN (2) will need to be arranged on the same basis, taking into consideration APN(1) and one's ability to pay for both?

Time to pay arrangements take into account all known liabilities etc. So if you have an arrangement running you argue that the second must be generous as to default the first would cause financial damage disproportionate to the charge.

You'd hope HMRC would realise this, but don't hold your breath.

[squirrel]

It will also be interesting to see

Time to pay arrangements take into account all known liabilities etc. So if you have an arrangement running you argue that the second must be generous as to default the first would cause financial damage disproportionate to the charge.

You'd hope HMRC would realise this, but don't hold your breath.

If HMRC are prepared to take other creditors into account in this instance. As I've mentioned in a previous thread, last time I had dealings with a TTP HMRC didn't care about my credit card bills, they only took living costs into account so I had to go on a DMP. But I actually owed them the money that time. This time it's different (yes I understand that an APN is legally enforceable blah blah). We'll see what they say.