HM Revenue and Customs has published a list of tax avoidance schemes whose users may be required to make an upfront payment of tax.

HM Revenue and Customs has published a list of tax avoidance schemes whose users may be required to make an upfront payment of tax.

The Revenue said in a statement that the list was being published to help avoidance scheme users and their advisors prepare for a new power called accelerated payments.

The published list has over a thousand scheme reference numbers on it. Users of schemes with a reference number on the list may receive a notice to make an upfront payment of tax. Before issuing anyone with an accelerated payment notice HMRC said it will write to them.

The Finance Bill, which is due to become law later this month, will enable HMRC to demand upfront payment of any disputed tax associated with avoidance schemes by issuing an accelerated payment notice rather than waiting for the outcome of a tax tribunal ruling.

“Most people pay the tax that is due, when it is due, so it unacceptable that a minority seek to hold on to the tax they should pay by using avoidance schemes,” said David Gauke, exchequer secretary to the Treasury.

“Accelerated payments will tackle the small minority of taxpayers who are currently able to put off paying tax, sometimes for several years. This will put them on the same footing as the majority of taxpayers who pay their tax up front,” Gauke added.

The Treasury has estimated that 33,000 individuals and 10,000 businesses will potentially be given accelerated payment notices by HMRC.

Taxpayers will be able to make representations to HMRC about being forced to make an accelerated payment, but there will be no independent appeal against HMRC’s final decision. Payments over disputed tax must be made within 90 days and there are penalties for late payment.

Insolvencies

Earlier this month accountancy firm Moore Stephens warned that HMRC’s proposed new powers to force businesses and individuals who have used tax avoidance schemes to pay the disputed tax upfront could trigger a wave of insolvencies.

“Receiving a demand to make upfront payment of tax could put some taxpayers under financial strain, and in the very worst cases, could even trigger personal bankruptcies or business insolvencies before the technical merits of the arrangement have been tested,” said David Elliott, restructuring partner at Moore Stephens.

“Even a remote prospect of being made bankrupt could mean that taxpayers feel under pressure to settle disputed cases rather than take an appeal to the courts,” he added.

Elliott said that the potential impact of these new HMRC powers is so huge that an independent appeal process should be introduced.

“HMRC has said that it will use its discretion under its time to pay arrangements if a taxpayer can’t afford to pay the money upfront, but that is not good enough when the taxpayer’s entire way of life may be at stake,” said Elliott.

Moore Stephens said that businesses that could be hit with an accelerated payment notice may already face a “contingent liability” that means any dividends that are taken out of the business by its shareholders ahead of the request for money could later be deemed illegal and therefore repayable. This would mean that the liability for payment of the money would pass from the company to any shareholder that had benefited from such a dividend.

“Directors, who are also shareholders, taking dividends from a company that has used a tax planning scheme may face claims against their own assets if the company is unable to pay an advance notice bill,” said Elliott.