HMRC to Repay APNs Demands to Contractors

HMRC has been forced to withdraw almost 2,000 Accelerated Payment Notices (APNs) that were sent to contractors in the banking and IT industries following a recent decision at a first tier tax tribunal.

The contractors who took part in the Isle of Man based tax avoidance scheme, will now be entitled to a refund of the tax they paid to HMRC as demanded under the terms of the APNs.

Accelerated Payment Notices were introduced in 2014 as a method of recovering unpaid tax that HMRC understood to be owed by individuals prior to entering into a hearing process through tax tribunal. Essentially, the demand is that the individual must pay the amount of tax HMRC believes to be owed within 90 days of receiving the APN.

In this case, a number of contractors had entered into a tax avoidance scheme (also known as Employee Benefit Trusts) which diverted their earnings into offshore accounts and repaid them as loans in order to offset their income tax liabilities. HMRC issued APNs to the contractors, many of whom would have had to sell assets in order to meet the demand. The decision now means that they could be refunded by HMRC, although the dispute between HMRC and the Isle of Man based promoter of the tax avoidance scheme is ongoing.

Contractors are one of a number of professions that has been subject to scrutiny by HMRC in its attempts to recover unpaid tax, with HMRC estimating that around 16,000 contractors have used similar tax avoidance schemes. The cost associated to such schemes is estimated to be £5.5bn, which HMRC aims to recover.

We have assisted a number of contractors in the IT, banking, oil and gas industries in clearing up their tax position with HMRC.

If you are a contractor and would like to discuss your circumstances with our experienced tax investigations and disclosures professionals, call us on 0113 387 5670 or fill out an Enquiry Form and we will contact you straight away.