Written by: Keith Tully
Published: 15th August 2014
More than 43,000 UK taxpayers have been required by HMRC to pay a combined £5.1bn in tax that was originally lost to the Treasury through tax avoidance schemes.
Around 33,000 individuals and 10,000 businesses will have received Accelerated Payment Notices containing a 90-day tax payment deadline with no right of appeal, as HMRC exercises its right in recovering disputed tax backed by Royal Assent.
Needless to say, a demand of this nature arriving through the door is expected to have serious consequences for thousands of UK taxpayers who will not have budgeted accordingly and will struggle to meet the 30 October deadline. And, naturally, HMRC will apply financial penalties for late payment.
Insolvency practitioners and business rescue specialists are already receiving calls from anxious sole traders and directors who put their faith in what they believed to be a legitimate and lawful tax scheme, only to be left in a precarious financial situation by this sudden demand.
“Given that the amounts in question can run into millions of pounds, this could lead to a “cash flow crisis” for taxpayers who receive these demands,” said Dawn Register, specialist at a leading UK tax consultancy.
“I can see this being a major issue for many wealthy investors who are often asset rich, but cash poor. For those who would have to liquidate assets – including property – to meet HMRC’s demands, three months is a tight window,” she added.
The legislation has also received criticism not only for retrospectively targeting schemes that were entered into years ago but also for removing taxpayers’ right to an independent appeal.
“Our concern is that it puts power into the hands of HMRC without judicial oversight,” said Patrick Stevens, tax policy director at the Chartered Institute of Taxation.
Another key issue of concern for individuals and directors implicated in Disclosure of Tax Avoidance Schemes (DOTAS) is HMRC’s new ‘direct recovery of debts’ (DRD) powers which will soon allow for the recovery of unpaid debts direct from bank and building society accounts – as outlined in the 2014 Budget.
According to the Treasury, DRD 'will focus on debtors who owe at least £1,000 and have been contacted multiple times by HMRC to pay'.
However, HMRC guidance indicates that ‘multiple’ could mean just four demands and this would include contact by either letter or telephone. According to HMRC, it 'will ensure that a minimum credit balance of £5,000 is available to the debtor across all accounts'.
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