There is very real concern regarding the legality of HMRC demands.
Our Taxflash in October noted that Accelerated Payment Notices (APNs) issued by HMRC may not be valid. UHY Hacker Young have been leading the way in ensuring that HMRC only seek to collect tax where they have a legal right to do so. Currently, we have two judicial reviews due to be heard in March and have been engaged for a third by Cotter Solutions Ltd, all of which question the legality of HMRC demands.
Noticeably, there is very real concern regarding APNs and the retrospective nature of the legislation. In its Budget 2014 Report, the Treasury Committee specifically raised concerns regarding the new legislation and, in their submissions regarding the same, both the Law Society and the tax institutes also raised serious concerns.
Further, HMRC have very wide powers of collection and on issue of a demand has unfettered powers to seek to distrain a taxpayer's assets and also seek a county court judgement. There is little doubt that HMRC will seek to use these powers if APNs go unchallenged and unpaid.
Our tax investigation and litigation team at UHY have been engaged by Cotter Solutions Ltd, a company specifically set up to challenge APNs and HMRC collection actions where it is believed these are beyond HMRC's legal powers. The aim of the company is to ensure that individual taxpayers have the knowledge and resources to balance the scales where it is believed there are bona fide legal reasons for challenging HMRC when they seek to enforce a payment of tax.
Together with leading tax counsel, we have identified a number of grounds for challenging APNs for Cotter Solutions Ltd. However, it is clear that the grounds depend on the circumstances of the particular taxpayer and, therefore, 'one size fits all' is unlikely to be the case. Consequently, it may be necessary to take a number of separate cases forward.
To date, in addition to the two judicial reviews mentioned above, we have successfully helped taxpayers resist distraint of their goods where it is believed tax demands were not legally issued. We also have three cases at County Court in which HMRC have ignored the fact that their interpretation of the law is subject to judicial review. Therefore, the Court has been asked to pause proceedings until the judicial review cases are resolved.
In the current environment, HMRC are under increasing pressure to collect tax especially where tax planning has been categorised by HMRC as avoidance. However, the taxpayer should only be obliged to pay tax where this is legally due. Additionally, where a taxpayer has self-assessed their tax in accordance with the proscribed procedure, HMRC should not have the power to alter that self-assessment without recourse by the taxpayer to the courts.
THE NEXT STEP
The specialist tax investigation and litigation team at UHY can provide you with objective advice as to whether or not the tax demanded of you is legally due. Where it is, we can assist you in making suitable arrangements to pay and negotiate with HMRC on your behalf, especially if you need more time. However, where there is a bona fide basis for challenging the right of HMRC to collect payment, we have the knowledge and, in particular, the relevant experience to support you in preparing a challenge.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
