Professional Negligence & Tax Mitigation Schemes

Posted by Carina McFadden on
In July 2014, HMRC were granted new powers requiring companies and individuals to repay disputed tax before any tax dispute is resolved. These new powers require taxpayers using avoidance/mitigation schemes to pay the disputed tax upfront through the use of 'accelerated payment notices (APN). The legislation applies to arrangements entered into in the past, not just new arrangements entered into after enactment of the legislation (17 July 2014).

The objective is to encourage taxpayers to concede where a judicial decision in another case has in effect determined the point at issue in their case, by demanding upfront payment of the tax at stake. Therefore, an APN requires the taxpayer to pay the disputed tax before any dispute with HMRC is resolved. HMRC can issue a taxpayer with an APN if the tax avoidance scheme is the subject of an ongoing tax enquiry or appeal, and:

  • the scheme is notifiable under the Disclosure of Tax Avoidance Schemes (DOTAS) rules and HMRC has issued a DOTAS reference number to the scheme; or
  • the scheme has been made subject to a follower notice; or
  • HMRC has issued a counteraction notice under the General Anti-Abuse Rules.

HMRC will set out within the APN how much tax is due and which must be paid within 90 days, subject to any written representations the party wishes to make.

In August 2014 HMRC began to phase in the issue of notices setting out those schemes whose users may be issued with an APN and will continue to do so over an approximate 20 month period. The lists on these HMRC notices contains scheme reference numbers rather than scheme names as taxpayers will have used this to identify their use of an avoidance scheme when completing their Self-Assessment tax return.

The latest of these notices was issued by HMRC on 30 January 2015. Taxpayers can check if their DOTAS scheme reference number is on HMRC's list. The next list will be published by HMRC in April 2015.

Appealing the APN

There is no right of appeal against an APN. However, the recipient of an APN can make representations to HMRC if they believe that one or both of the following applies:

  • the conditions for issuing the notice have not been met;
  • the amount shown in the notice is not correct - if this is the case you will need to tell us what you think the correct amount is and why.

If neither of these circumstances apply there is currently no other way to appeal the APN. Payment must be made to HMRC within 90 days; there is no specific process for a further formal appeal against the notice itself. Judicial review then becomes the appropriate remedy as a matter of general law.

Claim in professional negligence

Although you may not be able to avoid paying the sums owing following receipt of an APN, it is possible that you may be able to pursue the solicitor or financial advisor that assisted you with entering into the scheme. In order to understand whether you may have a claim against your Tax Adviser, accountant or solicitor we would need to consider:

  • the terms of engagement as set out within your retainer with the solicitor or accountant;
  • the nature and scope of the advice that you sought and were given about the tax mitigation scheme; 
  • how this advice was presented to you;
  • what documentation you were provided with to assist you in making an informed decision.

There may, also, be circumstances in which the tax mitigation scheme has not come under the scrutiny of HMRC, but rather the manner in which it was implemented has caused tax to fall due. In other words, it was a good scheme that was negligently implemented by the professional adviser. The test will be whether the advice given was reasonable at that time.

If you consider that you may have been provided with negligent advise by your professional advisor in relation to a tax mitigation scheme please do get in touch with the professional negligence team here at Blake Morgan to discuss your case.

About the Author

Carina is a Senior Solicitor in the Commercial Litigation team specialising in professional negligence disputes.

Carina McFadden
Email Carina
023 8085 7373

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