Have you or your clients been using tax avoidance schemes and are likely to be issued with an accelerated payment notice or APN?
If your company or LLP can't pay in 90 days, then the company is contingently or actually insolvent and the only option may appear to be administration or liquidation.
Depending on the other debts of the company you may still propose a CVA and the HMRC may only be able to vote to the value of £1, no matter what the final debt. Reason is that it is an "unascertained liability", in essence it is not yet proven. During the CVA process the scheme provider can continue to challenge HMRC in the courts and if HMRC loses then the company or LLP can exit the CVA. If not, then the company has the option of continuing in the CVA, pre pack administration or liquidation.
The relevant rule is enshrined in statute. The Insolvency Rules 1986 Section B 1.17 (3) States-
“A creditor may vote in respect of a debt for an unliquidated amount or any debt whose value is not ascertained and for the purposes of voting (but not otherwise) his (or her) debt shall be valued at £1 unless the chairman agrees to put a higher value on it”.
Accelerated payment notices started being issued in 2014. Since, HMRC have said that over £3bn has been raised from the scheme. The initiative came to an end in December 2016.
Powers are also being granted to HMRC to allow them to take money directly out of bank accounts. There is an strong move towards giving HMRC more "teeth" to collect unpaid debts.
HMRC is now looking to target IT contract workers and property developers for being involved in (previously legal) tax avoidance schemes in the 2000s. After winning a recent tribunal, HMRC can demand payment of backdated taxes from those involved in the 5% income tax scheme (partnerships could legally set up in the Isle of Man to reduce their income tax).
If you have received an APN, contact us on 08009700539 now to talk through your options.
Categories: Implications for Directors
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Please note that the guide was mostly written pre Covid-19 and there have been some changes to insolvency legislation that limits creditors actions and relaxes rules regarding wrongful trading. A new 20 day moratorium for distressed businesses has also been introduced.