Accelerated Payment Notices (APNs) are aimed at wealthy individuals who have been involved in tax avoidance schemes. 25,000 notices have been issued since the controversial power was given to HMRC last year resulting in £1 billion collected. Instead of going through costly court cases, HMRC can demand upfront payment of taxes (an appeal can be submitted afterwards if in dispute).
A recent article in the Telegraph looked into HMRC’s actions against several freelancers and contractors receiving APNs. It was reported they were ordered to pay thousands of pounds of backdated tax at very short notice for jobs they had years ago.
Unable to stop proceedings and prove themselves innocent, they could go bankrupt before they get the chance to appeal.
One individual described how he received a letter from HMRC explaining they were looking into his tax situation. He heard nothing from them for five years until an APN arrived demanding £27,900 to be paid in three months. Considered to be ‘aggressive tax avoidance’ by HMRC, the APN related to several of his freelance IT jobs with banks between 2008 and 2010.
During this time, it was likely he was marketed a tax scheme that was used as an alternative to running a limited company. Perhaps a legitimate scheme at the time, it is now considered as 'aggressive' tax avoidance, resulting in sudden claims of backdated tax.
HMRC stresses APNs are only sent to those who can afford them and have deliberately avoided tax, however the case above suggests otherwise.
As with the £1 billion collected in, accountants believe that 80% of the APNs issued will be appealed, therefore the overall figure may turn out to be substantially lower.