Participants in schemes the government believes to be tax avoidance measures have received demands for upfront settlements totalling £250 million from HMRC.
Since August, the Revenue has issued 600 new ‘accelerated payments notices’ which oblige taxpayers to cough up the disputed sum prior to any legal ruling on the legitimacy of their scheme. There is no right to appeal under the new scheme, which led to settlements amounting to £25 million in the first wave of letters alone.
Earlier this week, the Financial Times reported that HMRC intends to recover £7.1 billion in unpaid taxes using accelerated payment notices. Payment in full is required within 90 days, whereupon taxpayers become liable to a penalty of 5 percent.
The Financial Secretary to the treasury, David Gauke, said:
“Accelerated payments are changing the economics of avoidance by removing the cash flow advantage that avoidance scheme users have had until now.”
10,000 businesses and 33,000 individuals will receive such notices by the close of March 2016, with the revenue upping its output of the letters to 2,500 a month by January next year.
Upon reading this, Umbrella Company employees may be breathing a sigh of relief that they chose to pursue their professional contracting careers in the way that they did, secure in the knowledge that their Umbrella will automatically pay all due tax and NICs on their income on a PAYE basis.
The new scheme has led to warnings from Anne Fairpo, president of the Chartered Institute of Taxation, that the new scheme tilts the balance of power too far in favour of the state and undermines taxpayers’ rights.