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The APN (including Follower Notices) legislation was introduced a couple of years ago to essentially prevent tax scheme users from dragging their feet on tax disputes. Initially, the rules were designed to avoid situations in which having secured judgement against one user of a particular scheme, others who had used a similar scheme would not simply concede to HMRC demands for payment but demand their day in court too. That desire to short-circuit a cascade of cases which might take years to resolve and deplete the public purse did not seem to be an unfair approach in my eyes.
However, relatively late in the day, the scope was widened to include those who had used schemes that were subject to the Disclosure of Tax Avoidance Scheme (“DOTAS”) rules.
It is this extension where most of the problems arise. Of course, offering any sort of a defence on behalf of tax avoiders is never likely to generate much sympathy. However, it’s perhaps worth pointing out that there is something of a danger in applying today’s attitudes and practices to tax planning to related activity from a different period.
Right to appeal?
Famously, the APN has no right to appeal.
Instead, one can merely make representations. This involves one writing to HMRC within 90 days to state why you believe that the APN has been issued unlawfully.
The Revenue is supposed to respond within 30 days. In most cases, there is either a straightforward rejection or a request for more time to consider.
Furthermore, there has been an increase in the number of cases in which HMRC appears to flout the 30-day limit within which representations are meant to be answered.
What is also clear from representations is that HMRC will not entertain any further correspondence once they have rejected a representation.
This is frustrating because their responses are usually generic – setting out the conditions for issuing APNs and stating they think they have been met – and will offer no substantive consideration of any detailed points raised in a letter.
In addition, HMRC will not respond to further requests for it to elaborate further or explain the reasoning behind their conclusion. It will state that no further correspondence will be entered in to. In other words, to quote an oft-used phrase in modern society: “Talk to the hand!”.
I believe that this is not an acceptable way to treat taxpayers and professional advisers. Indeed, it does not come close to meeting the basic threshold of adult conversation.
Indeed, HMRC will (I always assume with a wry smile on their face) suggest that the taxpayer can always seek judicial review.
It is almost a dare and one which we should maybe not be too surprised to learn is being taken up in greater numbers. In fact, the number of judicial reviews of HMRC decisions has more than doubled in the last two years alone.
It isn’t ever a step taken lightly. The cost implications of applying for leave to review and then for the substantive case itself are significant. Of course, for a wealthy taxpayer or for a class action this might be an option. However, for most single taxpayers it is not.
Review is, therefore, not a reasonable remedy for most taxpayers. It is effectively denying access to justice for those who are priced out of making such a challenge. Backed by the public purse, HMRC will never have this problem, so the deck is rather stacked in their favour. This seems, amongst other things, to go against the overall objective of providing access to justice for all.
Of course, some JR’s will succeed. However, we should ask ourselves whether this really is an appropriate way to deal with tax disputes.
My view is that there should be a proper review of APNs and particularly how HMRC has exercised its powers and obligations. These powers were not provided in order to demand tax from every single user of a scheme to which a DOTAS scheme reference number was issued. However, it is clear that HMRC has been operating something of a giant mail-merge over the last few years.
Of course, this won’t happen. HMRC and the Government can state they have raised £3 billion using APNs. Of course, this is not the Government’s money yet as it is merely holding the money pending a dispute. To suggest otherwise amounts to ‘cooking the books’.
The legislation should be changed such that the FTT should now play a role. This would allow more people to have access to justice. Certainly, HMRC has lost its right to be the judge, jury and executioner.
Alternatively, there should be a separate advisory panel to offer quick and low cost resolution to APN representations Perhaps the GAAR advisory panel could be used to look at such cases. They don’t seem to have a great deal of work on at the moment.
If you or your clients need any assistance in relation to APNs then please get in touch.