I've Received an APN — What Should I Do?July 22, 2019
In September 2014, Raymond (not his real name) received an accelerated payment notice (APN) from HMRC. “We wrote to you on 2nd September, to tell you that we were going to send you a partner payment notice," it read. “I now enclose that notice, which shows the amount due.”
Raymond flicked through the paperwork until he found the APN details. Midway down the third page, he spotted the amount due and it made him gasp. It was an astronomical sum. Not only that, HMRC was demanding payment in full by December—just three months away. If he didn’t pay, within 28 days, HMRC would charge him another 5 percent. And if he didn’t pay within six months, they’d whack on another 5 percent.
The total sum, combined with the potential penalties and interest, frightened Raymond. He contacted HMRC, asked for a little more time to pay and accepted their first offer.
Raymond’s APN was one of the very first issued by HMRC after their introduction in 2014. At the time, they seemed like an exceedingly powerful tool. After all, HMRC didn’t even need to prove that you owed the money before they issued the notice.
Five years on, Raymond isn’t sure he made the best choice. He’d never heard of APNs and wasn’t sure what HMRC could actually do. Looking back, he says he would have challenged HMRC on the total due and tried to negotiate a lower settlement.
In this article, we’ll look at accelerated payment notices in more detail. We’ll discuss what you should do if you suspect HMRC has made a mistake, how to spot a scam APN and what you should do if HMRC issues several APNs at once. Finally, we’ll discuss what you should do if you can’t afford to pay your APN.
What is an Advanced Payment Notice (APN)?
Prior to 2014, if HMRC determined a tax avoidance scheme was unlawful, they would have to go through a lengthy court process to have the tax scheme declared unlawful and then demand the tax due from an individual. This often complex court case could very often take a number of years. Even if HMRC won in the end this gave individuals a huge cash flow advantage as they could hang on to disputed sums for many years while the court process rolled forward.
But that all changed in 2014 when then Chancellor of the Exchequer George Osborne introduced the Advanced Payment Notice (APN).
Using APNs, HMRC can demand individuals pay disputed tax before they begin the court action.
While HMRC had some success in the early days of APN—they once claimed that 99% of APNs were paid within the deadline—they did struggle with enforcement in the long run. HMRC has often been reluctant to take individuals to court for failing to pay an APN as they are concerned about a court ruling in their favour and settling a precedent against enforcement. So APNs were not as effective at recovering tax as HMRC had originally hoped. This weakness eventually led to the recent introduction of the loan charge legislation, which is covered in another of our posts.
I think there is an error with my APN. What should I do?
HMRC deals with hundreds of thousands of cases every single day so it’s unrealistic to expect everything to be perfect. And when you talk to people who have received APNs, it’s clear that HMRC make a tonne of mistakes.
There are two types of objection you can make: one, HMRC’s sums are wrong; or two, HMRC shouldn’t have sent the APN in the first place.
The first objection is straightforward. Since HMRC can go back decades to look for tax discrepancies, their calculations can be lengthy and complex. (In fact, sometimes HMRC admits that their demands are based on vague estimates.) And that increases the risk of a mistake being made.
When you receive an APN, the first thing you should do is go through the figures with a fine tooth comb. If you discover a mistake, you need to write to HMRC with your alternative calculation.
Once you receive your reply and if the APN still stands, you have 30 days to make the full payment.
The second objection you can make is that HMRC shouldn’t have sent the APN at all. There are three conditions to an APN:
- 1) there is either an open enquiry or outstanding appeal;
- 2) the return, claim or appeal results in a particular tax advantage from particular arrangements; and
- 3) any of: (i) a follower notice, (ii) the Disclosure of Tax Avoidance Scheme Rules or (iii) a GAAR counteraction notice applies.
While that might look simple, HMRC has a history of jumping the gun and issuing APNs when they haven't met the three conditions. In 2018, HMRC had to withdraw 6,000 APNs because judicial rulings stated that the schemes cited in the notices were not disclosed under DOTAS.
Again, when you receive an APN, check through those conditions and make sure that HMRC is actually allowed to send you the notice.
If HMRC maintains the legitimacy of your APN and you are still not satisfied, you can go down the judicial route, but whilst you’re waiting for the outcome of the case, you are still obligated to make the full payment. If you end up winning your case, HMRC should refund the disputed sum.
Finally, regardless of whether you believe an error has been made, you are still obligated to make the payment requested unless otherwise instructed by HMRC. The APN charge must be paid in full within 90 days of its issue or you will face additional penalty charges and, in some cases, recovery action.
I think I’ve received a scam APN. What do I do?
Internet forums are packed with threads on fraudulent or scam APNs. In fact, HMRC has even acknowledged their concern over several authentic-looking APN emails in recent years.
Whether you have never avoided paying tax and would never be obligated to pay an APN or you are expecting one, you are still vulnerable to receiving a scam APN. If you aren't familiar with what APNs look like, it's easy to get suckered in and end up paying hundreds or thousands of pounds to scammers.
Fraudulent APN emails are typically sent from email addresses that look official—for example, email@example.com—and usually include authentic-sounding subject lines like “Accelerated Payment Notice: Reference APN97741”. The email itself will include completely made up case details like a case reference number, amount of tax owed and tax year. Again, if you've never received an APN—most of us haven't—it's easy to assume that it's legitimate.
The good news is that HMRC provides information to help you identify fake communications. They advise you to avoid opening any attachments, avoid visiting any website links contained in the email, and to avoid disclosing any personal or payment information at all costs.
If you believe you may have received a scam APN, contact HMRC directly as soon as possible and ask them to verify the notice details.
I have received multiple APNs. Do I need to pay them all?
If you have used multiple tax avoidance schemes, it is possible to receive multiple APNs. And yes, you are required to pay them all.
APNs are issued on a scheme by scheme basis. If you are involved in multiple tax avoidance schemes, you will receive a separate APN for each one.
For example, if you were involved in two different schemes and received both a tax and NIC advantage, you would receive four different APNs.
I can’t afford to pay it all back within the 90 day period. What will happen?
If you’re late making the full payment on your notice, you’ll be charged a penalty or you may face enforced action to recover the money.
If you participated in a scheme before the 2009/10 financial year, HMRC will apply the following charges:
- 28 days late: 5% of what you still owe
- 6 months late: additional 5%
And if for schemes after 2010/11, there are slightly different fees:
- 31 days late: 5% of what you still owe
- 5 months late: additional 5%
- 11 months late: additional 5%
As you can see, your payment will quickly snowball with compound interest if you try to ignore it. If you think you’ll have issues making the full payment within 90 days, you should phone HMRC directly as soon as possible and explain your situation.
HMRC doesn't have a concrete policy in place to rule out payment extensions. If it is truly not practical or possible for you to pay in full on time, they could possibly work out an extension plan with you.
It is important that you determine if this will be an issue for you from the outset rather than leaving it closer to your deadline to contact HMRC.
For example, last year a chartered accountancy firm approached us with huge debts owed to HMRC and an advanced sequestration (bankruptcy) court action. We worked with our client to negotiate with HMRC and the Accountant in Bankruptcy to secure a long-term payment deal and save our client from collapse.
I’ve paid off my APN. Am I cleared of my tax debt?
Paying off your APN only addresses one part of the puzzle if your tax affairs are in disarray. You could still face additional interest or penalties for late tax payments.
The APN is calculated to cover only the advantage you would have received relating to that particular avoidance scheme, but you could very well still owe HMRC.
It is highly recommended that you seek out qualified, professional help to ensure that your tax affairs are all in order so that you are not caught out down the line. At 180 Advisory Solutions, we have extensive experience helping clients deal with personal or corporate debt, so we are able to provide advice and support to you whilst you deal with your APN and beyond.
If you want to dispute an APN or negotiate a payment plan, it’s essential that you get in touch with HMRC as quickly as possible. This gives you the best chance of securing payment extensions or amending mistakes made in the APN in a timely manner.
If you’d like to speak to a member of the 180 Advisory Solutions team, contact us today for free, confidential, and no-obligation advice in your first consultation.