Advanced Payment Notices (APNs)
What is an Advanced Payment
Legislation introduced on 17 July 2014 means that those who have used a tax avoidance scheme may have to make a payment in advance to HM Revenue and Customs (HMRC) in relation to their use of the scheme, before the final tax amount has been agreed or determined. This is known as an advanced payment.
When will an Advanced Payment Notice (APN) be issued
HMRC may issue an APN to those who have used an avoidance scheme if the following conditions are met:
- there is an open enquiry into the tax return or claim, or there is an open appeal
- the return or claim, or the appeal, is made on the basis that there is a tax advantage from the avoidance scheme used
and one or more of the following applies:
HMRC have issued a follower notice
- the avoidance scheme used was disclosed under the Disclosure of Tax Avoidance Schemes (DOTAS) legislation
- you are subject to a counteraction notice under the General Anti-Abuse Rule (GAAR)
How will I be notified of an advanced payment
HMRC will send you an APN which will tell you how much you will need to pay and when, along with how the advanced payment has been calculated. The notice will also provide advice regarding what you can do if you disagree with the notice.
How is the advanced payment calculated
HMRC will calculate the amount payable based on the tax advantage that the use of the avoidance scheme tries to achieve and will be calculated to the best of information available to them. Should HMRC not have had all of the information required to calculate the exact amount, then the amount shown in the advanced payment will be amended to reflect any actual amount due following the closure of the tax enquiry.
Should the actual amount due be less than the advanced payment, HMRC will repay any amount overpaid including interest that is due to you.
What if I don’t agree with the APN
There is no right of appeal against the APN, however you can make representations to HMRC if you believe that one or both of the following applies:
- the conditions for issuing the APN have not been met
- the amount shown in the APN is incorrect
You must make your representations in writing to HMRC within 90 calendar days from the date of the notice. HMRC will consider your comments and notify you of their findings.
How do I make an advanced payment
An advanced payment is due 90 days after the advanced payment notice issue date. Should you make representations objecting the APN, the date the payment is due may change. Should you have difficulty in making payment, you should notify HMRC immediately to request a time to pay arrangement.
What happens if I do not make the advanced payment on time
For APNs that relate to Income Tax and Capital Gains Tax for the tax year 2009 to 2010 or earlier, should you not make your full advanced payment on time, HMRC may apply a surcharge which will be payable in addition to the advanced payment.
If your payment is not made in full:
- within 28 days of the date it is due, you will be liable to a surcharge of an amount equal to 5% of the amount you still owe
- on or before 6 months of the date it is due, you will be liable to a further surcharge of an amount equal to 5% of the amount that you still owe. This is in addition to the 5% charged above
For APNs that relate to Income Tax and Capital Gains Tax for the tax year 2010 to 2011 or later and Annual Tax on Enveloped Dwellings, should you not make your full advanced payment on time, HMRC may charge you a penalty in addition to the advanced payment.
If your payment is not made in full:
- within 31 days after the date it is due, i.e. the penalty date, you will be liable to a penalty of an amount equal to 5% of the amount you still owe
- on or before 5 months from the penalty date, you will be liable to a further penalty of an amount equal to 5% of the amount you still owe. This is in addition to the 5% charged above
- on or before 11 months from the penalty date, you will be liable to a second further penalty which is an amount equal to 5% of the amount that you still owe. Again, this is in addition to the penalties charged above.
HMRC will notify you of any surcharges or penalties that you have been charged and explain how they have calculated it. Should you have a reasonable excuse for the pate payment, you should notify HMRC immediately. A reasonable excuse is usually an unexpected or unusual event that is unforeseeable or beyond your control. HMRC will review this and may remove the surcharge or penalty.
Will I be charged interest for late payment
HMRC will not charge interest for the late payment of the APN, however they will charge interest for the late payment of tax and this is charged from the date the tax was originally due until the date it is paid. Therefore, when your tax enquiry is settled, HMRC will calculate whether there is any interest payable. The advanced payment will be treated as a payment of tax and therefore interest will stop accruing on the amount of tax equal to the advanced payment on the date it is paid.