The accelerated payments regime… changes the underlying economics of tax avoidance. People who try to avoid tax have to pay the tax up front while their avoidance is investigated.
That’s according to an HMRC statement and a point that is reaffirmed by David Richardson, its Director of Counter Avoidance. He’s firm in the belief that when it comes to APNs, HMRC wins 80% of all avoidance cases that people litigate, and many more are settling before things get to that stage.
Ric Miller, of Corporate Strategies (CS) – the corporate turnaround and debt advisory division of Leonard Curtis Business Solutions Group (LCBSG), providers of the Lifecycle accountancy network– sets the current APN scene and his role within it.
“Since their introduction in 2014, APNs have raised more than £3billion yet, whilst these may sound striking statistics, the upshot is that one in five cases is not founded on a legitimate basis. This equates to 12,800 of the 64,000 APNs that HMRC will issue this year being either incorrect or negotiable to an affordable, achievable settlement. On that basis, it’s important to remember that whilst this is a complicated, uncertain and ever-changing landscape, clients do still have options.”
CS is a specialist in APN settlements and Time-to-Pay arrangements. It’s an area in which Lifecycle is providing free CPD training. Click here for more info and to sign up as a member.
Every day, the expert team at CS works with HMRC to negotiate affordable, achievable repayment terms for SME clients in arrears.
The team’s success rate in 2016 speaks for itself. Of the 54 time-to-pay proposals submitted, 91% – or 49 cases – were approved by HMRC. This resulted in the repayment of over £8million in tax liabilities over an average nine-month period and the safeguarding of around 3,000 jobs.
Here Ric discusses one particular case that was recently negotiated and resolved successfully by CS. It began when the steel company, which employs over 50 staff, took advantage of the free initial advice offered by CS following a direct approach at the start of December 2016.
“As soon as Corporate Strategies became involved, HMRC put on hold all threatened action,” explained Ric. “The request for an extension of two more weeks to develop a repayment proposal was granted and just three weeks from taking on the case it received HMRC approval – securing a five-year repayment period with payment of an initial upfront sum.”
Ric continues to detail the case in full. “Following the advice of its tax advisor, the client was utilising EBTs. Scrutinised by HMRC, the case had been under Counter Avoidance Directorate investigation for a while and an APN had been issued for the client to pay £1.5million tax up front while avoidance was further probed.
“The client’s accountant – who wasn’t involved in the set-up of the scheme – tried to negotiate the APN initially. However, given the highly specialist expertise required, CS was engaged to provide professional advice and support.”
CS provides a complementary, supportive area of experience and expertise that supplemented the client’s in-house and accountant advisor’s skills sets. Each case is assessed individually and all work is carried out under a fixed fee engagement.
Ric continues: “Collaborative working was beneficial to all parties. The accountant was able to protect his client relationship by pairing with us as APN experts and enabling us to concentrate on our area of expertise.”
The company was just 24 hours from being issued with a winding up petition by the time CS became involved. The case had been transferred to HMRC’s Debt Management department following delays in an attempt to buy time and the submission of previous unrealistic repayment proposals.
Ric explains: “In simple terms, the client owed tax and didn’t have the money to pay it. As is often the case, the company directors didn’t understand APNs and hadn’t been advised how to settle it on the best terms – it was an extremely worrying time for them.
“In addition, the situation was exacerbated by the client’s location and its employee demographic – the area already suffered levels of high unemployment, so it was important to do everything possible to protect the 50+ jobs at risk.
Working with CS created breathing space to stop and think. After meeting with the client, HMRC was immediately contacted and informed that an affordable and achievable repayment proposal would soon be submitted.
“Recognition that the client was working with a renowned, professional and trusted third party – which in itself simplified the negotiation process – provided breathing space to stop, consider all possibilities and develop the most robust repayment proposal,” said Ric Miller.
“Working in partnership with the client and its accountant advisor, CS quickly took full control of the case, whilst keeping the client and accountant fully informed at every stage of the process. At this stage, it was our responsibility to interrogate the numbers to ensure that a feasible plan could be presented.
“In the meantime, the accountant compiled all necessary key data and prepared the relevant forecasts and reports. After all, their client knowledge was far greater than ours and it was important that this insight and relationship was maximised for the best possible outcome.”
The client was subjected to a Direct Recovery of Debt (DRD) hours prior to the submission of the proposal – prompting some last minute negotiation.
Despite years of experience in this area, this was one of only a few occasions when CS has had to settle a DRD.
Ric continues: “Used by HMRC in only a very small minority of cases – 11,000 amongst more than 50 million taxpayers – DRD steps are actioned only once a certain level of risk has been identified.
“HMRC put measures in place to recover some of the client’s tax debt from company bank accounts. A real last resort, usually activated against those with established debts, those who have passed deadline for appeals and those who have repeatedly ignored HMRC’s attempt to make contact.
“In this particular case, we amended the final proposal in line with the DRD and the revised document was swiftly submitted and approved by HMRC.
“The successful APN negotiation – paired with the breadth of experience within LCBSG as a whole –engendered real trust between the client, its accountant advisor and CS.”
As a result, post-proposal approval, the client was keen to continue the collaboration and requested that Reach Commercial Finance – another division of LCBSG – assist the directors in securing asset finance.
To find out more about how CS can support your clients or business when under pressure from HMRC, email firstname.lastname@example.org or call 0800 002 9969.
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