What should you do when you’re served an Advance Payment Notice by HMRC requiring payment “on account” of disputed tax liabilities pending determination of the dispute?

By a decision made in August this year the European Commission concluded that the favourable tax treatment given by the Irish Government to two Irish incorporated companies owned by the Apple Group, allowing them to structure their businesses in such a way as to reduce tax payable to the Irish Government by as much as Eu 13 billion, amounted to illegal state aid.  The Commission ordered the Irish Government to recover this illegal aid.

The reaction of the Irish Government was to say that it disagreed with the decision profoundly and would appeal, effectively turning down a payment of Eu 13 billion – a sum roughly equivalent to Ireland’s annual healthcare budget.

In the meantime in the United Kingdom Her Majesty’s Revenue and Customs (“HMRC”) continue to regard with extreme suspicion efforts made by individuals and small businesses to organise their affairs in such a manner as to minimise tax liabilities.  Powers given to HMRC under the Finance Act 2014 (“FA 2014”) enable them to serve Advance Payment Notices (“APN’s”) – notices requiring, effectively, the payment “on account” of disputed tax liabilities pending determination of the dispute.  Sources say that 64,000 such notices are expected to be issued in the coming year.    

I am regularly approached by individuals asking what they should do having received an APN.  In the Barrett & Co Company and Commercial Department, whilst we are not tax specialists, we do like to try to assist our clients with their business problems as and when they arise; so a brief summary may be of assistance: 

There is no right to “appeal” an APN but s.222 FA 2014 allows written representations to be made to HMRC within 90 days of receipt:

i) Objecting to the notice if the grounds for service were not met; or
ii) Objecting to the amount specified in the notice.

Once they have received your representations HMRC are obliged to consider them and respond in the appropriate manner (confirmation, amendment or withdrawal of the APN).

The conditions for service of an APN are broadly set out in s.219 FA 2014:

i) There is a tax enquiry in progress or any appeal (not concluded in any manner) in relation to a relevant tax; and
ii) The return or claim or appeal is made on the basis that a particular tax advantage results from particular arrangements; and
iii)One or more of the following applies:

a) A relevant “follower notice” has been given; and/or

b) The arrangements are DOTAS arrangements; and/or

c) A relevant GAAR counteraction notice has been given

There are many “terms of art” in these conditions (relevant tax, follower notice, DOTAS arrangements etc.) and it is clear that advice from a disputed tax specialist is needed if representations are being seriously considered.  One point needs however to be borne in mind: 

If the above objections cannot be made out (or representations are rejected) the taxpayer’s only real recourse is to seek Judicial Review of the decision to serve the APN.  This will, however, be prohibitively expensive and, generally, the prospects of success will be limited. 

It may well be more pragmatic, however unfair this may seem, to pay the still disputed liability and concentrate resources on the underlying dispute which will not be resolved, one way or the other, by the APN.

The Irish Government is far from being the only government accused of allowing multi-national businesses to structure their tax affairs in such a favourable way as to amount to illegal aid.   Similar conclusions have been reached regarding Luxembourg (in relation to Fiat, with ongoing investigations in relation to Amazon and McDonalds) the Netherlands (in relation to Starbucks) and Belgium (in relation to up to 35 multi-nationals).  The deal done by the UK Government with Google in January 2016 must also, at best, raise eyebrows.

It seems ironic then that the UK Government continues to regard the tax planning efforts of individuals and small businesses with such suspicion.

I have written a book on Ten Common Mistakes Businesses Make with the Law.  To download a free copy of the book go to Martin Reynolds’ Book on Business Law.  If you would prefer to meet face to face to discuss your business needs call 0118 958 9711 to fix an appointment

Martin Reynolds

Have you received an APN? What Should You Do?

If you’ve received an Advance Payment Notice (APN) and want to better understand your legal obligation, you can make an appointment to meet Martin Reynolds or one of our other qualified Company and Commercial solicitors at our offices in Reading. An initial one hour consultation costs just £95 including VAT.


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