Guidance

Tax avoidance schemes - accelerated payments for Corporation Tax and group relief CC/FS28

Updated 19 June 2017

We’ve given you this factsheet because you’ve used a tax avoidance scheme, and we’ll soon ask you to do one or both of the following:

• make a payment of the amount that relates to your use of the scheme
• take action on the amount that relates to your use of the scheme

This factsheet is one of a series. For the full list of factsheets in the series, go to www.gov.uk and search for ‘Compliance checks factsheets’.

About tax avoidance schemes

A tax avoidance scheme is a set of arrangements that try to use tax legislation to gain a tax advantage that is not intended by the legislation.

When we may send an accelerated payment notice

We may send an accelerated payment notice to a person who has used an avoidance scheme if:

• there’s a current compliance check into their return or claim, (or for partnerships, into the partnership return or claim) or there’s an open appeal (Condition A)
• the return, or claim, or the appeal is made on the basis that there’s a tax advantage from the avoidance scheme used (Condition B) and one or more of the following applies (Condition C)
• we’ve given the person (or the nominated partner) a follower notice (this is explained in factsheets CC/FS25a and CC/FS25b)
• the person (or the partnership) has used arrangements that are disclosable under the disclosure of tax avoidance schemes (DOTAS) legislation
• the person (or the partnership) is subject to a counteraction notice under the general anti-abuse rule (GAAR)

The tax legislation that deals with accelerated payments refers to a compliance check as a ‘tax enquiry’.

How we tell you about your accelerated payment

We’ll send you an accelerated payment notice which will tell you how much you need to pay. If the understated or disputed tax advantage includes, or is all of an asserted surrenderable amount, we’ll tell you what action needs to be taken. The notice will also tell you what you can do if you disagree with it. When we send the notice, we’ll tell you how we’ve calculated any amounts.

If you’re a member of a partnership and the avoidance scheme was used by the partnership, we’ll send you, and each of the other corporate partners, a partner payment notice instead of an accelerated payment notice.

What is an asserted surrenderable amount

This is the amount that would be available for surrender as group relief if the use of an avoidance scheme were to achieve its objective, taking into account any relief claimed by the company against its own profits, but which HM Revenue and Customs (HMRC) considers will not be available for surrender if the avoidance scheme fails to achieve its objective.

How we work out the amount of an accelerated payment

The amount payable will be the amount relating to the tax advantage that the use of the avoidance scheme tries to achieve. The legislation refers to this as the ‘understated tax’ in cases where there’s a current compliance check, or the ‘disputed tax’ in cases where there’s an open appeal. In the case of an accelerated partner payment, the legislation refers to this as the ‘understated partner tax’.

If your use of the avoidance scheme creates a disputed loss or amount that has been, or may be, surrendered as group relief, the amount payable by the company which creates the loss will depend on how much of it has been claimed against its profits. If any of the disputed loss or amount has already been surrendered as group relief, the accelerated payment notice will require the company to withdraw surrender of a specified amount. The result of this is that the claimant company or companies must amend their returns to reflect the new situation. The time limit for amending a company return is relaxed to enable them to do so.

If the claimant company return is under enquiry, special rules will apply to allow HMRC to send an accelerated payment notice direct to the claimant company requiring it to pay the additional tax due because of the reduced amount of group relief that it can claim.

We’ll calculate the amount to the best of our information and belief. If we do not have all the information we need to establish the exact amount, then the amount shown in the accelerated payment notice may not be the same as the amount due when your compliance check is complete or your appeal is settled.

If the amount in the accelerated payment notice is more than the amount we find to be due once your compliance check is complete or your appeal is settled, we’ll normally repay any amount that you’ve overpaid. We’ll also pay you any interest that is due to you in respect of the amount overpaid.

If you’re a member of a partnership and the avoidance scheme was used by the partnership, your partner payment notice will show the amount relating to your share of the partnership’s use of the scheme. This will be the amount that was reflected in your own return or claim as a result of the scheme.

Paying what’s due and taking action on surrendered amounts

The time limits for making an accelerated payment, or to withdraw consent for a group relief surrender if instructed to, depends on whether representations have been made.

If no representations have been made, you are required to take the following actions no later than 90 calendar days from the date that you receive the notice:

• make payment of the amount specified
• withdraw the consent to surrender the specified amount of the group relief

If you make representations objecting to the accelerated payment notice, the date the payment is due and/or action needs to be taken may change. There’s more information about this in the section ‘If you disagree with the accelerated payment notice’ on page 4 of this factsheet.

Problems paying

If you think you may have problems paying, tell us straightaway.

Penalties for not paying the accelerated partner payment on time

If you do not pay the full amount shown in your partner payment notice by the date it’s due, you’ll be liable to pay a penalty. If we charge you a penalty, you’ll have to pay it as well as the accelerated partner payment.

If your payment is not made in full on or before:

• the date it’s due, you’ll be liable to a penalty equal to 5% of the amount you still owe
• 5 months of the date it’s due, you’ll be liable to a penalty equal to 5% of the amount you still owe – this is as well as the 5% explained in the bullet above
• 11 months of the date it’s due, you’ll be liable to a penalty equal to 5% of the amount you still owe – this is as well as the 2 previous 5% penalties

These penalties apply to all the taxes covered by the accelerated payment legislation.

Penalties for not paying the accelerated payment on time if there’s a current compliance check (this section does not apply to accelerated partner payments)

If there’s a current compliance check and you do not pay the full amount shown in your accelerated payment notice by the date it is due, you’ll be liable to a penalty. If we charge you a penalty, you’ll have to pay it as well as the accelerated payment.

If your payment is not made in full on or before:

• the date it’s due, you’ll be liable to a penalty equal to 5% of the amount you still owe
• 5 months of the date it’s due, you’ll be liable to a penalty equal to 5% of the amount you still owe – this is as well as the 5% explained in the bullet above
• 11 months of the date it’s due, you’ll be liable to a penalty equal to 5% of the amount you still owe – this is as well as the 2 previous 5% penalties

These penalties apply to all the taxes covered by the accelerated payment legislation.

General information about surcharges and penalties for not paying the accelerated payment on time

How we tell you about a penalty

We’ll send you a notice to tell you how much the surcharge or penalty is and how we’ve worked it out.

Letting us know about any special circumstances

If there are any special circumstances that you believe we should take into consideration when calculating the surcharge or penalty, tell us straightaway.

When we will not charge a surcharge or penalty for not paying the accelerated payment on time

We will not charge you any surcharges or penalties for paying your accelerated payment late if you had a reasonable excuse for paying late – as long as you paid without delay once the reasonable excuse had ended.

A reasonable excuse is something that has stopped a person from meeting a tax obligation on time, which they took reasonable care to meet. This might be due to circumstances outside their control, or a combination of events. Once the reasonable excuse has ended, the person must put things right without any unnecessary delay.

Whether a person has a reasonable excuse depends on the particular circumstances in which they failed to meet the tax obligation, and their particular circumstances and abilities. This may mean that what is a reasonable excuse for one person may not be a reasonable excuse for someone else.

If you think you’ve a reasonable excuse please tell us. If we accept that you have a reasonable excuse, we will not charge you a penalty. If we’ve already charged you a penalty for not paying on time, we’ll cancel it.

What if you disagree with any surcharges or penalties that we’ve charged

If we charge you any surcharges or penalties for paying the accelerated payment late, you’ll be able to appeal against them if you disagree. You can find out more about appeals in factsheet HMRC1, ‘HM Revenue and Customs decisions – what you can do if you disagree’. You can get a copy online, go to www.gov.uk and search for ‘HMRC1’.

Interest for paying late

We do not charge interest for late payment of the accelerated payment itself. However, we do charge interest for late payment of tax – from the date the tax was originally due, until the date it’s paid.

When your tax position is settled, we’ll work out whether there’s any interest for you to pay. For interest purposes, we’ll treat the amount you pay in respect of the accelerated payment notice as if it were payment of the tax. This will mean that interest will stop accruing on the amount of tax equal to the amount of accelerated payment you pay, from the date you pay it.

We also charge interest on the late payment of any penalties.

If you disagree with the accelerated payment notice

There is no right of appeal against an accelerated payment notice. However, you can make representations to us if you believe that one or both of the following applies:

• the conditions for issuing the notice have not been met – these are shown in the section ‘When we may send an accelerated payment notice’ on page 1 of this factsheet
• the amount shown in the notice is not correct – if this is the case you’ll need to tell us what you think the correct amount is and why

Your representations must be in writing, and you must make sure that you send your letter no later than 90 calendar days from the date that you receive the notice. We’ll then consider what you say and let you know our findings. When you write to us, please:

• give us as much information as possible about your representations
• send copies of any documentary evidence that supports your representations

You cannot make representations once the 90 calendar days has passed. This means that, once we’ve told you what our findings are, you will not be able to make any additional representations if the 90 days has already passed by then. So please make sure that you give us all relevant information when you make your representations.

If you make representations, you cannot ask for postponement of the amount shown in the accelerated payment notice.

However, if you make representations before the date the payment is due and/or action needs to be taken, and we do not withdraw the notice, the deadline for paying/taking action may be extended. Payment and/or any action to be taken will be due on the later of:

• the due date shown in the accelerated payment notice
• 30 days after the date on which you receive our decision about the representations you made

If the deadline for paying is extended, any penalties for paying late will apply from the extended deadline date.

If you’re a member of a partnership, you can make representations regarding your own partner payment notice. We will not normally accept representations on behalf of any of the other partners, or on behalf of the partnership as a whole.

If you want to settle your tax affairs

If you want to settle your tax affairs once we tell you that we’re going to send you an accelerated payment notice, we’ll work with you to settle the compliance check or appeal.

It’s entirely up to you whether you settle your tax affairs. If you do not want to settle, then the compliance check or appeal will remain open.

Your appeal rights for your current compliance check or appeal

When you pay the accelerated payment notice, this does not mean that your current compliance check or appeal is settled.

Although you cannot appeal against the accelerated payment notice, the legislation covering accelerated payments does not affect your appeal rights to the tribunals and courts in relation to your tax liability.

This means that if you:

• have a current compliance check – you’ll still have your full appeal rights if you do not agree with the outcome of that check
• have already appealed against the outcome of your compliance check, an assessment or a determination – you’ll still have your full appeal rights

If you’ve appealed and we had postponed the tax that you are disputing

If we’ve sent a closure notice in respect of a compliance check or sent an assessment, determination or other type of decision and you’ve

• appealed against the closure notice, assessment, determination or other decision
• asked us to postpone some or all of the tax in dispute

then the postponement of the tax in dispute is cancelled when we send you the accelerated payment notice. You’ll then have to pay all the tax that had previously been postponed by paying the accelerated payment notice.

What will happen if you pay the accelerated payment and/or withdraw any surrenderable amounts and a court or tribunal later rules that the scheme does produce a tax advantage

If a tribunal or court decides that the scheme does produce the tax advantage, we would normally repay the amount you’ve paid under the accelerated payment notice, along with any interest that’s due to you.

However, if we appeal against the decision to a higher court or tribunal, we may, in certain cases, also ask for their permission not to repay the amount to you. We would only do this if we believed that there was a risk that, if we were successful with our appeal, you would not then pay the amount you owe.

Fresh claims to group relief may be made in respect of any of the asserted surrenderable amount agreed to be available for group relief purposes when the matter is finally determined. The time limit for making a claim is 30 days after the amount is determined; any previous time limits are relaxed in this instance.

General information

Customers with additional needs

If you have any health or personal circumstances that may make it difficult for you to deal with us, please let us know. We’ll help you in whatever way we can. For more information about this, go to www.gov.uk and search for ‘get help from HMRC if you need extra support’.

The taxes to which this factsheet relates

This factsheet relates to accelerated payments for Corporation Tax and group relief.

Accelerated payments also apply to Annual Tax on Enveloped Dwellings, Capital Gains Tax, Corporation Tax, Income Tax, Inheritance Tax, National Insurance contributions and Stamp Duty Land Tax cases.

If you need to know more about such cases, contact the office that gave you this factsheet.

The disclosure of tax avoidance schemes legislation (DOTAS) and the general anti-abuse rule (GAAR)

You can find more information about:

• DOTAS, go to www.gov.uk and search for ‘disclosure of avoidance’
• GAAR, go to www.gov.uk and search for ‘GAAR arrangements’