Weekly Tax Update - 15 February 2016

1. General news

   1.1 HMRC collects £2bn in accelerated payments to date

   HMRC has confirmed that over £2 billion has been collected from investors in schemes labelled as tax avoidance, following the introduction in 2014 of the accelerated payment notice (APN) regime, under which HMRC can demand the tax at stake up-front from taxpayers while their tax affairs are disputed.

   HMRC says that it is now issuing over 3,000 APNs a month, and has issued over 41,000 notices since the start of the APN regime. In addition, HMRC has indicated that it expects to have completed issuing APNs by the end of 2016, which will give rise to over £5 billion in payments by March 2020. Taxpayers retain full appeal rights against the substantive tax liability.

   If the case is taken to litigation and the taxpayer ultimately wins, HMRC will repay the tax with interest.

   www.gov.uk/government/news/taxman-seizes-more-than-2-billion-from-tax-avoidance-scheme-users

   1.2 CRS client notification draft regulations and guidance

   Finance (No.2) Act 2015 s.50 includes a provision to impose client notification obligations on 'specified relevant persons'. The intention of this is to require tax advisers and other providers of financial services and financial institutions to write to their clients, using text provided by HMRC, to inform the clients about the impending introduction of the Common Reporting System (CRS) under which around 90 countries intend to exchange information about taxpayers.

   The communication will also need to recommend to clients with undeclared foreign income or gains taxable in the UK to disclose this to HMRC without delay under the 'final offshore disclosure facility' due to be introduced shortly. The primary legislation on CRS includes a power to issue regulations setting out the detail.

   The draft regulations and draft guidance were recently issued by HMRC for comment. These are a significant improvement on the original proposals aired last year, but will still impose a huge burden on every entity caught by this measure. Rather than HMRC sending a single letter to every taxpayer, the draft regulations will require tax agents, accountants, financial institutions, including banks and investment managers to write to many of their clients. Identifying the clients to write to will be an expensive task for many firms in terms of non-chargeable time as well as postage costs, though nowhere near as expensive as it would have been had it not been for informal consultations.

   It is currently unclear whether the final regulations will require each entity in multiple-entity firms with an overlap of clients to write to clients, who would therefore receive multiple letters from each service provider, devaluing the impact of the communications.

   Consultation is still ongoing and it is hoped, that, even if not withdrawn, the draft regulations will be further improved so as to minimise the huge burden on firms. The penalty for non-compliance is currently set at £300, although there is a risk that this could change.

   HMRC was open to comments on the draft regulations until Friday 12 February, although we understand the consultation deadline...