APNs were introduced in 2014 as a way for the taxman to force people to pay disputed sums within 90 days before their appeals can be heard by the tax tribunal.
Since then, HMRC has had to withdraw 8,600 of the 81,000 notices issued – cancelling over 10% of the APNs sent out in the past four years.
London-based law firm RPC said that the cancelled notices were probably issued in error, due to HMRC’s aggressive tactics in tackling tax avoidance.
Chartered tax adviser Liz Beadsley told International Adviser: “As APNs are no longer simply targeted at manufactured avoidance schemes, HMRC needs to review proposed APNs far more closely than the number that are being withdrawn suggest they currently are.
“The fact 2,600 APNs were withdrawn in 2018 alone suggests HMRC is putting thousands of families under unnecessary financial and emotional strain and that more care needs to be taken in future,” the tax, trusts and estate senior associate at Irwin Mitchell Private Wealth added.
“HMRC is under increased pressure to deliver, and there is also an apparent lack of resource and technical understanding within HMRC Counter Avoidance,” Mark Taylor, partner and head of tax investigations and dispute resolutions at accountancy and consultancy firm Buzzacott, told IA.
“Essentially what’s happening is, due to the large influx of cases, staff have been seconded into HMRC Counter Avoidance, with little or no experience of compliance or tax avoidance. They have been given duties, which, I do not believe they have had sufficient training for, leading to mistakes of this kind.
“The burning questions now is, how many APNs have been complied with, that are actually invalid because professional advice was not sought in the first instance?”
Last year, there were nearly 28,000 disputes against HMRC in the tax tribunal’s backlog.
Make HMRC accountable
RPC is urging anyone who should receive an APN to immediately seek legal advice before paying the sum upfront, as APNs can be challenged through judicial review proceedings.
Many notices have been withdrawn by HMRC following such reviews.
“The fact HMRC has had to withdraw over 10% of all APNs they have issued suggests they need to exercise far greater care when exercising this power,” said Adam Craggs, partner at RPC.
“There is a suspicion that HMRC may have commoditised the process for administrative convenience with little thought for the devastating impact receipt of an APN can have on a taxpayer.
“HMRC regularly refers to ‘fair’ in its various press releases, however, it is gaining a reputation as a department which is out of control and is anything but fair.”