Contractors, context not just proportion, is vital to compute HMRC’s new APN data

We’ve said that a sense of proportion is required when looking at HMRC’s own figures which show that it is still recalling more Accelerated Payment Notices than it issues, but equally required is a little context, writes Graham Webber, tax director at WTT Consulting.

In fact, it’s worth factoring in that HMRC has taken and won cases at the First-tier Tribunal, successfully challenging the non-disclosure of some schemes. For reasons unknown, perhaps lack of resources, perhaps because settlement is now being pursued by the users of those schemes, APNs have not been issued. While we have no accurate information on the number of potential APNs waiting in the system, we suggest that they would far outweigh the few hundred now withdrawn.

A worrying pattern

The initial surge of APNs issued -- a peak of 36,000 in 2015-2016, and now the current spate of withdrawals, which for affected taxpayers no doubt involved numerous exchanges with HMRC and perhaps legal costs too, at even a rate of just 10%, is indicative of a more worrying pattern.

Specifically, it used to be the case that HMRC would examine all repayment and relief claims before refunding money or allowing that relief. But the advent of self-assessment saw a shift to ‘repay now, check later.’ This is an efficient use of HMRC resources, as perhaps 90% or more of individual taxpayer instances require no further work. For the other 10%, at least HMRC has reduced the pool of potential enquiry cases!

While not to be found in any public statement it has made (or likely will make), we’re sure that HMRC decided that to issue 100 APNs and withdraw, say, 10, still means that they have captured 90% of relevant cases. The occasional errors are a necessary part of that ‘broad-brush’ strategy.

Why has the issuing of APNs reduced so much?

But what about the massive reduction in the taxman’s use of Accelerated Payment Notices (as illustrated in the table below)?

Source: HMRC figures – obtained by city law firm RPC under the FoI.

Even after the peak year of 2015/16, he still managed to dispatch some 30,000 in tax year 2016/17 – compared with just 1,320 in 2018/19 and only 220 in 2019/20.

No secret

Believe it or not, there is no secret here. HMRC has just run out of targets.

Schemes were, in general, disclosed up to March 2011. After that, disclosure largely stopped. Similarly, the Revenue’s APN campaigns in 2015 and 2016 exhausted the pre-March 2011 schemes, which contractors and others were taken in by. Since then, the few schemes disclosed post 2011 have had APNs.

And last year HMRC won a FTT case in which it was ruled that a scheme, Hyrax, should have been disclosed and as such, APNs could be issued. For some reason, the notices have not materialised as far as we know, but it is perhaps only a matter of available resources.

More worrying about these types of arrangements was the fact that parties seeking to recover the loans claimed that they are “forced” to make a disclosure to HMRC, and therefore they put the scheme users, such as contractors, in line for an APN. Whether this actually happened, we do not know. But generally-speaking, an absence of any recent APNs on schemes would indicate that this action has not been taken.

The Super APN

The use of APNs by HMRC has also been limited by the need for there to be an open enquiry. We know that in many instances, the Revenue has failed to open enquiries especially in the years to 2010/11.

Of course, the 2019 Loan Charge is - in effect - an APN on all years, disclosed or not, open for enquiry or not. The Morse Review has limited the impact of what we’d describe as a ‘Super APN,’ but HMRC claims that it will still collect substantial amounts of money, notably thanks to the September 30th payment deadline, which is now fast-approaching.