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HMRC should not bankrupt taxpayers receiving Accelerated Payment Notices

Published on 03 November 2015

HRMC should give an undertaking that they will not force individuals into bankruptcy through the use of its controversial powers to demand payment of disputed tax upfront, says City law firm RPC.

RPC says HMRC should not pursue insolvency proceedings to recover tax in dispute from taxpayers it has issued APNs to, until the underlying tax dispute has been concluded.


There are growing concerns, RPC says, that with no right of appeal against an APN, taxpayers could be forced into bankruptcy as a result of an APN, with irreversible consequences.


RPC says that many taxpayers who have received an APN are having to sell off their property and assets at less than their full market value, as they seek to free up much needed cash to pay their APNs.  Anyone forced into bankruptcy is likely to face severe difficulties in obtaining credit or working as a company director in the future. 


Individuals in the legal, accountancy, or financial services professions, would also be unable to practice whilst still going through the process of bankruptcy


RPC explains that the lack of any commitment from HMRC that it will not force people into bankruptcy is particularly worrying as HMRC continue to issue APNs in ever increasing numbers in order to meet their targets.


Adam Craggs, Partner and Head of Tax at RPC, comments: “HMRC should confirm that they will not force taxpayers into bankruptcy for non-payment of APNs. It is extraordinary that taxpayers may face bankruptcy as a consequence of being unable to pay an amount demanded in an APN, when that sum remains in dispute and remains to be determined by an independent tribunal or court as being lawfully due.”


“Taxpayers who are forced into bankruptcy as a consequence of non-payment of an APN will face a life-changing situation. Those working in the professions, or regulated industries, could face losing their livelihoods.”


“HMRC accepts "hardship" as a valid reason for non-payment of disputed VAT whilst a VAT appeal is proceeding before the tax Tribunal and there is no reason why it cannot do the same for APNs.”


APNs starting to cause hardship for ‘middle England’


RPC says that HMRC’s use of APNs is causing significant financial hardship for many ordinary taxpayers, such as IT contractors.


These taxpayers are receiving APNs in relation to arrangements which often took place many years ago and many do not have the money needed to pay the amount demanded by APNs, which have retrospective effect. There is growing concern that by demanding payment upfront, many taxpayers could be forced into bankruptcy.


Adam says: “APNs are not only being issued to High Net Worths, HMRC are also targeting  modestly well-off self-employed IT contractors who are now being pursued for alleged tax on income earned, in some cases, more than a decade ago.”