Latest HMRC accelerated payment regime clarified

From 17 July 2014, HMRC put into place a new accelerated payments regime which seeks to improve the hearing process for those taking part in a tax avoidance scheme who aim to reduce or avoid looming Inheritance Tax (IHT) payments.

This regime will only affect tax payers using schemes disclosed within the Disclosure of Tax Avoidance Schemes (DOTAS) legislation or counteracted under the General Anti-Abuse Rule (GAAR). The purpose of such schemes is to reduce the value of an estate below the current threshold of £325,000, thus avoiding any IHT liability for the person or any beneficiaries.

Not all disclosures of inheritance tax avoidance schemes will automatically be disputed. However, it allows the government to review each case and decide whether further action is appropriate.

When the new rules were announced, experts were claiming that the changes meant people would have to release upfront dispute payments before they died. However, the HMRC assures the scheme will be most beneficial to those who are compliant tax payers.

Within the new scheme, tax payers liable for IHT who have used an avoidance scheme will be issued with an Accelerated Payment Notice (APN), where the amount in dispute will be approximated and will need to be paid within 90 days of the notice. This payment will then sit with the Exchequer while the case is being handled. This system prevents the tax payer from retaining the cash benefit claimed as part of their self-assessment and reduces their overall liability.

Once the dispute has been resolved, HMRC will review the accelerated payment amount. If the payment is above the final amount due, the tax payer will be issued with a refund for the amount of overpayment — including any interest accrued.

Though the new regime may not resolve all IHT avoidance issues, the HMRC stated “the government will not be asking taxpayers to make an accelerated payment of inheritance tax — which is due on death — during their lifetime” and the government are looking into alternative ways to handle tax avoidance schemes.