Accelerated Payment Notices (APNs) are here to stay. HM Revenue & Customs (HMRC) are denying taxpayers the perceived and/or actual cash flow advantage gained by the use of a tax avoidance scheme.
HMRC is not considering the efficacy or otherwise of the scheme – HMRC just want the cash back. under an APN.
The government has signaled that any outstanding loan from a Trust will be taxed on 5 April 2019.
So is now the time to explore the possibility of reaching a Settlement with HMRC?
What is a Settlement?
A Settlement is a written agreement between the taxpayer and HMRC. HMRC sets out what taxes are due, the tax reliefs available, the payments made and what balance is due to HMRC or in an increasing number of cases, what balance is due back from HMRC.
Where Voluntary Restitution is in point, the cash refund can be even higher.
A Settlement brings certainty. It draws a line in the sand and allows everyone to move on in life.
Who receives the cash refund?
Whoever is seeking to reach the Settlement, i.e. it can be the company, the individual, the trust etc. will receive the refund. At least it is not sitting in the Exchequer!
Invariably I have found that it is the family company that gets the cash refund because it was the company that made the contribution into the Employee Benefit Trust (EBT) or the Employer Financed Retirement Benefit Scheme (EFRBS).
How can a cash refund be due?
In very simple terms, whilst tax may be owed in respect of PAYE and National Insurance, there may be corporation tax relief on certain items. And if the company has had to pay an APN, this can be offset in reaching any Settlement.
There are some schemes that specifically did not claim any corporation tax relief in the beginning. Such schemes are known as “… … … light or lite” depending upon the scheme provider. This can increase any cash refund due.
How much will the cash refund be?
It will always depend upon the facts.
That said, in a recent example where £250,000 was contributed by the company and an APN of approximately £120,000 had to be paid by the company, the company had a cash refund of just over £10,000 once a Settlement had been reached with HMRC. However, this will not be in all cases – it does depend upon the facts.
No loans. No trust to be administered.
How do I find out if I can get a cash refund?
Seek professional advice. Whilst no two schemes are ever the same, it is a pleasant surprise to taxpayers when the outcome is a cash refund.
If you want to explore your options, I can be contacted at firstname.lastname@example.org.