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A new fact sheet has been published by HM Revenue & Customs (HMRC) for anyone who is participating in a tax avoidance scheme, explaining how the new regime of follower notices and accelerated payments operates.

According to the fact sheet, a tax avoidance scheme is defined as:

“[…] a set of arrangements that try to use the law to gain a tax advantage that is not intended by the legislation.”

In July 2014, new legislation was introduced to affect anyone who is involved with a tax avoidance scheme. The legislation states that if an avoidance scheme doesn’t provide the intended tax advantage, users may be asked to amend their tax return, claim, or finalise their appeal by HMRC. The organisation may also request that users of a similar scheme take corrective action. Those who are affected by this legislation will be sent a follower notice by HMRC.

The follower notice will include a warning to the user of the avoidance scheme, stating that, if corrective action isn’t taken within the given time limit, a penalty will be charged that could be up to 50 per cent of the tax due. However, if the individual cooperates with HMRC, the penalty may be reduced, but not to less than 10 per cent. The corrective action must be taken within 90 days of the follower notice being issued.

If an individual doesn’t agree with the follower notice, they can set out their objections to HMRC within 90 days of the notice being issued. An “accelerated payment” notice may also be issued by HMRC if certain conditions are met. The notice will state the amount to be paid and the due date. Unlike a regular appeal against other tax regimes, the tax calculated to be owed has to be paid within 90 days of the notice being issued.

Rate of penalty

The penalty may be up to 50 per cent of the tax charged and the minimum penalty rate is 10 per cent. If you cooperate with HMRC, as previously stated your penalty may be reduced.

When does the penalty have to be paid?

The penalty has to be paid in full within 30 days of it being issued.

If you have been issued a follower notice or have any questions regarding the new legislation, please contact us here at The Accountancy Partnership. Our experts are on hand to provide up-to-date advice and guidance.

About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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