Major changes to tax planning arrangement that are likely to impact around 10,000 business are due for Royal Assent this week.
Businesses are warned they may face sizeable, unexpected tax demands from HMRC over the next 20 months.
Under the proposed Finance Bill 2014, HMRC will receive new powers to issue a tax demand and collect the tax in dispute in relation to certain tax planning arrangements.
Earlier this week HMRC issued a list of over 1,000 scheme reference numbers indicating the arrangements disclosed under the Disclosure of Tax Avoidance Scheme (DoTAS) regime they will be focusing on.
The Treasury says it plans to issue 10,000 payment notices to businesses and 30,000 to individuals. The notices are expected to raise £7bn for the Government in total.
Although HMRC has indicated that it will issue notices over a 20 month period, it is possible that some payment notices may start to be received shortly after the draft Bill gains Royal Assent.
Dermot Callinan, head of Private Client for KPMG in the North East, said: “Payment notices will be issued by HMRC over the next 20 months, starting as early as the end of this week, and it is vital that companies and individuals work out now if they are affected by these changes and consider how they will pay any tax owed.
“It is important to act early and take advice as soon as possible. Where one of these notices is issued, payment must be made within 90 days. The draft law includes no formal right of appeal against the notice although taxpayers may make representations to HMRC.
“Although HMRC has said that ‘time to pay’ arrangements will be available in certain situations, receiving a large bill which must be settled quickly will leave some companies and individuals severely cash constrained, Early appraisal of the bill and how to pay it can give those affected time to consider all of the options available to them.”
KPMG recommend three questions that businesses and individuals should ask themselves now:
Have you entered into any tax planning which is or you think may be potentially subject to HMRC challenge or have been disclosed under the Disclosure of Tax Avoidance Scheme (DoTAS) regime?
Are you aware of the new rules on accelerated tax payments and have you considered whether the rules will apply to you?
To the extent you think any of the above may apply to you, have you considered how any tax payments might be funded, or the potential impact on your financial statements and cash flow forecasts?