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Contributed by ACCA, in their own words

Taxpayers will be required to pay upfront tax disputed under schemes that fall within the DOTAS rules or are counteracted under the GAAR.

Budget 2014 announced a new measure that will require taxpayers to pay upfront tax disputed under schemes that fall within the Disclosure of Tax Avoidance Schemes (DOTAS) rules or are counteracted under the General Anti-Abuse Rule (GAAR).

Legislation will be introduced in Finance Bill 2014 that will enable HMRC to issue a ‘Notice to Pay’ to any taxpayer for whom there is an open enquiry, or the matter is under appeal, and who has received a cash flow tax advantage by the use of arrangements that:

  • fall to be disclosed under DOTAS, or
  • HMRC counteracts under the GAAR following an opinion of the GAAR Advisory Panel that, in the Panel’s opinion, the arrangements are not a reasonable course of action.

The notice will require the taxpayer to pay the tax in dispute within 90 days. If the taxpayer requests HMRC to reconsider the amount of the payment notice a further 30 days will be granted. In the case of a matter under appeal, the new rules will remove the postponement of the disputed tax.

The new measure will be effective from the date the Finance Bill receives Royal Assent and in respect of all cases where there is an open enquiry or open appeal on or after the day of Royal Assent.

The intended effect of the new rules is that of removing the cashflow advantage enjoyed by the taxpayer of holding onto the disputed tax during an avoidance dispute. There will be no change to the tax liability owed.