Tribunals to have partial closure notice powers

First Tier Tribunals (FTTs) are to be given powers to issue partial closure notices (PCNs) once the Finance Bill 2017 gains royal assent

The move means that discrete elements of disputed tax can be settled with HMRC while the remainder continues to be under question.

For example, if a taxpayer has £100,000 under dispute, but £10,000 is a straightforward income tax liability, the income tax can be settled while the remaining £90,000 remains in dispute.

HMRC will be able to issue a PCN either in agreement with the taxpayer, at its own discretion, or when directed to do so by the FTT on application by a taxpayer.

A PCN will almost always be followed by HMRC making an amendment to the tax return that may mean more tax is payable. Taxpayers will have a right of appeal to the FTT to both the PCN conclusions and the amendment to a tax return. Taxpayers will also be able to apply for postponement of any of the additional tax payable where they think it is excessive.

On costs, the government expects to lose £115m in 16/17, £20m in 2017/18 and to make £50m 2018/19. In 2019/20, its projected income is £170m, 2020/21 it expects £215m and in 2021/22 it has earmarked £180m. The figures have been certified by the Office for Budget Responsibility.

The measure is the latest in a series of moves over made by the Conservative-led governments and the coalition before it designed to augment HMRC’s revenue.

In 2014, accelerated payment notices, in which disputed tax is paid upfront before the issue is settled at a tribunal. In 2015, direct recovery of debt (DRD) powers were given to HMRC, which allows the tax authority to recover tax and tax credit debts directly from the bank accounts of individuals and businesses where they have persistently failed to engage over the disputed tax.

From April 2017, HMRC will be running its ‘serial avoiders’ regime, which is designed to increase pressure on all taxpayers to reach a quick settlement on tax avoidance arrangements used in years gone by and avoid future schemes. The title 'serial avoiders' is deceptive because it could apply where a taxpayer did only one scheme, and should three of their schemes be defeated, their name, address and business information may be published.

The policy paper Tax enquiries: closure rules can be read here.

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