De-celerated Payment Notices

Earlier this week, HMRC issued a Press Release trumpeting its performance under the Accelerated Payment Notices regime introduced by the Finance Act 2014.


What APNs do is enable HMRC to require taxpayers who have engaged in certain types of behaviour – behaviour that has hallmarks of ‘bad’ tax avoidance – to cough up the tax they say they’ve saved by that behaviour whilst the courts decide whether they’ve actually saved it. From a tax collection perspective, they’re rather a good thing – for reasons I set out here – and were a key part of the radical panoply of measures introduced by the Coalition to tackle tax avoidance.

From a tax collection perspective. But nothing’s ever quite as it seems.

Because another great advantage of APNs was a political one. They brought forward taxes that Government thought it was going to receive anyway. But the wacky way in which Government accounting works meant that the receipts from them could be treated as new income. The best way to think of APN receipts is like the one-off cash flow boost a business gets by factoring its receivables for the first time. Nothing wrong with a cash flow boost – but Government accounting means that one-off boost is treated like ongoing income and can be used to support additional year-on-year spending, or help spin a narrative that Government was reducing the deficit, or enable Government to pretend to have been tougher on public spending than it really has been. Remarkably, in Government accounting terms you can get a P&L boost just by fiddling around with items on your balance sheet. I wrote about this trick here and here (forgive the title of that latter piece – I got a bit over-excited before the last General Election). And we’re talking about big numbers: this, and the other iterations of this trick, added up to over £10bn per annum.

Anyway. Back to the Press Release. It’s a marvellous round number, £1bn. But how does it compare with what Government predicted it would collect? The forecast revenues can be seen here (at page 22), here (at page 57) and here (at page 33). We’re a a little over 5 months through the tax year 2015-16 and so we should have received all the revenues from 2014-15 (£425m) plus 5/12ths of those from 2015-16 (£2,102m x 5/12) or £1,300m – 30% more than the £1bn actually received. Put a mute on that trumpet, HMRC.

More worryingly still, from Government’s perspective, is that this money is only contingent and – as I pointed out in a piece called ‘Our Big Tax Gamble’ here – there’s a decent chance that the contingency will come home to roost and Government will have to give it all back. When I wrote ‘Our Big Tax Gamble’, the possibility was a theoretical contingency. But it’s a little more than that now: the Supreme Court has just said it will hear substantive arguments in the biggest case of them all: the so-called Eclipse Film Partners case. It wouldn’t do that unless it was interested in those arguments.

If the Government loses in Eclipse it won’t just have to give back some of that £1bn – it will also have to relinquish future anticipated tax receipts of a multiple of that sum.

[Note: I am lead Counsel in Eclipse].

[Note: I am grateful to @strongerinnos and iamconsistent (see comments below) for pointing out what I shall – to save my blushes – describe as ‘improvements’ to my maths.]

15 thoughts on “De-celerated Payment Notices

  1. Yes – I had thought the trumpet perhaps over-loud. Obviously none of us knows what was the forecast profile in-year for receipts, but no reason to think it’s not about evenly spread over the year, which would mean a shortfall as you say of around £370 million. But in *addition* to these sums, the 2014 Autumn Statement seems to have promised a further £425 million in 2015/16 as can be seen at page 33 of So one wonders how HMRC are really getting on with this ….

  2. Forgive me for my ignorance, but lead counsel for which side… (HMRC or tax payer/avoider)? 🙂

  3. Taxpayer.

  4. I would have thought that some taxpayers, at least, would have anticipated losing the argument with HMRC and have paid the tax upfront either as an unallocated credit to their self-assessment accounts or by purchasing certificates of tax deposit. If so the credits and CTDs would have been used to settle the APNs. So is the £1bn net or gross of CTDs etc? If gross then the £1bn is an exaggeration of the cash inflow.

  5. Lots of taxpayers pay upfront – mostly because they are subject to PAYE (see the explanation that I link to of how the APN regime works). I suppose a few others will make payments on account. But the £1bn number will be over and above those payments…

  6. I’m not sure your numbers are quite right. You divide the £1,890m by a half but for that to be fair you need to make sure that you take account of six months of receipts. So the cash received between 6 April 2015 and 5 October 2015. But as we are not there yet, I think it would be fairer to use 5 months. Using that the difference is £212 million.

    Now that is still a big difference but it looks like you are comparing apples and fruit. You seem to assume that “cash paid on an APN, and only on an APN” equals “yield of the APN regime”. But that is clearly not true as it ignores second order effects For example, I know of someone who received an APN and that encouraged him to take a settlement opportunity when they were very unlikely to have done so otherwise. Their cash will not be included in the APN cash received (or at least I hope it is not). But it should be counted in the measure’s yield. Similarly, how much revenue has not been lost as a result of people deciding not to take part in DOTAS registered schemes because of the APN regime? That is a hard question to answer but I expect it is not a trivial amount.

    I also struggle to understand your concept of the government accelerating the receipt of cash as an accounting trick but I’ll leave that for another time.

    You also say; “When I wrote ‘Our Big Tax Gamble’, the possibility was a theoretical contingency” but I think you wrote that before you had appeared in the Court of Appeal decision in Eclipse. So do you think that the Eclipse ‘non-taxpayers’ are in a stronger position than before you went to the CoA? If so, I’d love to understand the rationale of that.

  7. I am very grateful – I had forgotten about that further upwards revision – and have amended the post.

  8. Thanks Iamconsistent for those observations.

    On the numbers, you’re quite right. I have adjusted the calculation and credited you in the post (although there’s a further factor pulling in the other direction, too – as you will see).

    I take your point, too, about comparing apples and pears. And I am sure there will be the effects you describe. But I’m not sure it’s right: I have taken Government’s projected yield from APNs and compared it with Government’s figures for actual yield from APNs. So although there may be doubt about whether we’re talking about apples or pears, I think we’re comparing like with like.

    As to your last point, I am not at liberty to talk about prospects. But as you can see from the permission criteria the Supreme Court takes a very small number of tax cases, and does not take cases unless it believes that there is an “arguable point of law of general public importance…” In Eclipse the Supreme Court has indicated it wants to hear the full substantive arguments before it makes a decision about permission so it’s not quite the same as being through the permission threshold but it’s not far off.

  9. The press release on the £1bn uses the word “received”.But page 37 of the 2014 Budget’s policy costing document makes clear that the yield includes behavioural effects. So I think you are comparing apples (APN cash received) with fruit (i.e. APN cash received plus behavioural effects and the other points mentioned in calculating the yield).

    I realise you can’t talk about your case. But I am still surprised that you think you have a stronger position now than before you went to the Court of Appeal.

  10. As you say, I can’t address prospects.

    But the Press Release says this: “HMRC has collected £1 billion in tax payments from users of tax avoidance schemes as a result of the government’s new rules to collect disputed tax upfront, the Financial Secretary to the Treasury, David Gauke, announced today.”

    I think “as a result of… the new rules” is, on a normal reading, amply wide enough to include people who settle as a result of the new rules. You are also inviting readers to believe that Government has issued a press release containing a measure which modestly understates rather than overstates the efficacy of the new APN regime. Of course it would be lovely if that was how Government worked. But.

  11. I think one of the saddest changes in society over the last 20 years has been the increasing use of marketing/spin (call it what you like) at the expense of truth. Thank goodness for commentators who try to cut through the garbage.

  12. I think that’s the right side. The previous court decision was pretty harsh.

  13. CTDs are pretty rare in my experience. It takes away the advantage of those kind of schemes, which is getting the use of the money early.

  14. Whilst I agree that trumpeting a £1bn win when they predicted a win of £1.3bn is a little disingenuous, the bigger issue for me is the timing point – which you do mention.

    HMRC has not really “collected” this money at all, at least not in the sense that many members of the public might understand. It has not “collected tax”, it has merely borrowed a sum of money for an indeterminate period of time. Yes, the Treasury may well get to keep some of it but – even without your thoughts on Eclipse – it is almost inevitable that some of it will have to be repaid.

    A prudent business would make suitable provision for that outcome.

  15. Maybe we need to study next year’s HMRC Report and Accounts in a little more detail?

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