The government has now collected a record £1 billion in tax payments from individuals using tax avoidance schemes as a result of new collection rules, according to HMRC.

The new rules for accelerated payments, which mean that disputed tax is now paid upfront by avoidance scheme users, were introduced in the Finance Act 2014 . Those who win the dispute over their taxes have the amount repaid to them with interest by HMRC.

People who want to settle their claim instead of paying their accelerated payment notice can do so if they want, and penalties are applied for late payment.

Since the introduction of the new rules in August 2014, the government has issued over 25,000 notices for the payment of disputed tax. This number is expected to have risen to over 64,000 by the end of 2016, and HMRC estimates that it will have collected £5.5 billion in payments by March 2020.

Nigel Holland from Holland & Co Chartered Accountants said:

“The government has been forced to clamp down on tax evasion and aggressive tax avoidance because it is a vote winner. The new rules seem to be successful for the government because these rules force the tax payer to pay the disputed tax up front in accelerated payments before the dispute with HMRC is resolved. The first £1 billion has now been received by the government and HMRC have publicly stated that tax avoiders are running out of options. HMRC are winning around 80% of avoidance cases that people litigate. Many more are settling before litigation.

The counter argument to this is that more complicated tax avoidance schemes may be offered by tax advisers in the future which are totally legal and which would withstand an HMRC enquiry. Alternatively some tax payers may decide not to disclose their income to HMRC at all. The taxpayers decision may be thought of as being preferential for them compared to them reporting income to HMRC which is part of a recognised tax avoidance scheme.

Also just because a tax payer is forced to pay accelerated tax payments up front to HMRC does not mean that HMRC will not have to repay this money back to the tax payer in the future together with interest. HMRC will also be liable for the cost of litigation which could be substantial.

A balanced approach is needed by HMRC in which they penalise tax payers who are clearly breaking the tax laws. Also HMRC should be prepared to accept submissions made by taxpayers who are complying with the tax legislation.

At my firm we have an excellent relationship with HMRC and manage to submit tax returns which are accepted by HMRC without enquiry.”