HMRC has had to withdraw over 4,000 of its according Advance Payment Notices (APNs) to an accountancy firm.

Moore Stephens says that of the 60,000 APNs that HMRC has issued, one in 14 should not have been issued. This raises concerns over whether the Counter Avoidance Directorate has sufficient resources to do its job. The Counter Avoidance Directorate is the team within HMRC that investigates cases of suspected tax avoidance, and it has the power to issue APNs.

APNs were introduced amid controversy in 2014. The intention was to combat what HMRC saw as ‘abusive’ tax avoidance, and they gave HMRC the power to demand upfront payment of all disputed tax within 90 days. The individual issued with the demand does not have the right of appeal.

The number of APNs issued in error suggests HMRC does not have the resources it needs to carry out its investigations properly. Moore Stephens suggests taxpayers who receive an APN should not take it at face value and should contact a tax expert before they pay what could be a substantial amount of money to HMRC.

Judicial review proceedings have found that a scheme used by a taxpayer was not subject to Disclosure of Tax Avoidance Schemes (DOTAS) regulations, forcing HMRC to withdraw its APN.

Moore Stephens Head of Tax Investigations and Disputes Dominic Arnold said: “HMRC risks falling into a ‘shoot first, ask questions later’ approach with APNs.”