Law firm Withers has questioned whether HMRC's decision to force those accused of anti-avoidance to pay disputed tax upfront could prove to be a human right issue.
Individuals accused of tax avoidance will be forced by HMRC to pay the disputed amounts upfront - a move that was first flagged in the Autumn Statement last year.
At this point the government said it would, following consultation, introduce a new requirement for taxpayers to pay disputed tax upfront where the avoidance scheme being used has been defeated in another party’s litigation through the courts.
But today’s Budget has announced plans to go even further.
The government intends to extend the new requirement for taxpayers to pay upfront any disputed tax associated with schemes covered by the Disclosure of Tax Avoidance Scheme (Dotas) rules or the General Anti Abuse Rule (Gaar).
This is intended to remove the cashflow advantage for the taxpayer of holding onto the disputed tax during an avoidance dispute.
Sophie Dworetzsky, a partner at Withers, warns the move could prove multi-faceted and even breach human rights.
'This could prove to be interesting, given that it extends to old open enquiries and that what is said to be in dispute and any tax actually due are not always the same.
'This is clearly a massive cashflow issue for taxpayers who may also need advice on their position. And potentially a human rights issue?' she asked.
In her view, the issue is down to the fact that while the HMRC is 'encouraged' to issue 'a lot of these notices' because it helps it meet its targets. It also indicates the tax owed should be handed upfront, 'irrespective of whether they [the accused] have got a good argument against that or not.'
'I only imagine that it will ultimately give a cashflow advantage to HMRC, and a significant disadvantage to any taxpayer who has this demand issued upon them, and it seems to me unfair.
'This raises the issue of being consistent with human rights legislation, because what HMRC seems to be proposing is that they will demand payments of tax upfront, when they’ve looked at a similar scheme done by another taxpayer that’s been defeated,' she told Wealth Manager.
'There is a huge question mark over the amount that may need to pay, or the amount of tax that may or may not be endured. The huge issue is that the taxpayers may well need to take advice from an accountant or lawyer to enquire about what they should be doing, but they can’t all afford that.'
'It clearly discourages anyone from really fighting the point because they don’t all have enough money to fight it.'
The move could provide HMRC with additional tools to address a ‘legacy stock of an estimated 65,000 avoidance cases’.
The Revenue will only be able to issue an accelerated payment notice where they have first sent the taxpayer an enquiry notice or issued them with a notice of assessment.