HM Revenue & Customs brought a high-profile tax case against the company behind Rangers Football Club last year. It was determined that the company misused an employee benefit trust as a means to avoid tax payments. Back in 2017, it was ruled that all PAYE that must have been accrued under the scheme is now due to to HM Revenue & Customs, which takes claim in the liquidation to £72 million. The decision was taken on July 5, 2017, and therefore, follower notices in this regard can be issued until July 4, 2018.
Understanding the case
At the time of contract negotiation, employees were advised to make use of advanced loans through contribution to an employee remuneration trust, instead of using the regular PAYE scheme. This created an indemnity for employees, which now stands worthless, with Rangers Football Club landing in liquidation. Employees must now pay for the accrued income tax on the funds they have received and are required to settle negotiations with HM Revenue & Customs in this regard. Experts anticipate that many employees will need to deal with bankruptcy or sequestration.
Receiving a follower notice
A follower notice can be issued to a company/individual after the final judicial ruling is out. All follower notices must be issued within a year of the ruling date with accelerated payment notices, and the concerned company/individual must get their tax returns corrected. An accelerated payment notice is also issued with the due payment, which must be settled, and the funds must be submitted to HM Revenue & Customs, within a period of 90 days. A penalty for 50% of the accelerated payment notice will be further issued if the compliance is not adhered to. The penalties can be reduced in certain circumstances, but usually 10% of it must be paid.
Avoiding insolvency
Companies often end up in insolvency on a balance sheet basis because of such situations. If you have been served a follower notice, it is always advisable to engage with HM Revenue & Customs at the earliest to prevent increase in the dues. In case a company fails to do so and doesn’t pay the tax due, a winding up petition can be issued against the company. HM Revenue & Customs can also go for an arrangement, provided there’s a chance of recovering maximum of the tax amount. If your company is viable and has no other concerns, a flexible payment plan out of income resources can be arranged, or you may be asked to pay the tax by selling property.
Formal options that can help in avoiding winding up petition include –
- Creditors Voluntary Liquidation
- Individual Voluntary Arrangement
- Obtaining funding to make a settlement
- Company Voluntary Arrangement
- Administration
Make sure that you don’t avoid or delay dealing with follower notice.
