UK and International Tax news

New HMRC Settlement Opportunity

Wednesday 23rd January 2013

In December 2012, the Government announced additional funds would be made available to HMRC in order to clamp down on tax avoidance and evasion.  HMRC have recently announced that they are issuing invitations to some participants in certain schemes to settle their tax liabilities by agreement, without the need for litigation.

HMRC considers that this to be the best opportunity to resolve such disputes in a way which is cost effective and consistent with the law. Where taxpayers decline the settlement opportunity, HMRC are to increase the pace of their investigations and accelerate disputes into litigation.

The schemes included in the settlement opportunity generally seek to create tax relief much greater than the real economic cost borne by the participants.   The settlement opportunity will be offered to participants in the following schemes:

  • schemes which seek to use Generally Accepted Accounting Practice (GAAP) to write off expenditure or the value of assets to create losses either for sole traders, or individuals or companies in partnership,
  • schemes seeking to access the film relief legislation for production expenditure, and
  • schemes seeking to create losses in partnerships through reliefs such as first year allowances, payments made for restrictive covenants, and specific capital allowances.

HMRC considers these schemes fail to provide the relief claimed either because the majority of the funds employed in the business are not used for relevant expenditure or because the schemes do not meet the requirements for sideways loss relief so that the full relief claimed is not available to the participants.  

It is noted that HMRC have had recent successes in litigation including the following cases:  Tower MCashback LLP 1, Eclipse Film Partners No 35 LLP,  Icebreaker 1 LLP, Samarkand Film Partnership No 3 and Alchemist (Devil’s Gate) Film Partnership.

The settlement opportunity will be available to individuals, companies and partnerships that have entered into the above schemes.  Where the unresolved disputes mainly arise between HMRC and the relevant partnership,  HMRC hopes the partners will collectively agree that the partnership should accept the offer.  HMRC will also be prepared to offer settlements to individual partners even if the partnership as a whole continues to challenge their views. Such settlements will enable the partner to finalise their tax position, taking no further interest in the result of any subsequent litigation with the partnership.

The settlement opportunity extended to individual partners is open only to individual partners and company partners who have used specific tax avoidance schemes. It is not open to partners in any other partnerships.

In conjunction with offering the settlement opportunity, HMRC is also directing additional resources into litigating those participants who do not take up the opportunity, to ensure those cases reach the Tribunal as quickly as possible.  In such circumstances HMRC  will advance all arguments reasonably available at both partner and partnership level, including those that may deny relief completely.

 If you would like further information on the above, please contact Keith Rushen on 0207 486 2378.

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