HMRC launches settlement schemes for those in dispute over sideways loss relief

SETTLEMENT OPPORTUNITIES for sole traders, UK GAAP partnerships and corporates abusing sideways loss relief have been launched by HM Revenue & Customs.

The schemes targeted are broadly those which have sought to create a loss through the write-off of expenditure or the value of rights or assets through GAAP.

Sideways loss relief is an allowance made for trading losses.

Although the settlement regimes differ, they broadly take the form of the following:

Relief against other income will be allowed in an amount equivalent to the taxpayer’s contribution to the scheme, less any element expended on unallowable fees.

Unallowable fees are those spent on tax advice or circular funding arrangements. The balance of the loss claim won’t be allowable. Loan interest will only be allowable to the extent that it represents the allowable expenditure paid out of the initial cash contribution.

Any share of income attributable to the cash element of expenditure will be taxable in full, while any share of income attributable to the loan financed element will only be taxable in so far as it represents investment income over and above the return of the initial capital.

Where people decline the settlement opportunity, HMRC will increase the pace of their investigations and move disputes quickly to legal action.

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