Tax avoidance settlement scheme

HMRC has published the terms of the settlement opportunity open to participants in certain tax avoidance schemes which seek to exploit Generally Accepted Accounting Practice (GAAP).

On 3 December 2012, the government announced additional investment in HMRC to clamp down on tax avoidance and evasion. HMRC is now inviting some participants in certain schemes to settle their tax liabilities by agreement, without the need for litigation.

GAAP partnerships are those which have sought to create a loss through the write-off of expenditure or the value of rights or assets through Generally Accepted Accounting Practice.

HMRC has set out the following terms of settlement:

• Loss relief against other income will be allowed in an amount equivalent to your contribution to the partnership personally contributed by you as the cash contribution, less any element expended on unallowable fees.
• The balance of the loss claim will not 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.
• 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.

The settlement opportunity is open to partnerships, individual partners, company partners and sole traders who have used certain schemes. The settlement opportunity extended to partners is restricted to the specific circumstances of the schemes covered by this settlement opportunity. It is not open to partners in any other partnerships.

HMRC is also prepared to settle with individual partners, irrespective of whether or not the partnership itself continues to disagree with HMRC's view.

HMRC has published a dedicated page on its website which will be updated with details of opportunities available for specific schemes. HMRC is aiming to contact all those who are eligible for the offer by the end of January 2013.

Further details are available from HMRC. http://www.hmrc.gov.uk/press/settle-opp-tax-avoid.htm