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In this update we have some 'hot off the press' news relevant to clients who implemented the NT Advisors 'Caledonian' scheme (also referred to as 'Alanis'). Following recent discussions with HMRC on behalf of clients, we have been advised that a new settlement opportunity will be opening shortly. If you have clients who have implemented these arrangements, please read this update.
Background
Recent communications from HMRC suggested that they were in the process of issuing closure notices to scheme participants. However, we have recently been informed that the intention is to open a settlement opportunity. Those clients who choose not to take part are likely to be issued with a closure notice and any subsequent appeal heard before the Tribunal.
What are the likely terms of settlement?
HMRC have advised that in any litigation of this scheme they are likely to pursue an argument which includes denying the interest relief claimed as well as taxing the profits from the partnership. Under the terms of the settlement opportunity HMRC will only seek to deny the interest relief claimed. Interest will be due on any late paid tax arising as a result of denying the interest relief claim. Penalties will be considered on a case by case basis and so a review of the implementation of the structure will be important before entering into any settlement discussions.
Perhaps more controversially, it appears that HMRC is going to insist that clients entering into this settlement opportunity must also agree to settle any other NT Advisor schemes they may have implemented.
What does this mean for my client who has implemented this arrangement?
It seems likely that clients who do not settle with HMRC face the prospect of receiving a closure notice and, ultimately, the potential for litigation. While HMRC's view is that they will seek to deny the interest deduction claimed as well as taxing the profit from the partnerships, this of course depends on the final technical analysis.
Clients who want to close of continuing enquiries should explore the settlement terms on offer and engage with HMRC.
If you have any clients who have implemented this scheme and want further information on how to explore settlement with HMRC, please contact us. We have successfully resolved a large number of different structures on behalf of clients and so understand the technical issues and the nuances of HMRCs settlement terms.