Yes, we know the process of settlement agreement refunds. Yes, we know the documents that HMRC will require and want signing. Yes, we have had clients that have now received refunds with more being advised as each week passes.
So what else is there to know?
A fair bit of practical stuff and awareness of what HMRC are doing really.
Settlement Agreement Refunds
A practical aspect of the Settlement Agreement is that HMRC have asked on numerous occasions for a copy.
Rather odd as they will have the original.
However, it is a function of HMRC home working, something that is likely to continue for a while yet.
Without the original agreement the case handler can’t evaluate what a refund may be. If they can’t do that, whilst the eligibility may be fine, figures cannot be cascaded to the taxpayer. Process delayed until the case handler can get into the office to find it.
Knowing the requirement, we always provide a copy of the fully signed Settlement Agreement where we have it It accelerates the process.
Document signing is another practical aspect to consider.
Firstly, HMRC post gets scanned centrally, which takes time and often pages get detached. We scan all documents to case handlers direct.
Case handlers will only move matters on from HMRC scans but they will work in the background on documents provided by an agent.
Secondly, with home working, HMRC stockpile post in the office so the signer can work through a volume of documents in one go rather than doing multiple trips.
Knowing that helps manage expectations plus HMRC’s office suite is considerably reduced compared to historic locations. It is more of a task for an officer to get into an office to sign due to the geographic spread.
Not all decisions will be favourable for the taxpayer. Some are bizarre and are being challenged.
HMRC seems to be attempting to find various reasons not to refund even where the settlement was on ‘Voluntary Restitution‘ terms.
The oddest reason yet are VR settlements reached after the striking off of the corporate but HMRC attempting to say Reg 80’s and Section 8’s were valid at the time of settlement despite the company ceasing to exist. The position is being challenged.
Unless it is clear, remember HMRC has a very slanted view of refund, it doesn’t want to do it. It doesn’t mean it’s rationale to reach that view is robust.
A few clients have presented to us where loans have not been written off or the arrangement collapsed. This seems to have been on the misunderstanding that to do so would trigger Part 7a and a further charge.
Yes it is a relevant step for Part 7a, however, Para 59, S554Z5 (ITEPA 2003) etc kick in to apply overlapping relief provisions to render the w/o an effectively neutral event.
If the loans still exist it can result in additional IHT charges. HMRC are monitoring and policing this aspect.
Even if there is no additional IHT the structure still exists and there will probably be ongoing compliance costs when nothing is happening, or likely to happen, with it going forward. A cost hole with no enduring benefit?
Remember, the clock is ticking, settlement agreement refund claims have to be made before 1 October 2021.
There are numerous practical aspects that arise from the claim process; some good, some less so.