Surely that’s not right you may ask, HMRC does not give money back. Ordinarily they do not, but if you have previously agreed Voluntary Restitution Settlements with HMRC, now is the time to check the terms.
The Morse Review
The Morse Report was published in December 2019 and its recommendations have a major impact on the Loan Charge.
All loans that were obtained between 5 April 1999 and 8 December 2010 are now not included in Loan Charge.
Loans obtained between 9 December 2010 and 5 April 2016 could be excluded from Loan Charge depending on circumstances.
Loans still caught within Loan Charge can have their liabilities spread with time to pay arrangements and even the Loan Charge itself can be spread equally over 3 years.
Importantly, Voluntary Restitution Settlements already reached with HMRC will potentially be repaid.
A win for the taxpayer then? Yes, but… unfortunately, matters have got stuck. Enactment of the 2020 Finance Bill (Budget) is needed to put the Morse inspired legislation in to effect.
Voluntary Restitution Settlement
Once enacted, the legislation requires HMRC to establish a scheme to repay or waive payment in respect of a “qualifying agreement”.
The repayment is triggered by an application from the taxpayer (or agent acting on the taxpayer’s behalf) to HMRC on or before 1 October 2021.
A “qualifying agreement” is defined as an agreement with HMRC, which was
- Made between 16 March 2016 and 10 March 2020 (inclusive), and which
- Imposes an obligation to pay an amount of income tax that is referable to a qualifying loan.
The amount paid, or due to be paid, under a qualifying agreement is referred to as a “qualifying amount”, which is also defined as:
- Being referable to a qualifying loan, and
- Is a sum that HMRC had no power to recover at the time the qualifying agreement was made.
An agreement that fits the definitions is commonly referred to as a Voluntary Restitution Settlement.
Potential Money Back
Any taxpayer that has reached a settlement with HMRC in respect of a tax avoidance arrangement should check the terms of the settlement as they may be due money back. If a refund isn’t on the cards, you may be able to negate an obligation to make future payments in respect of the settlement.
Sometimes the expression Voluntary Restitution will be present in the settlement agreement or possibly communications with HMRC leading up to the agreement.
Another feature that opens up the possibility of money back is the absence of interest and penalties being charged.
Not all settlements will fit the claim parameters but a number will.