HMRC extends deadline for contractor loan settlement opportunity

HMRC has announced a one-off extension to the closing date for its contractor loan settlement opportunity (CLSO) for an additional six months for ‘exceptional reasons’, including the need to clarify some details of the arrangements relating to inheritance tax (IHT) rules and possible instalment settlements

The CLSO, which offers eligible individuals the opportunity to pay tax and interest to resolve open years of use of ‘contractor loan’ arrangements, opened four months ago and was originally scheduled to end on 9 January 2015. It will now close on 30 June 2015.

HMRC said: ‘The settlement opportunity has proved very popular, with thousands of users talking to us about settlement. But in light of the feedback from some users, we recognise that further information and clarification on some specific issues raised could help users make better informed decisions about whether to settle.’

In its latest announcement, HMRC makes clear that while it views the payments made under the contractor loans schemes as income and subject to income tax, the use of offshore discretionary trusts in these loan arrangements may also give rise to IHT liabilities arising from relevant property trust charges.

HMRC says it can give contractors an estimate of all the IHT charges relating to the loans, including any exit or 10 year anniversary charges where these have crystallised and include them in any settlement.

Future IHT charges would need to be reported to HMRC at the time they arose, or alternatively HMRC suggests contractors could look to finalise all liabilities by arranging with the trustee for all the loans to be written off now.

HMRC also says it will offer contractors who agree a settlement but cannot afford to pay the full amount within 90 days the opportunity to spread payments over a period of up to two years. It will no longer require a statement of assets and liabilities or income and expenditure form where a contractor can satisfy HMRC that they qualify for an instalment offer of up to 24 months.

The document states that HMRC can give no assurances about whether or when any contractors might receive Accelerated Payment Notices (APNs), and warns that during the CLSO, they must pay the amount requested or make representations within the specified time limit, even if they are discussing settlement with contractor loans team, or they may receive late payment penalties.

For contractors who reach a settlement with HMRC within the specified time limit and pay the amount due, then the APN will be withdrawn.

HMRC says that it does not believe recent tax decisions about cases involving loans from an Employee Benefit Trust (EBT) are applicable to contractor loans arrangements and says it has confirmation from a tribunal case that the department can continue to make use of the transfer of assets abroad rules.

HMRC says that by June it expects anyone who wants to take part to have been in contact and discussing a possible settlement, which should be agreed by 30 September 2015 at the latest. It stated that it would not be extending the deadline again, and that it will be issuing discovery assessment for the 2010-11 tax year ‘shortly’.

Further details are here: https://www.gov.uk/government/publications/tax-on-contractor-loans/tax-on-contractor-loans-extended-time-limit-and-more-information--2

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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