As part of a new raft of settlement deals HMRC has written to individuals who have taken part in other partnership reliefs and allowances schemes proposing to allow settlement under specific terms.

For the first time, the scheme covers partnership reliefs and allowances schemes which have sought to create losses in partnerships through reliefs such as first-year allowance, payments made for restrictive covenants and specific capital allowances.

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.
  • Unallowable fees are those spent on tax advice or circular funding arrangements. We will tell you if we believe a disallowance for fees is needed.
    • 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.

  This follows an earlier settlement deal given to participants in certain tax avoidance schemes which exploited UK GAAP.

  Whilst not of general applicability to partnerships, within the specific terms of this settlement deal HMRC is prepared to settle with individual partners, irrespective of whether or not the partnership itself continues to disagree with HMRC's view.

  There is a dedicated page on the HMRC website which will be updated with details of deals 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

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