HMRC publishes new guidance on sideways loss relief settlement

Are you a sole trader, a corporate or GAAP partnership seeking to create a loss through the right-off of expenditure or the value of rights or assets through GAAP? Then Steven Glicher accountants would like to bring to your attention the fact that HM Revenue and Customs (HMRC) has launched a settlement scheme for those in dispute over sideways loss reliefs.

The new Revenue scheme is targeted at those sole traders, corporates and UK GAAP partnerships that have sought to create a loss through the write-off of expenditure or the value of rights or assets through GAAP.

What exactly is sideways loss relief?

Well, it’s an allowance made for trading losses. However, there is a limit on the amount of income tax relief that an individual may claim for deduction from total income in a single tax year.

So what does the new HMRC scheme say? Well, separate guidance has been published for both sole traders and companies, but HMRC is inviting participants in these schemes to settle their tax liabilities by agreement, without the need for legal action. This settlement opportunity offers both the taxpayers and HMRC the best chance to resolve sideways loss relief disputes in the most cost-effective and consistent manner.

While the settlement regimes are different for sole traders and companies, never the less they broadly consist of the following:

  • Relief against additional income will be allowed in an amount equivalent to the taxpayer’s contribution to the scheme, less any element expended on ‘unallowable fees’.
  • Unallowable fees are fees spent on tax advice or circular funding arrangements. The balance of the loss claim won’t be allowable. Loan interest will only be allowable providing 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, while any share of income attributable to the loan-financed element will only be taxable as it represents investment income beyond the return of the initial capital.

What happens where businesses decline the settlement opportunity? Well, HM Revenues & Customs will be increasing the pace of their tax investigations and will take swift legal action to escalate disputes.

If you would like further information on sideways loss relief, or would like a more detailed explanation about the new HMRC guidance, then contact Steven Glicher accountants on 0161 485 8007 or email

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