Plans to restrict income tax loss reliefs have been put on hold after responses to the consultation document were published earlier this week.
HMRC said the consultation generated “many thoughtful, informative and constructive responses”.
It has also decided it will now monitor the effect of several policy initiatives to tackle avoidance before considering whether to proceed with measures put forward in the June 2011 consultation to counter avoidance involving income tax loss reliefs.
The consultation originally proposed three options to counter avoidance:
- a principle-based approach
- a mechanistic approach of limiting relief to £25,000
- an administrative approach of withholding repayment where the total loss relief claimed for set-off in a year is in excess of £25,000, until claims have been agreed by HMRC
HMRC noted in the response document that a cap on income tax reliefs would affect the amounts of loss relief that may be claimed against general income.
On 30 June last year, HMRC published the “High-Risk Areas of the Tax Code: Relief for income tax losses” consultation document on options to deter tax avoidance exploiting income tax loss reliefs. This was followed at the 2012 Budget with the announcement of a cap on uncapped income tax reliefs to be introduced in April 2013.
The government also announced proposals for a General Anti-Abuse Rule (GAAR) to be introduced in 2013, following consultation.
HMRC added that the proposed GAAR was “likely to affect at least some of the schemes that seek to exploit loss reliefs against general income and gains.”
Download the full summary of responses to the income tax loss relief consultation.