INTM573090 - Thin capitalisation: the Advance Thin Capitalisation Agreement: Penalties in relation to ATCAs
Paras 49 and 50 of Statement of Practice 04/07 state:
49. Because an ATCA is an agreement between HMRC and a business which decides how certain issues will be determined for the purposes of the Taxes Acts, a return made on any other basis in relation to those matters during the currency of an ATCA will constitute an incorrect return. Consequently, a tax-geared penalty will be chargeable where the business has acted fraudulently or negligently in making such an incorrect return and tax has been lost as a result. Where a return is made in accordance with the agreement, but it is discovered that false or misleading information was submitted fraudulently or negligently in the course of obtaining the ATCA, the legislation provides at section 86(5), FA 1999 that the agreement is treated as if it had never been made, with the result that questions relating to the subject matter of the agreement are no longer to be determined in accordance with the agreement. This may mean that returns made in accordance with the nullified ATCA are incorrect with the consequences for penalties described above.
50. A penalty not exceeding £10,000 may be imposed where false or misleading information is supplied fraudulently or negligently in connection with an application for an ATCA - section 86(8), FA 1999. There is no requirement for the agreement to have been finalised in order to apply this sanction. In practice, where a tax-geared penalty is obtained following the nullifying of a ATCA as described above, a fixed penalty under section 86(8), FA 1999 will be reduced so that the total amount of the penalties does not exceed whichever is the greater or greatest of them. Section 98 TMA 1970 will apply to information required as part of the process of monitoring an ATCA where there has been a failure to provide the information or where incorrect information has been fraudulently or negligently provided.
Business International will monitor and advise on consistency in the application of penalties.
