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HMRC internal manual

International Manual

Thin capitalisation: practical guidance: the Advance Thin Capitalisation Agreement process: withdrawing from the ATCA process

If the parties to the discussions are unable to agree terms, either side can walk away from the table and the process lapses; thin cap becomes a matter for annual self-assessment by the borrower, and risk assessment by HMRC.

If HMRC withdraws from the ATCA process, it will issue a formal statement to the applicant or their representative recording the reasons. HMRC is not obliged to continue discussion beyond the point at which it has determined that agreement cannot be reached on terms which it finds acceptable. A proposal by HMRC to withdraw from the ATCA process will be reviewed by Business, Assets & International before a final decision is made.

The exception to this policy is where a sustained failure to communicate on the part of the applicant may lead HMRC to the conclusion that the ATCA is no longer required, though HMRC will try to confirm this before closing the case.

Equally, a company may withdraw from the process at any time before final agreement is reached. It would of course be preferable if it could communicate the reasons, in case there is a solution, so that HMRC is aware of possible weaknesses or flaws in the process and can consider scope for mediation.

If the process is abandoned, and thin cap concerns are left unresolved, they may be picked up at the next opportunity to enquire into the CT return.

Every effort should be made to reconcile differences and allow the parties to reach an agreement, particularly since it is likely that the parties may otherwise find themselves reassembling eighteen months later to discuss the same issues as part of an enquiry.