Interest rates
The rate of interest charged on underpaid instalment payments of corporation tax changes from 5.75% to 6%.
The rate of interest on overpaid instalment payments of corporation tax, and on corporation tax paid early (but not due by instalments) changes from 4.5% to 4.75%. These new rates of interest take effect from 20 November 2006.
HMRC press release dated 16 November 2006
Large business review
The Chancellor recently announced the outcomes of the 2006 Review of Links with Large Business, chaired by Sir David Varney, former chairman of HMRC. The report proposes a framework within which business and HMRC can work together to improve the nature of the relationship. The eight key proposals contained within the report are:
- The introduction of a system of advance rulings to give UK and international business certainty about the tax consequences of significant investments and corporate reconstructions. From pre-Budget report 2007 HMRC will provide binding rulings across all relevant taxes to businesses that provide clear plans for investment.
- The extension of existing clearances so that as normal business practice, HMRC will provide businesses with their view of the tax consequences of significant commercial issues whenever there is uncertainty. By the 2008 Budget, businesses seeking HMRC's view on significant issues both pre and post transaction will receive a binding HMRC view within 28 days as the norm.
- The implementation by 31 December 2007 of an approach to enquiries which concentrates on risk areas so that resources are focused on resolving contentious issues more efficiently and quickly than is currently the case.
- A comprehensive approach to the settlement of transfer pricing enquiries, based on guidance to be developed with business and published by the end of 2007 so that, subsequently, matters will be settled within 18 months as the norm. Only those cases which are both particularly complex and high risk will continue beyond 18 months. It is expected that such cases would take no longer than three years to resolution or the point where preparation for litigation starts.
- HMRC will make it clear to business how contentious issues will be resolved in a more efficient, less confrontational way and ensuring the mechanisms for dispute resolution work effectively.
- HMRC senior management will take responsibility, with immediate effect, for the active management and resolution of tax enquiries that remain unsettled after 18 months of enquiry.
- With effect from the 2007 Budget, HMRC will be accountable for taking the business perspective into consideration in everything they do from implementing policy decisions to designing systems and processes.
- The introduction of a programme, agreed with business representatives, to revise and update the various forms of guidance of relevance to large business. From 2008, all such HMRC guidance will be developed in conjunction with business.
An advisory board will be established to include senior representatives from business and HM Treasury to oversee delivery of the proposals and report progress. A delivery plan is being developed and will be published prior to the 2007 Budget.
Praising the creation of the large business advisory board, Chris Sanger, Ernst & Young's head of tax policy, said that this would 'be a helpful addition to the policy debate and should ensure that the harsh realities faced by businesses in complying with our tax system are tackled and addressed'.
Overall Chris said that 'these initiatives, and the regular updates, could herald a promising new era of co-operation and efficient compliance, where resources of HMRC and companies are deployed at the key areas of concern and not diverted by the inefficiencies of an aging tax system'. Similarly, Grant Thornton's national head of tax, Francesca Lagerberg said that 'what businesses have been looking for is the speed to certainty and this is a very positive step in the right direction'.
Welcoming the review, CBI director-general Richard Lambert said that the relationship between business and HMRC has been a cause for growing concern recently, but 'what is promised now is a more transparent, open and predictable approach, and one where problems will be dealt with in a timely manner. He cautioned that administration was just one element of the tax system and that to enhance the UK's international competitiveness, 'the Government must also look at lowering the overall tax burden and reducing the complexity and costs of compliance'.
Paul Eagland, head of tax at BDO Stoy Hayward was pleased with the proposals that 'low risk' businesses will be subject to less HMRC enquiries than high risk ones, as this would reduce 'unnecessary burdens on businesses'.
HMRC press release dated 17 November 2006
Interventions review
The much reviled interventions letters pilot scheme is to be reviewed by HMRC. Hailed by some publications as HMRC backing down, this is not really the case at all. An HMRC spokesman confirmed that 'nothing has been scrubbed. The intervention pilots have shown HMRC how we can make the enquiry process more effective for both customer and department. We want to share that learning with tax advisers and others in constructing the next round of pilots'.
Advisers' complaints hinged on the fact that the interventions pilot was introduced in a rushed way with no consultation. It seems that, in the light of the pilot, HMRC intend to take account of this criticism and talk to advisers. Francesca Lagerberg says that HMRC are 'not backing off the interventions scheme, but plan to consider the results of the pilot and discuss the scheme with advisers'. This is all to the good, and is perhaps another indication that HMRC are listening to advisers.
Pre-Budget report
Pre-Budget report will be on Wednesday 6 December.
Let's talk
HMRC have announced a programme of consultation in order 'to deliver a more effective service to local businesses and individuals'. The series of consultations on the future shape and direction of the department will begin in December. These consultations are designed to progress the consolidation of the HMRC estate and the co-location of staff nationwide following the merger.
HMRC have a government target of 12,500 net staff savings by April 2008, which it is on its way to meet and is working towards a target to reduce annual estates costs by £30 million by then. The merger has provided the opportunities to achieve these targets. The department now has more buildings than it needs, and co-locating staff makes good business sense whilst providing the opportunity to streamline processes and eliminate duplication.
Included in these consultations is a commitment by HMRC to try to improve the relationship between HMRC and tax advisers. Francesca Lagerberg, head of the national tax office at Grant Thornton, said that this 'offers a glimmer of hope'. The proposal is to introduce a 'proper agents' helpline' which, says Francesca, is something that agents have been requesting for a long time. This helpline would be manned by people who have received enhanced training enabling them to give fuller answers to agents' queries. There would in addition be a more senior HMRC person available, akin to fully trained Inspectors of yore, to deal with more complicated enquiries.
HMRC are also considering customer relation managers to take responsibility for the relationship between HMRC and tax advisers at a local level. Francesca says that advisers have long bemoaned the loss of the degree of contact that they used to have before so many HMRC offices were closed and people relocated. The idea is that the customer relations managers would reinvigorate that relationship, providing a local contact for advisers with whom a helpful relationship could be built. This is very encouraging, says Francesca, and it will be interesting to see how it works in practice. The fact that HMRC are talking about it is good, as it shows 'renewed recognition of the role of tax advisers'.
HMRC news release dated 16 November 2006
