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As part of an extension of the clearances provided to businesses, from next year's Budget HMRC will provide firms with their view of the tax consequences of significant commercial issues wherever there is uncertainty, regardless of when the legislation was enacted.
HMRC are committed to responding to clearance applications within 28 days as the norm.
HMRC are to run a clearances pilot from January 2008. This will encompass:
- business in the retail sector whose tax affairs are handled by the Large Business Service; and
- business, across all sectors, whose tax affairs are handled by offices within the North West and Midlands group of Local Compliance.
The second group includes businesses whose main place of business is in or whose tax affairs are dealt within, the counties of Cumbria, Lancashire, Merseyside, Cheshire, Staffordshire, Derbyshire, Greater Manchester, Warwickshire, Worcestershire, West Midlands, Shropshire and Herefordshire. For these businesses, HMRC will:
- remove the restrictions in the last four Finance Acts to which direct tax clearance applications were subject under Code of Practice 10;
- ask them to demonstrate the commercial significance of the transaction where the clearance relates to direct tax legislation older than the last four years;
- respond within 28 calendar days, as the norm;
in advance of the full implementation of the clearances proposal around Budget 2008.
Businesses which partially fall within one of these definitions and have a clearance application that they wish to make during the pilot period, should contact their client relationship manager or local tax office.
The current arrangements for substantial shareholdings exemption and stamp duty land tax, where the four Finance Acts restriction has already been removed, will continue, with all businesses able to make clearance applications in those areas.
Businesses in LBS Retail sector should continue to send their applications to their client relationship manager during the pilot, and HMRC will ask these businesses to use the draft guidance to replace Code of Practice 10 and VAT notice 700/6 in preparing their application.
Businesses handled by Local Compliance's North West and Midlands group will submit their applications, using the draft guidance, to a central team. Details of the team address and the new draft guidance will be published in December.
HMRC say that the purpose of the pilot is to enable them to evaluate new processes to handle clearances in a more consistent way.
Grant Thornton's Francesca Lagerberg said that this follows on from the many proposals for larger businesses as part of the Varney Review.
She added that 'clearances have been a source of some contention of late. The main issues tend to be, are they dealt with swiftly enough for the fast moving business community? Are they able to provide certainty without onerous administrative burdens? Are they looked at commercially without the answer just being “no”?
'This pilot is a good way to check whether the new approach will provide the right level of improvements and is likely to be welcomed by the larger business community.
'However, the pilot is also extended to all businesses which is good news for the smaller corporates who have rightly complained that they have, until now, been overlooked by the types of reforms championed by Varney'.
