.png)
.png)
Registration delays
I am flabbergasted that HMRC has the nerve to make a public statement that registration delays have now been dealt with (News update, Taxation, 13 May 2021, page 5).
I am a small practitioner and have VAT applications that take almost six months to process. I have a VAT transfer of going concern application from January 2021 that has not yet been processed.
I have a client whose name has changed on their VAT registration, for no apparent reason, and clients whose bank account details have been changed without protocols being properly observed.
The online query simply does not work and the people try to be helpful on the telephone helpline but once they cannot deal with a query, it just dies a death, as there is no way to re-contact them. Clearly writing to the written enquiries team is the work of a very patient man.
Somebody needs to face up to the fact that the whole system is in absolute turmoil and is not functioning and is causing a lot of stress. The idea of moving forward to the other aspects of making tax digital is laughable.
It is hoped that if this information appears in Taxation magazine, someone at the senior level might take some action or admit that there are enormous issues.
R M Levitt, Mill House Bloodstock Services Ltd.
Tax underpayment
I have recently read with interest the article by Keith Gordon ‘Trust in the balance’ (Taxation, 6 May 2021, page 20). I have had a similar event, this one concerning a client’s 2019-20 tax return which I thought might be of interested. There are some differences between the cases as in my case the penalty was readily withdrawn but another issue arose that I had never been aware of (if it is true, that is).
We submitted our client’s 2019-20 tax return online on 7 December 2020. His tax liability was £2,573 and there were no payments on account in that year, so this was his entire tax liability for the year in question. As in the case in Keith’s article, we had not ticked the appropriate box on the tax return, thus indicating that the underpayment should be collected through the 2021-22 tax code.
The first indication of a problem was the receipt of a penalty notice, dated 14 April 2021 but not received until the end of that month. After a few days, I prepared myself for the now customary long wait on the agent helpline and rang HMRC. I spoke to a very helpful officer, who immediately cancelled the penalty but then went on to advise that she could not amend the tax code to collect the underpayment. It was not that she wouldn’t do so but that the system would not let her do so. I was astonished to hear this. It has always been possible to have an amendment made to a tax code. In fact, HMRC regularly does this after a change in a taxpayer’s circumstances. Despite my persistence, she was adamant that the system would not allow her to make the adjustment to collect the previous year’s underpayment.
I wrote a letter of complaint on 6 May but have not yet received a response. I have now lodged a formal appeal against the incorrect tax code.
Graham Stapleton FCA, Howard & Stapleton.
Multiple completion contracts in share buybacks
I was interested to read Russell Eisen’s experience with a multiple completion purchase of own shares (POS) transaction in Feedback (Taxation, 29 April 2021, page 26).
I have been advised on numerous POSs, including those implemented through a multiple completion mechanism. Many of these have involved highly reputable law firms and sometimes eminent tax/legal counsel. In that time, I have only experienced one instance where the lawyer initially thought that a multiple completion POS might be unlawful but they eventually conceded that it could be done.
Multiple completion POSs have been around for many years. Formal acknowledgement and acceptance by (as it was then) the Inland Revenue goes back to April 1989. The Institute of Chartered Accountants in England and Wales technical release 745 issued in April 1989 at paragraph 10 (b) states:
‘They [the Inland Revenue] take the view that as the beneficial ownership of the shares is regarded as passed at the date of the contract, a disposal for capital gains tax purposes will have taken place by the vendor at that time notwithstanding payments at later dates.’
If multiple completion POSs were unlawful or potentially unlawful, I would have expected HMRC’s legal team to have made some form of pronouncement on this point by now.
Further, as many will be aware, HMRC must have actually considered this issue several years ago when it looked at the question of voting rights in relation to the shares that were still to be purchased after the date of the POS agreement. HMRC took the view that while beneficial ownership of the shares can pass on ‘day one’ (provided the agreement is properly drawn-up), the seller of the shares cannot be deprived of their voting rights whilst they still had legal ownership of the shares and could attend shareholder meetings.
This becomes a potential problem in relation to the ‘30% plus connection test’ in CTA 2010, s 1042 and s 1062 (2)(c). Where there is a risk of the connection test being triggered, HMRC is normally prepared to accept that this can be remedied by converting the ‘remaining’ shares into non-voting ones.
The professional bodies have also had discussions with HMRC in relation to multiple completion shares and entrepreneurs’ relief/business asset disposal relief. HMRC also comment on multiple completion transactions in its Capital Gains Manual at CG5865. In my view, if HMRC’s legal team had any concerns about the legal validity of a multiple completion POS, I am pretty sure this would have been voiced by now.
The fact is that many lawyers, accountants and tax advisers continue to advise on multiple completion POSs in suitable cases. They are not tax schemes but simply an arrangement that enables companies to comply with the Companies Act 2006 requirements where there are insufficient cash funds to pay the full consideration for the shares on ‘day one’. Multiple completion deals would not be required if the Companies Act 2006 permitted shares to be sold for a deferred consideration. Given the large take-up of multiple completion transactions, perhaps those responsible for company law reform could consider appropriate changes to this area.
For the relatively few who are uncomfortable with multiple completion arrangements (and there may be a number of reasons why this might be the case, including ‘security’ issues), it is always possible to use the ‘Newco’ buy-out route.
Peter Rayney FCA CTA (Fellow) TEP, Peter Rayney Tax Consulting Ltd.
