CIoT warns on new new targeted anti-avoidance rule

CIoT warns on new new targeted anti-avoidance rule

CIoT has warned that businesses undertaking some commercial transactions will face unnecessary uncertainty because of a lack of clarity about the breadth of a new anti-avoidance tax rule

THE CIoT has warned that businesses undertaking some commercial transactions will face unnecessary uncertainty because of a lack of clarity about the breadth of a new anti-avoidance tax rule.

The Finance Bill 2016 introduces a new targeted anti-avoidance rule (TAAR) for certain distributions of share capital made on winding up a company. The aim is to tackle a small number of taxpayers who are seen to be exploiting the current rules to reduce the tax that they pay.

The CIoT has told HMRC that the TAAR, which is widely drawn, potentially encompasses a very wide a range of legitimate commercial situations where tax avoidance is not likely to be the motivating factor.

The new TAAR does not have a formal advance clearance procedure, whereas various other parts of UK tax legislation applicable to significant transactions do. This means that taxpayers will have to self-assess whether the TAAR applies or not.  A clearance procedure would enable taxpayers to obtain a ruling from HMRC in advance of a transaction.  This would greatly reduce uncertainty.  Instead, business can only use the wording of the legislation and HMRC’s guidance to decide for themselves whether the TAAR applies or not.

Tina Riches, chair of the CIoT’s owner managed business sub-committee, said: “The business community would prefer a more narrow use of the TAAR so that legitimate commercial decisions and transactions are not delayed or obstructed.

“As it stands, without an advance clearance procedure, it will be crucial that clear guidance on how HMRC plan to interpret the legislation is made available by HMRC. This should be published as soon as possible, even if in draft, in order to minimise the uncertainty that the legislation has created.

“Despite our view that having to rely on HMRC guidance is a very unsatisfactory feature of the current UK tax system, businesses need certainty about the sorts of transactions that HMRC consider are caught by the legislation.

“We have therefore sent HMRC 18 examples of transactions provided by our members that we think are suitable for guidance and on which HMRC’s view is needed”.

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

Professional Services Why Professional Services Firms Should Ditch Folders and Embrace Metadata

2m

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

6m

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine

Accounting Firms Turn Accounts Payable into a value-engine

1m

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021

Making Tax Digital Digital Links: A guide to MTD in 2021

2m

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource