TaxCorporate TaxTreasury ignores Institute’s CGT pleas

Treasury ignores Institute's CGT pleas

The Treasury has flatly rejected a plea from the Institute of Chartered Accountants in England and Wales to limit anti-avoidance measures that the accountancy body fears will wreck the new capital gains tax relief for companies disposing of substantial shareholdings.

The ICAEW joined the Confederation of British Industry in lobbying MPs on the Commons Finance Bill Committee for amendments to a provision designed to enable companies to restructure without facing a tax charge.

Tory MP and accountant Mark Hoban said he received representations from the Institute warning the clause contained the anti-avoidance measure ‘so widely drafted that it appears to catch almost any disposal’.

He complained that if the Revenue strictly applied the clause it ‘would risk emasculating a relief which business regards as very important’.

Liberal Democrat shadow Treasury minister Edward Davey welcomed the relief but warned: ‘If we are creating a general anti-avoidance mechanism, about which there is a lack of clarity and uncertainty, the benefits from the overall policy will not be so easily realised.

‘The situation may arise where companies have been advised that a disposal would be exempt, but it turns out not to be.’

And Tory paymaster General Howard Flight called for a formal clearance process to guarantee companies that what they proposed would qualify.

But economic Secretary Ruth Kelly said the amendment ‘would remove a provision that will protect the regime against exploitation’. She said the Treasury was ‘particularly concerned that schemes could be created for converting untaxed income into tax-free capital gains’

Kelly said detailed guidance was being drawn up on how the Revenue will interpret the provision. This is to be published as a statement of practice to allay companies’ worries.

She said experience had shown a formal vetting process would be expensive because it would be used unnecessarily, but the Revenue would give advice.

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