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.