Companies awaiting Inland Revenue clearance to undertake millions of pounds worth of share buybacks have been facing frustrating delays due to the closure of the section that deals with them for a ‘summer holiday’.
Buybacks have been in vogue among British companies this year as they attempt to offload excessive equity. Tomkins announced a £418m buyback in March, and Safeway a £290m buyback in May.
Revenue clearance is required over whether shareholders have to pay income or capital gains tax on buyback proceeds – a decision that often decides a deal’s success.
Accountants attempting to contact the ‘purchase-of-own-shares’ section of the Revenue to check on the progress of clients’ applications have been greeted with a cheerful answerphone message telling them the whole section has closed down ‘for the annual summer break.’
Embarrassed Revenue officials hurriedly re-opened the section this week after intervention by Accountancy Age. But it was too late to satisfy one accountant waiting for clearance on three buyback applications who said it had been closed for three weeks.
Frank Haskew of the English ICA’s Tax Faculty said the closure was a ‘national disgrace’ and questioned why staff could not rota holidays.
Ernst & Young tax partner Heather Self said it was ‘completely uncommercial’.
She said big companies undertaking buybacks often needed clearance in days. The Revenue said applications would be dealt with within the statutory 30 day deadline.