Long-awaited rules finally unveiled by the Inland Revenue last week will do little to help British industry use up its #7bn advance corporation tax mountain when the tax is abolished in April, experts have warned.
The ‘shadow’ ACT rules are intended to provide relief for surplus ACT built up by British companies which they have been unable to offset against mainstream corporation tax.
But Maurice Parry-Wingfield, tax consultant at Deloitte & Touche, slammed the new rules as ‘incomprehensible’ and said they would do little to help companies. He warned that even the limited relief they offered could be temporary as their existence was guaranteed only until the end of the current parliament.
Companies would then lose the right to offset their ACT surpluses against mainstream corporation tax altogether, opening up the government to accusations of double taxation.
Parry-Wingfield said many companies had been busily engaged in tax planning to reduce the size of their ACT surpluses.
Robert Turnbull, KPMG tax partner, urged companies to take immediate steps to reduce their surpluses before April, although he admitted publication of the ‘shadow’ rules had come too late for many.
The long delay in their publication and their secret circulation has provoked criticism from the tax community. But an Inland Revenue spokesman said this week that the new rules would ‘substantially preserve companies’ existing expectations in respect of the recovery of past surplus ACT’.
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