TaxPersonal TaxBudget fails to dispel currency tax fears

Budget fails to dispel currency tax fears

Fears that changes to the foreign exchange rules proposed by the Inland Revenue could cost UK businesses millions in lost tax relief have not gone away despite Budget day announcements.

Gordon Brown announced that consultation will continue into an anti-avoidance measure, but with no details published experts believe the Revenue could still push ahead with a new test that could hit business hard.

Derek Jenkins, a partner at PricewaterhouseCoopers, said: ‘We are waiting to see what will be in press releases expected this week.’

At a confidential meeting in January with industry representatives, Revenue officials indicated there was a desire to scrap legislation that allows tax relief on foreign exchange losses in favour of using the notorious paragraph 13 test for ‘unallowable purposes’ from the loans relationship rules.

The Revenue believes the old foreign exchange rules are abused for tax avoidance and paragraph 13, widely thought to be badly drafted and untested, is being touted as a proposed solution.

However, a Budget statement spoke of ‘targeted anti-avoidance measures’ leading observers to hope that any new policy will be more refined than paragraph 13.

Links

Brown delays decision on forex relief

Currency tax fear hits business

AccountancyAge.com: Budget 2001

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