BUDGET IN DEPTH: FOREX grumbles continue
Tax experts were yesterday dismayed that they did not receive further documents in the Budget clarifying forthcoming changes to the foreign exchange rules.
The Treasury intends repealing the foreign exchange rules and replacing them with the loans relationships legislation and its now notorious line 13.
Line 13 was intended to be used to define which foreign exchange transactions have been made for ‘unallowable purposes’, and a full definition was promised among the Budget press releases.
However, experts have complained the clarification did not appear and they remain as unhappy with the proposed changes as when the idea was first raised in 1996.
Derek Jenkins, a partner at PricewaterhouseCoopers, said: ‘We haven’t seen the document that was promised.’
The changes to foreign exchange legislation are intended to root out tax avoidance among companies moving large sums of foreign currency.
But line 13 has been widely criticised for being ‘untested’ and badly drafted, and equating ‘unallowable purposes’ with tax advantages and avoidance.
Experts say tax advantages cannot always be assumed to be avoidance.
Roger Muray, a tax partner with Ernst & Young, said: ‘There’s still a concern and the main concern is that it is so badly drafted.’
It remains to be seen when the Revenue will release the document clarification.