Corporation Tax Operational Consultative Committee (CT OCC)

Minutes of meeting held on 21 June 2006 at 100 Parliament Street, London SW1A.

Present:

HMRC	Representative Bodies
Alex Hardaker - CT & VAT (Chair)	Sebastian Hordern (CBI )
Michael Christy - CT & VAT (Secretary)	Carolyn Fisher (CBI)
Will Parker - CT & VAT	Chas Roy-Chowdhury (ACCA)
Steve Coad – CT & VAT	Lakshmi Narain (CIOT)
	Donald Drysdale (ICAS)
	Jackie Latham (ICAEW)

Introduction and apologies

1. Welcome by Alex Hardaker. Apologies were received from Richard Harries – Large Business Service, Mukesh Gunamal – ACCA, Derek Allen – ICAS, Richard Baron – IOD, Colin Davis – CIOT, Ruth Paynter – CT & VAT and John Roche – Large Business & Employers Customer Unit

Matters arising from minutes of previous meeting (16 January 2006)

Application Note G to FRS 5

2. Representatives reported that most issues had now been resolved and that they hoped to publish detailed guidance in the near future.

Review of Consultative Forums

3. HMRC said that prior to the meeting, it had issued a note inviting representatives’ views on the effectiveness of CT OCC as a consultative forum.

4. There was a brief discussion of the note from which it emerged that Representatives found the forum to very useful and that its effectiveness depended on the current hot topics and agenda items. Representatives did not think that a merger with OCC would be helpful as it was rare for there to be an issue common to both forums.

5. HMRC said that it would welcome further written views by 30th June 06.

Chairman’s Review – Links with Large Business

6. HMRC gave representatives copies of slides relating to the Review of Links with Large Business being led by Sir David Varney.

7. The majority of representatives said they were already involved in one way or another and that they welcomed the open and candid dialogue.

CT Regime - Simplification

8. HMRC said that it had demanding targets to reduce the administrative burdens on business. HMRC said that a number of ideas were already under discussion but invited representatives views on where they thought burdens might be alleviated.

9. Representatives said that they had already raised some concerns about the model being used by HMRC. Immediate suggestions included the capital allowances treatment of expensive cars and capital gains rollover relief. HMRC said that they would write to representatives inviting further suggestions after the meeting.

Aligning Filing Dates

10. HMRC distributed handouts outlining their current thinking following formal consultation on aligning filing dates. Members confirmed that they had reviewed the Small Company Discussion Document HMRC had sent to them by e-mail on 16th June, and that there was no need to repeat the detail contained therein.

11. HMRC said that they have received 107 written responses to the November 2005 consultation document, some of which were followed up by subsequent correspondence. HMRC also met with a large number of different individuals, groups and bodies to discuss the proposals. Views covered a wide spectrum.

12. HMRC reminded the representatives that the purpose of the consultation process is to inform policy development and nothing in the handouts provided and the verbal discussion based upon it, are certain to happen, as some aspects are still being actively debated within HMRC, and Companies House. Equally, the formal consultation was not the end of evidence gathering. Informal discussions were continuing with CTOCC and with other interested parties, to further improve HMRC’s understanding of the customer perspective.

13. HMRC provided the following breakdown of responses:

a) Large companies - The largest number of responses were from large multinational groups of companies, and the great majority of these were very concerned. They pointed out that the task of preparing tax computations for their sort of business is enormous.

b) Accounting and representative bodies - Most responses from the large international accountancy firms and representative bodies were also opposed to an earlier filing date.

c) Small companies - Most of the responses from small business were encouraging. Most favoured alignment of dates at 9 months after the accounting date. Most were supportive of more joined up processes between HMRC and Companies House.

14. HMRC said it is considering excluding large and complex companies from the proposed earlier filing dates by means of not imposing a penalty for not filing by the 9th month but before the current 12th month.

15. Representatives expressed a number of concerns, including:

a) Is this proposal going to be voluntary?
b) The preparation and submission of accounts for Companies House was quite separate both in substance and timing from those submitted to HMRC,
c) The proposals would not in their view be deregulatory,
d) There would be no cost savings to companies.
e) Is there going to be a transitional period?
f) The proposal would encourage businesses to submit incorrect return, as business would have less time to complete return.
g) There might be some issues around dormant companies and companies in winding up/administration.
Representatives also expressed concern that the view of their members, the vast majority of whom advised the smaller business, did not accord with the analysis at 13(c) above.

16. HMRC said an earlier filing date is not of itself deregulatory. But HMRC think that many small companies would prefer to settle their tax and Companies Act obligations as early and simply as possible, to minimise both the amount of management time used and to reduce the period of uncertainty.

17. HMRC also said that it would be simpler for most companies to have a single date to work to and also companies would have to pay and file by the same point for tax purposes. This should make it easier for companies to get their tax payment right, and allow HMRC to integrate our pursuit of tax and the return where they are late.

18. HMRC confirmed that the single filing date would not be on a voluntary basis and there would be no transitional period. However, HMRC’s intention is to give ample time to businesses to adjust to the new requirement.

19. HMRC reminded the representatives about the Lord Carter’s proposals and its obligations to strike a balance between the large and small businesses in implementing any new proposals.

20. Members asked whether the detail of the carve-out for large companies was still open for discussion. HMRC confirmed its desire to discuss this in more detail with interested parties, both internally and in the external stakeholder community. Several members expressed their interest in taking part in those discussions.

21. HMRC noted all the comments made by the representatives and that it was clear that they could not be explored fully within the time allocated for the meeting. The following was agreed:

• HMRC to produce and disseminate a paper on options for the large company carve-out for further discussion with representatives; and
• Once the paper is issued, HMRC to arrange a meeting with the representatives to discuss this issue further.
• HMRC would continue to improve its evidence base on the views of small companies and their agents. Members were invited to help to facilitate this process.

Clubs and Associations

22. HMRC reiterated that they had an administrative practice not to pursue very modest amounts of tax where the amount would be outweighed by the cost of assessment and collection. Therefore it is probable this practice would apply to most clubs and associations so keeping them out of tax net.

23. HMRC confirmed that all of their operational offices were aware of this administrative practice. However, HMRC is currently in the process of reviewing this practice and will report the outcome of the review to the representatives in due course.

CTSA in Practice

2006 Budget Changes

24. HMRC reported that it is currently issuing a budget insert containing all relevant information about the 2006 budget changes affecting the company tax return and giving information and advice on changes in rates. A copy of the insert had been circulated to the representatives for reference.

Letter to companies

25. HMRC are to send a letter to some of the companies that were formed between October 2004 and August 2005. The purpose of the letter is to help these companies get their tax obligations right first time and on time. Along with the letter HMRC are sending a copy of CT41G Notes and an agent authority form 64 8.

Authority for agent to act

26. HMRC informed the representatives that a revised form 64-8 would shortly be brought into use – the new form would enable the duties the authority was to cover to be specified. All completed forms 64-8 should be sent to the appropriate office as stated on the forms.

27. Agent authorisations can also be effected by an electronic procedure available on the HMRC website.

Letter to new companies

28. HMRC reported that from the early autumn it will be sending out letters to new companies that have not yet sent in their first company tax return, with a copy to any authorised agent HMRC have noted in their records. The letter contains the latest information HMRC hold for the company and confirms the key dates by which the company must act to comply with its CT obligations.

AOB

Substantial Shareholding Exemption: COP10

29. HMRC reported that they were considering the request to extend the COP 10 time limit in respect of trading status for the purposes of the Substantial Shareholdings Exemption and aimed to publish the decision on the website in the near future.
CT manual and marginal relief calculator

30. Representatives said that they were very pleased with the consideration and speed HMRC had given to the suggestion to clarify the guidance on the calculator.

Next meeting

31. It was provisionally agreed to hold the next meeting in October.