Corporate Tax Operational Consultative Committee
Minutes of meeting held on 26 January 2005 at 100 Parliament Street
Present:
Tax Personnel |
Representative Bodies |
|---|---|
| Alex Hardaker - Revenue Policy (Chair) | Sebastian Hordern - CBI |
| Kathy Prior – Revenue Policy (Secretary) | Chas Roy-Chowdhury - ACCA |
| Steve Mole – Service Delivery Support | Donald Drysdale - ICAS |
| Ruth Paynter – Business Services | Colin Davis – CIOT |
| Derek Easey - Business Services | Graham Wheeler - IOD |
| Nigel Eastaway – CIOT | |
| Ian Young - ICAEW |
Introduction and apologies
1. Apologies were received from Carolyn Fisher – CBI, Mukesh Gunamal - ACCA, Jackie Latham – ICAEW, Derek Allen – ICAS, Richard Harries - Large Business Office, Sally Littlejohns - Large Business Office
Matters arising from minutes of previous meeting (15 September 2004)
HMRC Bill - informal consultation
2. The draft bill has now been published and the Government has committed to consultation before the Budget on the compliance powers of HMRC.
Other Fora
3. The Large Corporates Forum (LCF) met on 12 January when they discussed the formation of the new Large Business Service. The minutes from the previous LCF meeting on 20 July 2004 are available on the IR website.
Application Note G to FRS 5
4. The Urgent Issues Task Force (UITF) issued a guidance note with comments due by 11 January. Representatives said there had been some adverse comments and UITF may need to think again.
5.95 Small Businesses discussion paper
5. Representatives said that the contents of this document had come as a surprise. They had assumed that it would contain more specific proposals for the re-alignment of the self-employed and corporate/director tax regimes. The Revenue explained that the Treasury now had a dedicated Small Business Team that was in the lead on 5.95 issues. In addition, HMRC had set up a small business team under Theresa Middleton that intended to focus on lightening the regulatory burden.
6. The discussion paper issued at PBR was intended to start a debate as to what the underlying problems were, with a view to building consensus about potential solutions. Consequently, it was likely that changes and solutions would emerge over the medium term and might take even longer to be fully implemented. Representatives said that as a principle they would be happy with a phased approach assuming full consultation with business and their advisers.
7. The Revenue expressed their gratitude for the help received from a number of external advisers – Francesca Lagerburg and Ann Redston in particular.
Veltema
8. The Revenue issued guidance in December 2004, which was welcomed by the tax and accounting bodies.
R & D Tax Credits
9. Representatives still had concerns on how this is working in practice. They said that the fundamental difficulty lay in the Revenue trying to interpret / apply DTI guidelines. Representatives suggested the setting up of a separate consultation forum specifically for the purpose of considering practical & operational issues. The Revenue agreed to consider the idea – either as a part of Working Together or as a sub-group of CTOCC.
Euro Preparations
10. The Revenue felt some further clarification of the plans for the introduction of the Euro was necessary following comments from representatives at the September CTOCC meeting. The date the Euro is adopted (E day) will be on 6 April of the year of introduction, to coincide with the start of the tax year. Any transaction up to E day can be in Sterling but after then must be in Euros. There will be a fixed exchange rate for up to two years prior to the introduction of the Euro and companies will be able to submit returns in Euros before E day.
11. Representatives felt there could be difficulties for the SME sector who do not have sophisticated accounting systems. The Revenue will advise the Treasury that CTOCC members should be placed on the consultation list for their publication "Euro Preparations Managed Transition Plan", that will explain the plans in more detail.
Agenda items for January 2005
CTSA in practice
CT600
12. Version 2 (both the full and new short version) of the CT600 return form were available from November 2004, and the CT600 Supplementary Pages were issued in December. The Revenue asked for any comments on the short return form. Representatives felt the short return form was good and that version 2 of the full return form was much better than version 1.
CT - Online
13. Version 2 of the CT600 was now also available online and the number of companies filing online is steadily increasing. The target date to accept company accounts and computations in XBRL is now November 2005. Work is beginning on looking at ‘Structured Action Requests’ and ‘Structured Enquiry Forms’ for companies. It is anticipated that they will be available during 2006.
Communications with agents
14. The Revenue were considering how best to communicate with agents as part of its Business Channel Strategy. At present, Budget Inserts are not sent to agents but are enclosed with the notice to deliver that goes to the client. Representatives were asked if agents would like to receive the Budget Insert direct and if so how? They agreed they would prefer direct via email so they can easily pass the information on through their own networks.
15. An electronic authorisation route is expected to be available for agents later this year, although the paper 64-8 route will continue. The electronic route will have security features with it and the Revenue is considering if additional security is needed around the paper 64-8 route. Representatives felt there was no need for added security.
Compulsory notification of new companies.
16. A revised New Company Details form CT41G, issued to all newly registered companies, is planned for later in 2005 as a result of S.55 FA 2004. When a CT41G is issued there will also (as at present) be an agent authorisation form (64-8) issued along with new Notes for New Companies (CT41G Notes) explaining the company's obligations. From June 2005 reminders will be issued to companies who have not completed any form CT41G or the dormancy review form CT204 issued to them warning of potential penalties. Representatives said the timing of issue of form CT41G was fine for companies immediately active but not for those registered by company formation agents.
17. The Revenue explained that companies should tell the Revenue when they are not immediately active and give a date when they expect to start if they know it. Revenue records will be amended in line with what the company says; a prompt for relevant details will be issued as the period of expected dormancy comes to an end and in due course a notice to deliver a company tax return. Unless the accounting period changes no further notice of accounting date should be necessary.
2004 Pre Budget Report
18. The Revenue reminded the meeting that they no longer had the lead for policy development issues (this is now with the Treasury) and so were now able only to consider possible policy maintenance or operational implications arising out of the PBR and Finance Bills. Representatives expressed concerned about the PMG’s remarks on retrospection in connection with employment-related securities and NICs. For example, if a return was submitted on current legislation and this was subsequently changed what would be the outcome?
19. The Revenue said that the PMG’s comments were in respect of employment taxes and so affected individuals and not companies. Consequently this was an issue for another forum.
Associated companies
20. The Revenue explained its position on the associated companies’ rules with the hope that representatives could take this into account when making Budget representations or other requests for change.
21. In the Revenue’s view, the current rules were well understood and easy to operate. Changes can be considered if there is sufficient evidence to demonstrate that the rules are causing significant problems for business. But any changes are likely to affect nearly 100 other pieces of legislation. Consequently changes would be difficult and costly to make.
22. Furthermore, as the associated companies’ rule prevents fragmentation
of profits to prevent business accessing lower corporation tax rates,
complex anti-avoidance measures would be required to prevent abuse in
any revised set of rules. This would inevitably lead to higher compliance
costs for both business and the Revenue. The Revenue distributed an article
from British Tax Review issued in 1978 in which Denzil Davis who was a
Treasury Minister at that time, explained the reasons for not amending
the associated companies’ rule.
23. Nonetheless, representatives felt the rules were so wide that they caught businesses that were not trying to fragment their profits. In their view, they felt that Extra-Statutory Concession C9 could be amended to introduce the desired changes. The Revenue disagreed and reminded representatives that it was almost impossible to consider amending ESCs until after the outcome of the Wilkinson case. They explained that following the judge’s comments in the Wilkinson case on its powers to make ESCs, no changes or new ESCs could be considered until that issue was resolved. The Wilkinson case is due to be heard by the House of Lords later this year.
AOB
24. There was no other business.
Next meeting
25. It was provisionally agreed to hold the next meeting on 26 May 2005 but this was cancelled and the next meeting is scheduled for 21 September.
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