Corporate Tax Operational Consultative Committee

Minutes Of Meeting Held on 17 July 2002 at 22 Kingsway, London WC2

Present

 
Inland Revenue Representatives

Judith Knott (Revenue Policy / Chair)

Richard Baron (IoD)

Mark Bravery (RP / Secretary)

Colin Campbell (ICAEW)

Steve Coad (Business Services)

Colin Davis (CIOT)

Dick Medland (LBO)

Donald Drysdale (ICAS)

Susanna Wright (SDS)

Nigel Eastaway (CIOT)

 

Carolyn Fisher (CBI)

 

Sebastian Hordern (CBI)

 

Lakshmi Narain (CIOT)

  Chas Roy-Chowdhury (ACCA)
  Simon Sweetman (FSB)
  Graham Wheeler (IoD)

Introduction and apologies

  1. Apologies had been received from Mukesh Gunamal (ACCA - Chas Roy-Chowdhury deputising), Gordon Slater (CBI), Graham Black (IR - SDS) and Sally Littlejohns (IR - LBO). Simon Sweetman was welcomed to the committee

.Minutes of previous meeting (23 April)

  1. These had been agreed and published on the Inland Revenue website.

Matters Arising

  1. The April minutes had recorded that the compliance regime for small companies would be an agenda item for this meeting. The Revenue explained that they were still considering this matter internally, hence the item's absence from the agenda - but that it would be an agenda item for a future meeting.

Reviews of Links with Business

  1. The Revenue's Large Business Office (LBO) had set up working parties to take forward a number of the report's recommendations. Much of this work arose from Recommendation 6 on 'faster working', or 'new compliance process' as it was now termed. Various businesses were participating in the trial. A preliminary evaluation would take place in the autumn, with a further evaluation next spring. The benefits of the new process would be fully revealed only when returns for the relevant periods have been examined.
  1. Work was also proceeding on Recommendation 9 (a review of Code of Practice 10, which deals with Revenue advice on interpretation of the law). Input from the Large Corporates Forum and the British Retail Consortium had identified further issues. This may lead to the scope of the review being widened and/or a new timetable being drawn up. It was possible that COP10 would be extended to cover smaller businesses. Representatives said they would be interested in seeing the outcome of the review.

  2. Plans are well advanced to launch the Business Tax Forum (Recommendation 16). A formal remit had been agreed. Jon Symonds of Astra Zeneca (and Chair of the 100 Group) will jointly chair the co-ordinating group with Dave Hartnett of the Inland Revenue (head of Revenue Policy). The CBI will nominate two further representatives to sit on the co-ordinating group. It was hoped that the first meeting would take place in September.
  1. More generally, work was progressing well on each of the 40 recommendations. An Action Plan would be published shortly. The Revenue would invite the Action Manager to the next meeting to give a fuller report.

Quarterly Instalment Payments (QIPs)

  1. The Revenue's guidance on estimating profits had been published on their website on 28 June. Feedback so far had been generally positive. Representatives welcomed the guidance - though some commentators felt it didn't go quite far enough and one member commented that many of the points made in the guidance had already been assumed. The Revenue said that even stating the obvious could provide welcome reassurance to some businesses.

  2. The CBI had written to the Revenue asking if companies could have the option of a 'safe harbour' from penalties by basing their QIPs on the previous year's profits. The Revenue said that the CIOT had previously proposed this. The Revenue hoped that the guidance would offer the necessary reassurance. The 'safe harbour' proposal detracts from the current year (CY) principle of instalments, under which companies match tax payments with rising or falling profits. A change in legislation should not be expected - the emphasis instead must be on getting the CY system to work more easily for companies. That was the purpose of the guidance.

  3. The guidance referred to the use of management accounts. The CBI pointed out that many businesses do not produce these accounts in such a way that they readily adapt to tax purposes. The CIOT added that a company would be aware in any case if its profits were rising or falling.

  4. The Revenue re-emphasised that for a penalty to become chargeable, there had to have been a reckless or deliberate failure by the company to pay the right amount. Basing QIPs on last year's profits would be unlikely to meet these criteria - although it could in some extreme cases. From a purely practical viewpoint, the Revenue's interest is in protecting the Exchequer from any attempt to "opt out" from paying QIPs, not with charging penalties for their own sake. Representatives appreciated this, but asked to be kept informed of the penalty situation generally.
  1. The CBI added that QIPs tended to fall due at points in the year when interim results were being drawn up. If the payments were due just 2-3 weeks later, this would significantly ease pressure on companies.

  2. The IoD asked if anything had emerged from the study of CT compliance costs. Getting QIPs right could impact on those costs. The Revenue said that the survey's results were with Ministers.

CTSA in practice

  1. There were a number of issues relating to the Inland Revenue website. At the previous meeting, a question had been raised about searching for a particular numbered paragraph in the on-line guidance. This cannot be done using the 'quick search' facility on the homepage. The Revenue had decided not to facilitate this type of search because of the number of pages involved. There were about 10,000 main pages on the site, and a further 70,000 pages in the manuals. 90% of searches were on the main pages. If quick searches could also be made in the manuals, the search engine would function much less efficiently. However, a search for paragraph numbers could be made in the manuals section of the site.

  2. Representatives had also asked whether all new material on the website could be flagged. The Revenue said that, although this was possible in principle, it would be costly in resource terms and there was a danger of clogging up the 'what's new' area with enormous numbers of minor items. In the meantime, work was ongoing to improve the site. Also, a new senior appointee, who will oversee the development of guidance, will have an interest in material on the site. The highlighting of new material would await these developments.

  3. One representative said it was difficult to find some new material, for example on Stamp Duty. He suggested that there be a 'What's New' section containing general information, plus a specialist section (perhaps updated weekly) for tax practitioners. The Revenue said it was currently possible only to flag major tranches of new material, but a more comprehensive service would follow in due course. Another representative observed that the new Customs & Excise system had, if anything, rather too much detail.
  1. The Revenue reported that there were now direct links on the site between the CT and LBO sections. There was also some new guidance on how to calculate CT, which would be superseded in due course by an automated marginal relief calculator. The Revenue apologised for a brief period when draft material on the 2002 CT return had been accidentally published on the site before being withdrawn.

  2. Hard copies of the draft 2002 return form were distributed to those present. The Revenue apologised for the non-sequential numbering of some boxes. This would be regularised in due course when a wholly new version of the form (rather than the revised imprint before the committee) was produced. This would be more costly, but the Revenue is looking seriously at doing it for 2003. The Revenue were willing to take a broader look at the usability of the form as part of that process, and would welcome written suggestions for improvements by the end of September. The process for producing a new version would be discussed in more detail at the next meeting. The Revenue would like to set up a forum in the autumn to discuss possible improvements to the CT return form with customers. The committee was asked for nominees to take part.

  3. The form now ran to sixteen pages. (Unfortunately it had not been possible to resist expansion from twelve.) Following changes brought about by the 2002 Finance Act, there were new boxes to cover intangible assets, cross-border royalties, charity relief, community investment relief, ring-fence trades, R&D expenditure, vaccine research and capital allowances for green technology.
  1. There were also new supplementary pages for cross-border royalties and ring-fence trades. The existing supplementary page CT600E (for charities) would be extended to cover Community Amateur Sports Clubs. There were some changes to the description of Case III income, and to the address box (to stop companies entering a business address rather than the registered office). Finally, the advice on repayments had been overhauled, one change being that companies could now opt to have repayments held back to set against a later liability.

  2. One representative asked whether the form still needed to cover repayments of ACT (abolished in 1999). It was important to remove out-of-date material to keep the form to a manageable length. The ACT box was there in order to allow companies to use the current form when making a return for an earlier year. The Revenue said that all versions of the CT600 are compatible with earlier years. However, it is likely that any wholly new version would only be usable for current or subsequent years - so out-of-date material would be eliminated at that point.
  1. Any further comments on the 2002 changes should reach the Revenue by 31 July. To facilitate this, the committee secretary would shortly forward an electronic version of the draft form to representatives.
  1. In the general context of guidance, the CIOT asked whether the Revenue's extra-statutory concession C9, on control of associated companies, could be revised following last year's judgement in the Newfields case. It was accepted that the Newfields case had not changed the law, merely confirmed the Revenue's interpretation, but it had raised the profile of this issue both among companies and inspectors. Many business partners (for example, in film partnerships) were unaware of companies controlled by other partners, yet they needed to know about them in order to complete their returns. (This could also be difficult where some partners are non-resident.) Guidance would be welcome on what is expected of companies when completing returns.
  1. The Revenue said they were aware of the issue, for example in the venture capital field. But it may be difficult to consider changes before the Law Commission review of partnership law was complete. Nevertheless, the Revenue were willing to make this an agenda item for the next meeting.

E-Business

  1. The controlled take-up of the liabilities and payment service was now under way. (The initiative had won a Government computing award.) Some 200 companies were now able to access their data. The full launch would take place shortly. The agents' service was now also live, and response generally had been encouraging. The registration process (through the government gateway) had not been popular, but this had been unavoidable. Letters had been issued to those agents with over a hundred clients. A few of these couldn't register, but this problem was being resolved. The Group Payment Arrangement service for nominated companies would probably be launched in August.

  2. A lot of work was ongoing on e-filing. Initially, companies would be able to file an XML CT600 with pdf attachments . A more user-friendly on-line CT600 was now being developed, which should be available by the end of 2002. The XBRL schema for accounts and computations would be piloted in 2003.

  3. A major revision of the website material was continuing. The Revenue were also looking at replacing some paper documentation with e-outputs. The support for collaborative working was progressing. Most of these issues had been discussed by CTOCC's e-business sub-group, which had recently met.

  4. One representative was concerned that the schema would introduce unwelcome standardisation. Others explained that the schema merely gave electronic tags to potential entries in accounts and CT computations. Software providers would then apply these tags to the appropriate items. Effectively, the schema works like a dictionary that translates entries into an electronically recognisable form, and so enables a company to satisfy its filing obligation by electronic means. It does not affect the existing lay-out or format of the document concerned.

  5. Some representative bodies were interested in publicising the liabilities and payment service to their members. The Revenue were happy for this to happen, but asked that articles be cleared with them in draft.

Report from Large Corporates Forum

  1. The Forum had met on 20 June. Discussion had focussed on items in the Review of Links with Business. There had also been discussion of the processing in COTAX of non-return cases, and automated penalties. Human input was still needed for some processes, but the Revenue hoped to automate fully early in 2003. This may not visibly change the process.

Other Business

  1. The FSB asked whether there was evidence of an increase in the number of small companies forming following the introduction of the zero rate of CT. The Revenue said it was too soon to say with any certainty but they would of course be monitoring the position.

Date of next meeting

  1. This was agreed as Tuesday 15 October.
   
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