Corporate Tax Operational Consultative Committee

Minutes Of Meeting Held on 23 April 2002 At 22 Kingsway, London WC2


Present
Inland Revenue
Judith Knott (Revenue Policy / Chair)	Colin Campbell (ICAEW)
Mark Bravery (RP / Secretary)	Colin Davis (CIOT)
Graham Black (Service Delivery Support)	Donald Drysdale (ICAS)
Susanna Wright (SDS)	Nigel Eastaway (CIOT)
Steve Coad (Business Services)	Carolyn Fisher (CBI)
Sally Littlejohns (Large Business Office)	Mukesh Gunamal (ACCA)
Dick Medland (LBO)	Sebastian Hordern (CBI)
	Lakshmi Narain (CIOT)
	Graham Wheeler (IoD)

Introduction and apologies

Apologies were received from Derek Allen (ICAS), Richard Baron (IoD) and Gordon Slater (CBI).

Minutes of previous meeting (14 January)

These were agreed. It was noted that the minutes had (for the first time) been published on the Inland Revenue website.

Committee name and terms of reference

The draft terms of reference had been circulated to committee members. Some minor changes had been suggested. It was agreed to adopt a CBI proposal to add "policy proposals and related operational issues" to the description of subjects for discussion. At the IoD's suggestion, it was agreed to amend "industry" to "business" in the summary description of representative bodies.
The name of the committee would change from Self Assessment Consultative Committee (CT) to Corporate Tax Operational Consultative Committee (or CTOCC for short). The fit with other forums would need to be kept under review. CTOCC would aim to exchange minutes with OCC and other consultative forums.

Budget 2002

The Revenue mentioned the Chancellor's announcement that the starting rate of CT was being reduced to 0%. The Revenue said they would be looking at the compliance regime for very small companies and clubs and societies in the light of this change. CTOCC would be consulted about any proposals, and this would be an agenda item at the next meeting.
Representatives asked if the Chancellor intended to spare small companies the task of completing CT600 returns, and if charities would need to send returns. The Revenue said the focus of the change announced in the Budget was to cut Corporation Tax for small companies. There were some 150,000 corporation tax payers with profits below £10,000 that would benefit directly from the zero rate. But as previously indicated the Revenue would be considering the implications for returns before the next meeting. They confirmed that clubs and societies would continue to be entitled to receive their savings interest gross.

Review of links with business (the Hartnett Review)

The Revenue's Large Business Office (LBO) was taking forward various of the review's recommendations, e.g. on employer compliance. Two working parties had been set up to look at controlled foreign companies and the self assessment regime, and these were consulting with corporates. The LBO was also developing its ringmastering role, by identifying parts of the Revenue that have dialogue with companies. Case Directors are being closely involved in this work. Separately, the LBO are working with Revenue International on transfer pricing and other cross-border issues.
Other work was going on in the Revenue's network offices. The Revenue's Area reorganisation had included the introduction of Case Director roles, modelled on the LBO. Guidance was being issued to Areas covering such issues as ringmastering enquiries from other offices, agreeing timescales for enquiries, and reviewing companies' accounting and control systems. In London, the Revenue were hoping to discuss these developments with the larger accountancy firms.
Representatives asked whether these arrangements extended to small companies and agents. The Revenue said they were adopting a graduated approach, starting with larger players but with the possibility of extending to others in due course. E-services offered companies a closer relationship with the Revenue, but generally it was large companies that were interested in this. Small companies tended to want to minimise contact with the Revenue. Representatives thought this was largely because small businesses lacked tax expertise. The growing complexity of the tax system did not help. The Revenue mentioned the planned consultative document on streamlining CT, for example by reforming the schedular system
More generally, representatives saw difficulties in extracting information from accounting systems in order to meet inspectors' requests. The Revenue suggested that a switch to 'real time' risk assessments, where a company alerts the Revenue to an ongoing transaction, may be a way forward. Representatives accepted that it would be helpful to get agreement at an early stage, and also for the Revenue to understand commercial drivers for transactions. The Revenue said that they were reviewing their Code of Practice 10, on pre-transaction agreements. Representatives were concerned that an informal approach may favour larger companies. Sometimes it may be better to discuss an issue with a company direct rather than with the agent.
Representatives asked if they could see any emerging proposals in draft. The Revenue said they were happy to use the committee as a sounding-board for ideas.

Group Payment Arrangements (GPAs) and Quarterly Instalment Payments (QIPs)

The Hartnett Review recommended that the Revenue issue guidance on estimating profits and on the penalty regime. The Revenue reported that it had already gathered comments from two workshops held in London, one with companies from the insurance sector and the second with retail and other companies. These focussed on unpredictable events such as market movements late in the accounting period (a particular issue for the insurance sector) and foreign exchange gains. Chargeable gains could be a distorting factor, particularly if the timing or the availability of roll-over relief was uncertain. Other matters liable to cause late revisions to profits included receipt of overseas dividends, changes to tax law or accounting practice (particularly overseas) and the conclusion of Revenue enquiries that impacted on the current year.
The Revenue's guidance would address practical issues such as record-keeping, and make clear that companies' existing systems should normally provide them with information that was sufficiently accurate to rule out any liability to penalties. It would give examples of where the Revenue would seek penalties. Companies would be encouraged to approach their tax office where an issue was not covered by the guidance.
The Revenue would hold another workshop in Glasgow in May, to give Scottish businesses an opportunity for input and to discuss the emerging themes. Two further workshops, involving the participants from the first two, would take place later in the month, at which the draft guidance would be tested and refined. CTOCC would then be consulted. The aim was to publish the guidance by the end of June.
The CBI mentioned their own survey of QIPs, which they hoped to discuss with the Revenue soon. The Revenue said they would be in touch about this. The Revenue's data suggested there had been a tendency for companies to overpay. But the extent to which this was due to the introduction of QIPs was difficult to gauge because companies had also overpaid under the previous system.
The Revenue recognised the widespread concern about penalties. But they were aware of only two cases in which penalties had been sought, and these were connected cases dealt with by the Special Compliance Office. All the indications were that penalties were in point only in extreme cases. The LBO had impressed on its Inspectors that penalties existed to deter companies from failing to operate the quarterly instalment system, not to demand high levels of accuracy, and that they should not be spending much time considering penalties. Representatives had some concern that in other areas the Revenue had sought penalties in an unconsidered manner. The Revenue pointed out that there were different categories of penalty, some of which were charged automatically under statute.

CTSA in practice

The Revenue reported recent improvements to their website. The CT material had been extensively revised, with anachronisms weeded out. Information was available on the internet service, returns and record-keeping. There were links to guidance material and leaflets. The material would henceforth be updated regularly. The CTOCC minutes would appear under 'Consultation'. A representative said it would be helpful to search by manual reference, and also to have a summary of changes to manuals. The Revenue said they would look at these issues.
The Revenue said that the CT600 form would be finalised after the Finance Bill gained Royal Assent. A draft would be shown to CTOCC members in due course. In the meantime, a summary of proposed changes was circulated. New boxes would be needed to reflect the new legislation on intellectual property and capital allowances for green technology. There would be new pages for cross-border royalties and for oil and gas companies. A new page may also be needed for Community Amateur Sports Clubs. Information on the changes was available on the website.
The Revenue pointed out that the changes to CT rates were covered by PCTA resolutions, so that returns including claims for the new rates could be made and processed before Royal Assent.

E-business

There had been steady progress on viewing liabilities and payments on screen. Around another 20 companies were being brought into the system immediately, and some 190 would have been invited to join by the end of May, with full national roll-out to follow in the Summer. The service for agents had just started. The service for groups (covering GPAs) would come in later, and would include provision for associated companies to nominate one company to have access to the others' records. As a separate development, e-filing workshops had been taking place.
The e-business sub-group of CTOCC had met in March, involving representatives from CBI, IoD, ICAS and the ICAEW, as well as various Revenue personnel. It was hoped to arrange another meeting for June. It was suggested that this involve taxpayers and agents who had used the Revenue's live e-CT service.

Reports from other consultative forums

The LBO Large Corporates Forum had met in March. This had focussed on the Hartnett Review recommendations, including the revision of COP10, and the possibility of a 'one stop shop' for different clearance applications. The CIOT asked whether there were any notes arising from the seminar on s.765, involving PricewaterhouseCoopers, which had taken place earlier in the year. The Revenue said they would find out. The ICAEW asked about progress with the Business Tax Forum. The Revenue said they were still considering how this would fit into the network of different forums.

Other business

One representative had heard that returns in other currencies were being rejected by the Revenue. It was agreed that he would set out the concerns in a note, which the Revenue would follow up.

Date of next meeting

This was provisionally fixed for Wednesday 17 July.

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