Self Assessment Consultative Committee (Corporation Tax)

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MINUTES OF MEETING HELD ON 14 JANUARY 2002 AT 22 KINGSWAY, LONDON WC2

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Present:Inland Revenue

Judith Knott (Revenue Policy / Acting Chair)
Steve Coad (Business Services)
Mark Bravery (RP / Secretary)
Susanna Wright (Service Delivery Support)
Sally Littlejohns (LBO - Item 3)
Henry Asenso (RP - Item 5)
Steve Batterby (RP - Item 6)
Terry Hawes (BS - Item 7)
Pam Jones (BS - Item 7)
Tom Carne (Board's Accountant - Item 8)
Tony Beauchamp (RP - Item 8)
David Earle (Working Together)

Representatives:

Richard Baron (IoD)
Colin Campbell (ICAEW)
Colin Davis (CIOT)
Donald Drysdale (ICAS)
Nigel Eastaway (CIOT)
Carolyn Fisher (CBI)
Mukesh Gunamal (ACCA)
Sebastian Hordern (CBI)
Lakshmi Narain (CIOT)
Gordon Slater (CBI)
Graham Stenson (CIOT)
Graham Wheeler (IoD)

Introduction and apologies

  1. Apologies had been received from Francis Sandison (Law Society). It was noted that Mike Templeman (CBI) had stood down from the committee, and been replaced by Carolyn Fisher. On the Revenue side, Freda Chaloner had moved to another Department and so was unable to continue on the committee.
  1. As there was a very full agenda for the meeting, it would run from 11 until 3, with a break for lunch.

Minutes of last meeting (15 October)

  1. These were agreed.
  1. Para 4. List of items for review. The CBI raised the issue of information given to the Revenue that should not be asked for again. There were mismatches between the record-keeping requirements for CT, PAYE and VAT (for example, period for which records should be kept). The Revenue said they would be happy to discuss this at the next meeting, but asked that the CBI get back to them in the meantime setting out their concerns in more detail. The Revenue also mentioned that a Tax Bulletin article on record-keeping was in preparation, and they would be willing to circulate this to representatives in draft.
  1. Para 3. R&D guidelines on IR website. The Revenue reported that the technical problems were being resolved. The DTI consultative document on Treasury shares could be viewed via a link to the DTI site.

Hartnett Review - IR links with large businesses

  1. Copies of the Review's report were distributed to those present. The Revenue said the report signified a move towards a more enabling culture. The Large Business Office (LBO) were already revisiting their planning to reflect the review. An action plan would be published in due course. One recommendation was that companies be given more guidance on what is expected from them under CTSA. The LBO would be talking to business about this.
  1. Representatives hoped that guidance would reflect comments actually made. There were still concerns about Inspectors' use of their statutory powers. The Revenue said the report's recommendations provided a challenge for both sides.
  1. The report recommended the creation of a new Business Tax Forum for large corporates, but also that SACC(CT) continue as the main forum for general CT operational issues. The Revenue circulated draft terms of reference for a re-cast SACC(CT). It was agreed to amend these to refer to consultation on "prospective" changes to legislation and practice. Other suggestions would be welcome. The Revenue would finalise the terms of reference before the next meeting.
  1. Representatives asked whether the committee would deal with policy issues. The Revenue said the committee would deal mainly with operational matters, but they could include policies that have operational effects. It was agreed that the committee would remain a key stakeholder in the development of e-business for companies.
  1. Representatives noted a gap for smaller businesses. The Operational Consultative Committee (OCC) and its umbrella group dealt largely with personal tax and employer issues. The Revenue said there may need to be closer links with OCC - as there would have to be with the Business Tax Forum. The committees could usefully share their minutes with each other.

GPAs and QIPs

  1. One of the Hartnett Review recommendations was to introduce guidance to help companies estimate their profits. This would aim to reduce unnecessary worry about estimating. It would include advice on penalties. The Revenue were considering the setting up of a working group, and would be happy to involve representatives in this. The Revenue did not believe any penalties had been charged in relation to incorrect instalment payments, but would check the position and report back. The LBO would also check the extent of enquiries and reasons for QIPs being incorrect.
  1. Representatives said that companies did not want to make full computations every quarter. They also saw dangers in a mechanistic approach to guidance, leading to false expectations of a 'safe haven'. And some companies were still pressing for PY.
  1. The Revenue said that companies preferring PY generally also wanted the option of CY. That would create complexity, and have Exchequer implications - payment dates may need to be brought forward several months to protect revenue. There are no formal plans to consider PY.

CTSA in practice

  1. At the last meeting, representatives had raised the issue of Revenue determinations, specifically where losses had been brought forward but were not taken into account. The Revenue said their internal guidance made clear that determinations were to be made to the best of the officer's judgement and this included taking losses into account, as appropriate. In some circumstances, for example, where the quantum of the losses to be carried forward is the subject of enquiry it may not be appropriate to include losses in the determination. Representatives said this could be a problem in liquidation cases.
  1. More generally, representatives thought determinations were used as a lever to get returns in. It was sometimes thought that an Inspector could pluck a determination figure out of the air. The Revenue said that a determination had to be made to the best of the Inspector's judgement. There was concern about late filing, which was a particular issue within groups where the Revenue needed to look at the whole.
  1. The Revenue advised that a determination could only be superseded once the Company Tax Return was submitted. There was a communication issue here - the Inspector and the company needed to talk to each other. Representatives asked if the Revenue would accept incomplete accounts in certain circumstances. Did the Revenue need to exercise more flexibility, for example in accepting a "reasonable excuse"? Perhaps the Revenue needed to issue more reminders about returns that were nearly due or overdue.
  1. Representatives also asked whether minor issues could be settled without the need for a formal enquiry. And many notices seemed to be issued very close to the end of the statutory 'window'. It was suggested that minor issues should generally be capable of resolution over the telephone. E-filing may help, since it enables the sifting out of simple errors. It was pointed out that the Revenue hadn't published their validation criteria (in the context of checks for a successful filing). The Revenue said they would check the guidance on the website and advise where it could be located.
  1. The CBI added that there had been a loss of flexibility for group relief claims, now that the time limit for varying the relief was effectively about two years (assuming there was no enquiry). Prior to CTSA, groups had nearly six years to move relief around. This change needed to be publicised as March year-ends approached. Other representatives noted that companies with December year-ends may already have been caught by the new limit.

Deferred Revenue Expenditure

  1. This issue had been raised at the previous meeting. The Revenue explained that a Tax Bulletin article in June 2001 had set out their position. Ministers were signed up to the approach described. The article was based on legal opinion. In short, DRE had not been dealt with consistently. The Courts had told the Revenue they were interpreting the law incorrectly. They now had to address open cases in accordance with the law.
  1. A representative noted that the impact was solely on whether the company would get a deduction, with no effect on the rest of the liability. There was some concern about the effect on EBTs, and that incorrect computations were still being submitted. David Earle suggested using the 'Working Together' newsletter to publicise the issue.

E-business

  1. Terry Hawes and Pam Jones gave a short presentation, updating those present on the live trial for viewing payments and liabilities on screen. The portal went live on 17 December, involving a small number of companies, with the trial due to last six weeks. Feedback so far had been encouraging.
  1. Terry and Pam showed a short demonstration of the "view liabilities and payments" service. The emphasis had been on layering information, not presenting it in en masse. Users could drill down to greater and greater detail about payments and liabilities. They showed the 'find a payment' facility using either amount or date. This shows what the Revenue did with the payment.
  1. The system would be a building block for e-filing and workspace. There was scope for adding other services. Content will be developed, with links to other parts of the Revenue website.
  1. Following the live trial, the Revenue expected a controlled take-up by other companies. Positive marketing of the facility would come later. Agents would be allowed access, probably from March. The Revenue were exploring ways of allowing agents rapid access whilst maintaining security. The system would also allow Structured Action Requests and group functions in due course.
  1. There was also some new thinking on e-filing, with the Revenue exploring the possibility of standardising the submission of accounts. Software would be needed to process different formats. The timetable on this was open. Ultimately the Revenue were trying to enable one-stop filing. They were not looking to load extra costs on companies.
  1. The Revenue suggested setting up a small sub-group of SACC(CT) to keep up with developments on e-business. Those interested were asked to contact Mark Bravery.
  1. The IoD asked about the XML schema for accounts and computations. The Revenue said they were looking at this, and would be grateful for any input. The Revenue confirmed that the e-mail pilot was ongoing.

Accounting Enquiries

  1. Tom Carne and Tony Beauchamp attended to give the Revenue's position on this issue, which had arisen at the previous meeting. The Revenue were entitled to look at the accounting basis of entries in a return. But there were internal controls in place. The Revenue had increased its accountancy expertise, with regional accountants able to refer matters up to Tom Carne. If a case was going to appeal, it would be looked at centrally within Tony Beauchamp's part of Business Tax. Additionally, the Revenue were looking to enhance their quality assurance processes, for example through changes to the Inspector's manual. Representatives had suggested the establishment of an accountancy tribunal, but the Revenue were not convinced this was necessary - as this would add time and cost to existing procedures.
  1. The CIOT said that matters such as work-in-progress computations, royalties and recognition of advances could give rise to different views that were not easily resolved. There was sometimes reluctance on the Revenue's part to accept the judgmental aspect of accountancy. And it was not always obvious from where the Revenue's accountancy advice had been derived. The Revenue said they accepted the scope for judgement. They encouraged their accountants to get involved in issues and meet agents where necessary. They hoped that most issues could be resolved without going to an appeal hearing. The CIOT asked about intractable issues. The Revenue believed such issues were rare. It was agreed that if audit mechanisms had been satisfied this should reduce the likelihood of there being a problem.
  1. The CIOT pointed out that there were costs involved in pursuing cases to appeal. Could the Revenue use Tax Bulletin to disseminate precedent cases? The Revenue saw limitations in this, since there would frequently be the question whether the reported decision was on all fours with other cases. But they were happy to publish an article explaining how Revenue accountants are organised, and setting out the approach they take over accounting principles. The ICAEW and the Revenue agreed that it was not desirable for the Revenue to publish their interpretation of accounting standards, as this was a matter for the accountancy profession.

Other business

  1. The Revenue advised that they may be proceeding with legislation that would allow dividend vouchers to be delivered electronically. If Ministers gave their approval, there could be consultation later in the year followed possibly by secondary legislation in autumn 2002. Electronic vouchers would only be an option for shareholders - they could continue to receive paper vouchers if they wished.

Date of next meeting

  1. The next meeting was provisionally arranged for Tuesday 16 April. It may be possible to post the minutes of this meeting on the Revenue website. Representitives would see the minutes in draft first. (Date for next meeting was subsequently changed to Tuesday 23 April).
   
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