A clearances pilot from January 2008

At Pre-Budget Report 2006, as part of the Review of Links with Large Business, we announced an extension of the clearances we provide to all our business customers. From Budget 2008, we will provide business with our view of the tax consequences of significant commercial issues wherever there is uncertainty, regardless of when the legislation was enacted. We also committed to responding to clearance applications within 28 days as the norm.

At Pre-Budget report 2007, we outlined the responses we received on the consultation paper ‘Giving certainty to business through clearances and advance agreements’. We also announced that we would run a clearances pilot from January 2008.

Today we announce that the pilot will encompass:

• business customers in the Retail sector whose tax affairs are handled by the Large Business Service (LBS) and
• business customers, across all sectors, whose tax affairs are handled by offices within the North West & Midlands group of Local Compliance

The North West & Midlands group includes customers:

• whose main place of business is in or
• whose tax affairs are dealt within, the counties of Cumbria, Lancashire, Merseyside, Cheshire, Staffordshire, Derbyshire, Greater Manchester, Warwickshire, Worcestershire, West Midlands, Shropshire and Herefordshire.

For these businesses, we will:

• remove the four Finance Act restriction that direct tax clearance applications were subject to under Code of Practice 10 (COP10)
• ask them to demonstrate the commercial significance of the transaction where the clearance relates to direct tax legislation older than the last four years
• respond within 28 calendar days, as the norm

in advance of the full implementation of the clearances proposal around Budget 2008.

Customers who partially fall within one of these customer definitions and have a clearance application that they wish to make during the pilot period, should contact their Client Relationship Manager or local tax office.

The current arrangements for Substantial Shareholdings Exemption and Stamp Duty Land Tax, where the four Finance Act restriction has already been removed, will continue, with all business customers able to make clearance applications in those areas.

Business customers in LBS Retail sector should continue to send their applications to their CRM during the pilot. We will ask these customers to use the draft guidance to replace Code of Practice 10 and VAT notice 700/6 in preparing their application.

Business customers handled by Local Compliance’s North West & Midlands group will submit their applications, using the draft guidance, to a central team. Details of the team address and the new draft guidance will be published in December.

The purpose of the pilot is to enable us to evaluate new processes to handle clearances in a more consistent way. Through the pilot we will test draft customer guidance, draft guidance for our staff and new operational processes.