HMRC clearance update

TAXATION SPECIALISTS PETE MILLER

Partner of The Miller Partnership

HMRC clearances update

HMRC is engaging with the tax community over clearance changes concerns

Before completing a company reorganisation, restructure or demerger, in many cases you can apply to HMRC for statutory clearance in advance, so you know how your transaction will be treated for tax.

HMRC must respond to your clearance application within 30 days, and this usually happened without a hitch. But, after the unit’s relocation from London to Birmingham two years ago and a new team, this deadline has frequently been missed, with some clearances taking as long as six months in cases where the unit has asked for further information.

Clients have also encountered difficulties with the new team misinterpreting or misunderstanding the ‘commercial reasons’ statutory test, which has meant in some instances having to go to the Tribunal to get the decision we can’t get from HMRC. To try and prevent this situation from arising, we are now having to write much longer and more detailed clearance applications, to try and persuade HMRC that the transaction has a genuine commercial purpose.

As a corporate tax adviser who moved into private practice after many years in senior roles with the Inland Revenue, including having had a clearance role myself, I’ve been taking a personal interest in these issues.

I’m pleased to report that HMRC is now engaging with the tax community on this pressing matter. Thanks to representations from my own professional body, the CIOT, as well as other interested parties, HMRC is listening to our concerns. Although there are further discussions to be had, we feel that we are making progress in helping HMRC understand the commercial drivers for business transactions. And it has been helpful that there have been several Tribunal decisions in favour of the taxpayers that have explained how the Tribunal judges view these questions of commerciality.

Obtaining clearance can be a complex procedure, and given these technical and administrative issues, it is even more essential that you seek professional tax advice.

We’re experts in HMRC clearances and have many years’ senior-level experience in dealing with them.

Email pete.miller@themillerpartnership.com and we’ll guide you through the process, including drafting your application and dealing with any questions that HMRC raise.