We often obtain an HMRC tax clearance, in advance, to confirm the tax treatment of your share transaction or SEIS, EIS, EMI, Entrepreneurs relief transaction. The advantage is peace of mind.
Our HMRC tax clearance service includes:
- Availability of tax clearances from HMRC;
- Considerations before applying for a tax clearance;
- Post transaction valuation checks from HMRC; and
- Raising technical queries with HMRC.
Availability of tax clearances from HMRC
Taxpayers often want confirmation as to the tax treatment of any transaction before completing the transaction. Not all situations are suitable for tax clearances as your application may unnecessarily alert HMRC. The decision on whether to seek a tax clearance from HMRC requires judgement and our experience is invaluable.
HMRC have substantially reduced their staff. Our specialist expertise in understanding how HMRC operates are key to achieving your desired outcome. Timing is also critical.
Examples of some popular tax clearances we obtain from HMRC
We have secured a great many tax clearances from HMRC over the years. We have illustrated some of the more common applications but there are others we can obtain not listed.
- Trading status of companies for entrepreneurs’ relief purposes;
- Share re-organisations and transfer of trades;
- Share buybacks;
- Advance assurance that a trade qualifies for SEIS or EIS;
- Enterprise Investment Scheme (EIS);
- Enterprise Management Incentive options (EMI); and
- Employee Shareholder Shares (ESS).
Statutory clearances given by HMRC
Most clearance provisions are available to taxpayers. If, however, a party to the transaction is resident outside the UK then the clearance may not be needed – it depends on the specific facts.
The taxpayer must provide accurate details of the circumstances and surrounding facts. If relevant information is not provided, then the clearance is void. Judgement is required as to how much information is necessary.
Considerations before applying for clearances from HMRC
The considerations will depend upon the facts of the case. Based on past experience we have drawn up some guiding rules:
A clearance or informal ruling does not cover other taxes or other parts of the transaction. It is only binding in relation to the:
- Specific situation covered by the relevant legislation; or
- Specific transaction for an informal ruling.
Clearances or informal rulings should not be sought where the tax position is clear.
Whether it is worth obtaining clearance, or an informal ruling, depends on circumstances.
Generally, you want to obtain clearance early rather than later.
If the clearance concerns a transaction, HMRC wants draft documentation. Oftne completion depends on tax clearance. We ensure tax-clearance is co-ordinated with the commercial agreement.
HMRC Post-transaction valuation check withdrawn
HMRC have withdrawn the post-transaction valuation check facility for tax payers. This means that it will no longer be possible to obtain agreement from HMRC on the taxable value of shares provided to employees. The change is most likely to impact on private companies where there is no market for the shares.
Implications of HMRC withdrawal
The process for determining the taxable value of shares will be via the individual’s personal tax return. The individual will be required to report the taxable value, pay the tax due and wait to see if HMRC challenge the value reported to HMRC. The risk of under reporting is that the individual will incur interest and penalties.
HMRC is streamlining its resources to increase scrutiny over taxpayers tax returns and reassess more tax returns where they consider the value of the share related benefit has been under reported – the purpose of the scrutiny is to assess interest and penalties to increase the overall tax payable.
We work with tax payers who are faced with determining the taxable value of shares. Questions for us to solve are most likely to arise where:
- Employers who have provided shares to their employees to help them determine and report the appropriate value of shares to HMRC.
- There has been a transaction in shares and the value of deferred consideration is not quantified.
Exception for HMRC approved employee share schemes
HMRC have announced that they will continue to provide valuation checks for approved employee share schemes. This means that for EMI and CSOP options and ESS shares the taxable values on award can be pre-agreed with HMRC before award.
HMRC are still dealing with technical questions relating to interpretation of legislation. For example, if you were concerned as to whether your business qualified for EMI, EIS or SEIS we can approach HMRC for you and obtain a determination. Alternatively, if you were concerned about whether expenditure will qualify for R&D tax credit relief they do offer an assurance service for certain companies.