HMRC do offer the facility for tax payers to agree with HMRC the tax position before a tax liability arises. Our specialist team review your position, make any recommendations on steps that put you in a better position with HMRC and then deal with the HMRC tax clearance process.
We are always happy to discuss your situation and provide a scope and fee estimate. Please do give us a call.
Using HMRC effectively
People can get lost in the maze of dealing with HMRC. It is not unusual to find that HMRC themselves do not understand the transaction at first glance – a help from us can clear the picture. Another area where we solve problems is when HMRC do not follow their own internal guidance – picking this up can move the case along.
To help build an awareness of the practice and procedures of HMRC and how to ensure you obtain a favourable clearance we have explained below:
Availability of tax clearances from HMRC
Not all situations are suitable for tax clearances. We will guide you on what is available and how to maximise your chances of success with HMRC. HMRC is split into divisions and we make sure your case is sent to the right division.
Popular HMRC clearances available
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.
HMRC clearances available to tax payers
- Trading status of companies for entrepreneurs’ relief purposes;
- Tax neutrality on the re-organisation or de-merger of a business;
- Confirmation of hold over relief from capital gains tax upon a share for share exchange. Typically upon imposition of a new holding company.
- Clearance that there is no de-grouping charge if a subsidiary leaves a group in qualifying circumstances;
- Capital treatment of proceeds received upon the company buying back shares from a shareholder;
- Advance assurance that a company can offer investors SEIS or EIS;
- Clearance that stamp duty is not payable under certain re-organisations and new holding company structures.
HMRC is there to impose a tax charge whenever it can. The clearance system will help defend a tax payer against claims from HMRC that the transaction was set up to avoid tax.
Details needed for HMRC clearance
The taxpayer must provide accurate details of the circumstances and surrounding facts. HMRC will want to see documents such as the articles of association, share buy back agreement, de-merger agreements and supporting documentation in many cases. HMRC will also want to see the step list setting out the order of events. The timing of each step in a transaction can make or break the chances of obtaining the desired HMRC tax clearance.
Implications of not providing the correct information to HMRC
If relevant information is not provided, then the clearance is void. Judgement is required as to how much information is necessary.
If the step list for the transaction is not in the right order HMRC will refuse clearance and in some cases an unexpected tax liability arises.
Should you apply for HMRC clearance
If time permits and your transaction falls within the areas of tax for which a HMRC clearance is possible – yes applying for an HMRC clearance is always recommended. HMRC do not charge for this service.
The statutory tax rules under which the clearance is sought must be set out in the application. Not every transaction is is capable of HMRC clearance because there is no enabling legislation. In such cases you may need to apply for a ruling (discussed below).
Timing for obtaining the HMRC clearance
Timing for the HMRC response times needs to be factored into the transaction timetable. Generally speaking providing HMRC are given the relevant documentation in the format they know and understand the average turn around time for an HMRC clearance application is two weeks. Technical queries and rulings can take much longer for HMRC to deal with.
HMRC will deal 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.
HMRC will not provide a clearance as such. What HMRC do give is a non-binding statutory ruling. The tax payer is left to hope he can rely upon that. Unsatisfactory but the best there is.