Clause 28 - Notices under sections 24 and 26
Finance Bill
5:00 pm
Philip Hammond (Shadow Chief Secretary To the Treasury, Treasury; Runnymede and Weybridge, Conservative)
Clause 28 deals with the procedural rules for companies that are subject to a notice under clauses 24 or 26. I do not have a tremendous amount to say about clause 28, but our new clauses have been grouped with it. We aim to resolve the uncertainty that we are told still exists by introducing a binding statutorily provided advance clearance regime that, if operated efficiently and consistently, will quickly restore taxpayers' confidence.
New clause 5 sets out a procedure for advance clearance on application to the commissioners. Subsection (1) would remove companies that have sought and received advance clearance from consideration under clauses 24 and 26; subsection (2) states that any application made under subsection (1) can be in writing, delivered by post or electronic mail, and shall contain particulars of the operations that are to be effected. There is also a provision within subsection (2) to allow the commissioners to require further details for the purpose of their decision within 30 days of the receipt of the application or of any further particulars previously required. It tries to keep the process moving fairly speedily.
There is also provision that if such requested information is not received within 30 days of the applicant being required to give it, and if any such notice is not complied with within 30 days or any longer period that the commissioners may allow, the commissioners need not proceed further. In other words, they may treat the taxpayer as having abandoned the application.
Subsection (3) requires the commissioners to notify the applicant of their decision within 30 days, or, if they have requested more information, within 30 days of the receipt of that information. Subsection (4) gives the applicant a right to refer any rejected application to the special commissioners who have the power to give clearance in the same way that the commissioners do, and subsection (5) makes any decision by the commissioners or special commissioners void if information provided by the company is not accurate or does not accurately disclose all the facts.
Since the Finance Bill was published before the election it has been changed and the guidance notes now state that there will be a clearance regime, albeit not one with any statutory force. We welcome the introduction of the clearance regime that the Government have announced, but we recommend that such clearances be within a statutory framework, provided that the clearance, if obtained based on accurate and full information, is binding on the Revenue by statute for a period of time.
Practitioners tell me that some of the existing non-statutory clearance methods work better than others from a taxpayer's point of view. I say that to be consensual. That is why we seek to include a statutory provision in this case. The new clause would enable taxpayers, when implementing a financing structure for their UK or overseas investments, to get advance clearance from the Revenue. That would give the taxpayer certainty rather than considerable uncertainty, which the new rules might otherwise create.
Guidance notes are no guarantee of certainty and the existence of those notes leaves a great deal of room for interpretation. The taxpayer has the additional problem that guidance notes can be withdrawn or redrafted at any time; the taxpayer always has to face the possibility of a change in the guidance that governs the effect of any part of the legislation.
The rules that we propose mirror those for pre-clearance of share reorganisations and the transactions and securities legislation. I note that most jurisdictions, including the United States, Australia, New Zealand and the Netherlands, have advance clearance systems to obtain pre-transaction binding rulings for such transactions. Such a clearance system is intended to be a practical way for taxpayers and the Inland Revenue to achieve certainty and avoid complicated arguments at a later date.
Another example has come to my attention today. Apparently, the Belgian authorities have now taken steps to implement a decision that was taken in 2003 to give Belgium what they describe as
''an efficient, proactive and flexible ruling practice''—
this is the interesting part—
''in order to remain attractive for foreign investors and to provide the necessary certainty to Belgian taxpayers.''
As I have conducted my preparatory discussions in the past few weeks, it has surprised me how often Belgium has come up.