HMRC have announced a revision to the clearance service for businesses. This continues to look really helpful. It is a development from the guidance note issued on 11 April 2008 when HMRC introduced a non-statutory clearance service to provide businesses with their view of the tax implications of significant commercial issues regardless of when the legislation was first enacted. Non-business taxpayers remain subject to Code of Practice 10 where technical enquiries are answered only if they arise from the last four Finance Acts.
The purpose of the new clearance service is to provide certainty for businesses operating in the UK at a level where a speedy response from HMRC can reasonably be assured. They anticipate a response within 28 days on areas of material uncertainty relating to the legislation concerning the tax outcome of a real issue of commercial significance to the business. HMRC emphasise that this non-statutory clearance is a written confirmation of their view of the application of tax law to a specific transaction or event which the taxpayer can rely on in most circumstances.
The guidance note sets out the procedure for making an application (which is sensible and predictable) and clarifies those areas where HMRC will not accept such an application. They will not comment on tax planning advice; where the relevant point is not uncertain (i.e. where the point is covered by their published guidance – although that is not of course the same thing); where they have already opened an enquiry into the transaction or the relevant self assessment return; on issues which do not involve statutory interpretation such as asset valuation and transfer pricing; or on whether a particular research and development project qualifies for relief under the various tax incentives. In particular, they confirm that they will not comment on the tax consequences of executing trust deeds or whether the settlements legislation applies.
HMRC confirm that the whole point of this system is that the taxpayer should be able to rely on any clearance they provide. They do not say that such a clearance will be binding and explain that whether it is binding or not will be determined by the courts. They do however set out some circumstances in which they will not be bound – all of which are absolutely reasonable, such as where the law has changed between the clearance and the transaction taking place or where incorrect or incomplete information was included in the clearance application.
The similar non-statutory clearance procedure for inheritance tax has also been updated.