Following the consultation document of 6 June and our Law-Now Tax in Debt Restructuring, HMRC’s open meeting today on the modernisation of the taxation of corporate debt and derivative contracts clearly establishes HM Treasury and HMRC’s intentions:
- First, simplification of a regime in existence since 1996 held together by sticking plasters to keep up with increasingly complex financial instruments and avoidance schemes;
- Secondly, and perhaps most importantly, a regime based on agreed overarching general principles on what should be taxed and relieved; and
- Thirdly, collaboration with experts and industry to achieve a workable solution and to lessen the compliance burden on business, in this regard four working groups have been established focusing broadly on structure (Working Group 1), groups and connections (Working Group 2), accounting (Working Group 3) and funds (Working Group 4).
Perhaps surprisingly in the current climate, the main driver is not to increase tax revenues or combat anti-avoidance.
What was clear from the meeting is that there are no hard and fast rules at this stage; HMRC is open to suggestions and insight and no definite decisions have been made.
If you would like HMRC to take into account how your business will be impacted, we encourage you to respond directly to the consultation by the deadline of 29 August or send us your comments by 16 August for us to collate a response. To join a working group, please contact Andy Stewardson at HMRC by close of business tomorrow (28 June).
Slides from the meeting can be found by clicking here.
HMRC also confirmed that they will be reviewing the worldwide debt cap rules separately.