This week's Tax Administration and Management Day saw the publication by the government of many new 'Calls for evidence' (a bit like a consultation, but not quite) and some responses to past consultations and 'calls'. We have picked out some of these for review this week and will pick more over the coming weeks.
The thing that really turned our heads this week was a tax case that featured a combination of Transactions In Securities (TiS), Entrepreneurs' Relief (now Business Asset Disposal Relief) and Business Investment relief issues. It was the TiS part that really caught our attention.
When you submit an advanced tax clearance under the TiS provisions, you must have considered firstly whether your transaction creates an Income Tax advantage, and secondly that you do not consider that tax avoidance is the 'main purpose, or one of the main purposes' of structuring the transaction that way.
It is a truth universally acknowledged that there is a continuing problem, in that HMRC's manuals and its tax clearance team appear to exert a distinct bias in its view that, if your transaction can be structured in another way, which achieves no tax advantage, then the only way to show that tax avoidance is not a motive is for you to structure the transaction in that non-tax advantaged way. This creates something of a 'Catch-22' situation, whereby the Clearance team seeks to influence an actual transaction and, as a result, some taxpayers do not to bother with tax clearance.
In Assam v HMRC (see the link below), the taxpayer did just that. Dr Assam sold one of his companies to the other for cash. He maintained that he needed cash to invest abroad, and it was simpler to arrange a sale rather than having to do tax clearance and a share for share exchange then declare a dividend etc. He was rich enough to persuade the tribunal that he did not care about tax. HMRC failed to prove any tax avoidance motive which left the Upper Tribunal (UT) to confirm that the existence of an alternative transaction which has a different tax result does not necessarily mean that a transaction with a lesser tax result is undertaken for a main purpose of tax avoidance.
Breaking news: the ICAEW report that HMRC has announced that its VAT and Corporation Tax helplines are closed on Fridays through-out December. Staff shortages are to blame.
More fascinating tax cases and updates for you, so do please read on.
Nichola Ross Martin FCA CTA (Fellow)
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Too rich to TiS?
In Assem Allam v HMRC  UKUT 0291, the Upper Tribunal (UT) has found that the Transactions in Securities (Tis) provisions did not apply when a wealthy entrepreneur sold his property company to his trading group for nearly £5m in cash, despite earlier clearance being denied, there was no evidence of any tax avoidance motive.
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