Those of you who aren't interested in Euro-law or compliance matters will probably be tempted to skip this article. While these are extremely important topics, I must confess, I too find substantive tax law more interesting. But instead of turning the page, I strongly suggest that you carry on reading. For these new rules aren't confined to a single particular tax pigeonhole, but will affect a range of tax incentives such as the EIS and VCT Schemes.
In certain cases, failure to comply with the new rules may lead to a denial of the relevant tax break.
Tucked away towards the end of this year's Finance Bill is a series of clauses which are to do with "State aids granted through provision of tax advantages". These clauses, when enacted, will empower HMRC to request information from any person who is claiming a tax incentive under any of the statutory schemes that are listed in the legislation.
There is nothing wrong with any of these schemes. The tax reliefs are all kosher as they have government backing. However, they are all subject to EU State Aid approval, and the new information powers are being introduced to ensure that the UK is complying with its own EU obligations1.
The schemes that are to be subject to the new information powers fall into two categories:
So which is which?
Category One - if you don't tell HMRC what they want to know, they won't give you the tax break for the following schemes:
Two of the reliefs on the list - BPRA and vaccine relief - are set to expire in March 2017 and are not going to be renewed5. Since the new information powers relate to claims made on or after 1 July 2016, these two schemes are unlikely to be affected in practice6.
Category Two - where supplying the information to HMRC is not a condition precedent to a successful claim for relief. The schemes involved are:
It must be stressed at this stage, that these powers do not come into force automatically on the passing of the Finance Bill. The relevant clauses state that the Commissioners may ask for the relevant information, not that they will ask for it. The actual power will no doubt be enacted in the form of a statutory instrument, setting out the precise circumstances in which HMRC may request the information, what information must be provided and the manner in which it must be given.
So far we are told that for a Category One request, HMRC may require the following information (but the list is not exhaustive)7:
For a Category Two request, HMRC may require the following information (again the list is not exhaustive)8:>
But what are they going to do with this information? We are told that it's for the purpose of complying with the UK's obligations to the EU. But one can't help feeling suspicious whenever a public body wants information for what seems, on the face of it, an innocuous reason. ("Oh, don't worry, it's got nothing to do with you, it's just for monitoring purposes.").
So what do they mean when they say that they will also be able to publicise details of whatever they find though a "legal gateway"?9 And what information will be disclosed about the person or business receiving the requisite amount of State Aid?
We are told that only persons who have obtained at least 500,000 Euros worth of State Aid will be affected, but the actual amount of the tax advantage will not be disclosed10. However, we are not told whether there will be any safeguards to protect those persons whose information is to be made public. And this is a slightly disturbing state of affairs.
It sure looks like it. It is too early to say what impact these new information powers will have. However, when one considers that the EIS and VCT Schemes have recently become even more complicated as a result of EU State Aid rules, one wonders whether another dose of Eurolaw is really welcome.
This article can be downloaded in pdf format at Academia.edu
The information provided in this article is for general information purposes only. The information is not intended to be comprehensive or to include advice on which you may rely. You should always consult a suitably qualified professional on any specific matter.
Maastricht University - 5th Global Tax Policy Conference: Tax Policy after BEPS, what can be expected? On 6 September 2019 at the Royal Museums of Arts and History in Brussels, Prof. Dr Hans van den Hurk, chairman of the Annual Global Tax Policy Conference of the Maastricht Centre for Taxation (Maastricht University) with his esteem speakers are addressing the above question.Read more