There has been (and continues to be) a lot of consultation around various aspects of the UK tax regime lately. Apart from the fact that sometimes it feels as though it’s all happening at once, that has to be a good thing. Most recently, I have been involved in consultations on the CFC reform, the new Patent Box regime, reform of the R&D regime and HMRC’s Agent Strategy. I have to say that these consultations work best when there is active engagement between HMT/HMRC and the taxpayer/adviser community with whom they are consulting. It’s not just about putting out a consultation document, getting written responses and moving on. Proper consultation is a dialogue.
Good examples of this recently have been the consultations on CFC reform and the Patent Box. There have been open days arranged to allow the government team to explain their thinking and to allow taxpayers and advisers to provide early thoughts on the proposals. In this way, clear issues with (for example) the CFC legislation were identified and dealt with early in the process.
Why is it, then, that some in HMRC seem to find such proactive engagement so difficult? As readers will know, I believe that the (very welcome) proposed changes to the EPW rules within the R&D regime are flawed. The changes needed to deal with a connected party situation are more complex than was appreciated. I pointed this out to HMRC just after the draft legislation was published; I was told that the draftsman had thought it worked and no one else had raised any concern. Since then I been unable to get a sensible response as to whether or not HMRC agrees with my view. At the start of January, I was told that the matter was “under consideration”. With no further news, I emailed HMRC again yesterday. Today I am told that “the matter is under consideration as part of the consultation process.”
I assume that this means they agree that the changes don’t work and they are trying to come up with a solution. Why can’t they just say this?
At the end of next month, in just under 8 weeks, the Finance Bill will be published. I do hope that this is not the first time that we find out the result of HMRC’s “consideration” on this matter.