UK and International Tax news

HMRC Publishes Summary Of Responses To Condoc On Company Distributions

Friday 29th April 2016

HMRC has recently published a summary of responses to the company distributions consultation it ran from December 2015 to February 2016 and has set out its own response.

In our UK Tax News item on 30 December 2015, we reported on HMRC’s condoc which invited comments on the existing tax rules governing distributions by a company and the specific changes put forward in draft legislation to be included in the 2016 Finance Bill.

The government has confirmed that it will continue with plans to amend the Transactions in Securities rules and introduce a new TAAR, but will amend the draft legislation to reflect some of the issues raised. While acknowledging the range of views shared through this consultation, the government believes that the proposed legislation (as amended) is the appropriate action to take. The government will monitor the effects of these changes.

The legislation will be amended so that:

  • it will not apply to minority shareholders;
  • ‘arrangements’ is clearly defined;
  • distributions will not be treated as income to the extent that they represent the Capital Gains ‘base cost’; and
  • the exemption for distributions of irredeemable shares will be widened to ensure that the TAAR does not apply to standard ‘liquidation demergers’.

Further amendments will provide additional clarity, for example in how the rules apply to partnerships or holding companies.

The revised legislation will form part of the Finance Bill 2016 and is due to come into effect from 6 April 2016.

The government has confirmed that it does believe that a clearance procedure for the TAAR is appropriate in the circumstances because clearance procedures are not generally provided for this type of anti-avoidance rule. However, HMRC will provide guidance to demonstrate how this rule will be applied in practice, as requested by the many respondents.

If you would like more information on the above, please contact Keith Rushen on 0207 486 2378.

 

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