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Delays at HMRC – Direct tax clearance

For anyone who has had dealings with HMRC it will come as no surprise to hear that, following HMRC’s clearance facility being relocated to Birmingham, there has been a change to the direct tax clearance process resulting in delays and problems for businesses planning corporate restructuring.

Businesses applying for tax clearance should be aware that a tax clearance application which would have previously been dealt with in 30 days can now take several months and a decision resulting in an appeal to tribunal can easily add another 6 months to the process.

There are a number of factors causing delays including:

• Less experienced staff now dealing with clearances.

• HMRC questioning how the commercial purpose of a transaction relates to the trade carried on by the business involved
despite there being no legal requirement for a link between the two.

• HMRC questioning whether a transaction is necessary or whether the desired result could have been achieved another way. Again, legislation does not prevent a certain course of action being taken simply because there is more than one way to deal with the issue.

All the above are resulting in protracted correspondence with HMRC and unnecessary delays in obtaining direct tax clearance from HMRC for even straightforward clearance applications.

A number of representative bodies are currently raising these issues with HMRC but, in the meantime, it is essential that businesses factor in the length of time it may take for HMRC to grant clearance when considering company restructuring.

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