In the run up to the new tax year, there was a scramble by business owners keen to sell their businesses before the new Capital Gains Tax (CGT) took effect.
The sell off is somewhat at odds with Labour's oft repeated claim that they are "business friendly".
The stampede to sell was of such gargantuan proportions that it overwhelmed HMRC with applications for approval of sales before April 5. This backlog in applications for approval exposed many businesses to potential tax bills of millions of pounds.
To be eligible for the CGT rate of 10%, the sale must have been completed before April 5. However, businesses that had not received clearance from the Revenue before selling do not have any guarantee about how much tax they will have to pay. Thus they are exposed to the anti avoidance crackdown announced by the Chancellor in the Budget.
The Revenue (HMRC), in theory, should have processed clearance applications within 30 days of receipt. However, it can push back the time limit if it has any queries about the transaction.
Can you guess what happened?
Yes, that's right, there was a noticeable spike in questions being sent back by HMRC around Christmas. One accountant has described the quality of questions being raised by HMRC as being "absurd".
A cynic might conclude that HMRC were slowing down the process, so as to ensure that clearance was not given in time for the change of tax rate. Thus leaving the businesses exposed to further tax demands in the coming year, as HMRC and Brown desperately scrabble around for more cash (tax take) to fill the ever burgeoning budget deficit.
The risk of being delayed by the HMRC in this manner prompted many professional advisers to tell businesses to take the risk of a business not receiving clearance, and go ahead without it.
What a mess!
This is no way to run an efficient, effective and ethical tax collection system.
Tax does have to be taxing.
HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"
- About HMRC Is Shite
- RTI Resources
- Tax Insurance
- About KenFrost.com
- Contact Me
Dedicated to the taxpayers of Britain, and the employees of Her Majesty's Revenue and Customs (HMRC), who have to endure the monumental shambles that is HMRC.