Be prepared – anything goes on timescales for impending corporate interest restriction legislation, warns Hall Morrice LLP

From this summer’s snap general election to the impact of Brexit and the looming prospect of a second referendum on Scottish independence, the country’s political landscape seems to be on a continual journey of uncertainty.

But while the current ifs, buts and maybes may be driving the average man in the street to distraction, it is having a severe impact on businesses which depend on clearly defined legislation to operate and plan long-term strategy.

Shona Duncan is a senior tax manager at Aberdeen-based independent chartered accountancy firm Hall Morrice LLP.

“Taxation can be a challenging issue for many companies as it is – especially those who do not have an in-house finance or tax function - but having to operate with so much uncertainty is escalating those challenges,” she says.

“With the snap general election and the ongoing Brexit negotiations, it seems that eyes have been taken off the ball.”

Of primary concern, says Shona, is the Finance Act 2017 – many key elements of which have been left hanging in limbo. While some reforms were pushed through ahead of election campaigning and summer recess, major announcements on the introduction of corporate interest restriction and loss relief were left on the shelf.

“The government saw this as being a popular move to end what many very large companies like Starbucks and Google were seen to be using as a form of legal tax avoidance,” explains Shona.

“Businesses across the country expected this to be introduced in April, however these pieces of legislation have still not received Royal Ascent. Although interest deductibility and loss relief is likely to be applied retrospectively, there are still concerns in the business community that the draft legislation has not been fully reviewed.

“It is just like being in a horse race and there being a false start. Everyone was primed and ready to go, but now they are all cantering around the paddock just waiting to get called back to the start line.

“Strictly speaking, if the law enacts retrospective businesses should have been making the restriction in the tax calculation since April, but we have no idea when it will actually be introduced. It may come in during September – at which point taxpayers will have to put through a significant figure when it could have been spread throughout the year.

“On the other hand, it may just roll over into the 2018 Finance Act and in which case there will be no need to make those provisions in this tax year. There has been no indication whatsoever – all we can do is advise our clients to be ready and to be prepared to push the button when an announcement comes.

“While we would generally urge our clients to hold off on making decisions that rely on the dropped measures either being backdated or rolling forward, all we can really do is to advise them to consider both eventualities.

“HMRC has stated that the corporate interest and loss relief restrictions will be enacted retrospectively. Companies could, of course, challenge the need to backdate payments, but there would be little chance of them winning a case – the government had expressed its intention to legislate prior to the general election, so it would likely be considered that taxpayers were given adequate warning.”

Hall Morrice, which has based in Aberdeen and Fraserburgh, works with companies of varying sizes to provide support across all accountancy services. The firm expanded its tax team earlier this year, creating the new senior manager role, in response to a growing demand for its expertise.

Shona adds, “There has been a great deal of political change, but more change is on the horizon for HMRC.

“New initiatives such as Making Tax Digital – a requirement for digital reporting and record keeping – is going to have a significant impact on taxpayers, and I anticipate that demand for support is going to increase as both businesses and individuals try to get to grips with these changes.”

Founded in 1976, Hall Morrice is one of Scotland’s leading independent firms of chartered accountants and has offices in Aberdeen and Fraserburgh. Based at 6 and 7 Queens Terrace in Aberdeen, Hall Morrice can be contacted on 01224 647394 or at accounts@hallmorrice.co.uk

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