Withdrawal of Extra Statutory Concessions
An Extra Statutory Concessions (ESC) is a concession granted by HMRC that usually reduces a taxpayer’s tax liability to a level less than they would expect to pay based on a strict reading of the law. The majority of the ESCs introduced by HMRC deal with anomalies in the legislation which under certain specific situations create unintended consequences for taxpayers and which are difficult to remedy from a legislative effect.
For many years, HMRC has sought to remove ESCs following a landmark decision of the House of Lords (in 2005) that questioned the ability of HMRC to make use of certain administrative discretions such as an ESC. In recent years many ESCs have been withdrawn.
HMRC has now published a consultation which will gather evidence on the potential impact of withdrawing the following four ESCs:
- Zero-rating of central processor – Notice 701/7 (VAT)
- Composite rate of VAT for computer systems – Notice 701/7 (VAT)
- Affiliation fees for sports clubs – Notice 701/45 (VAT)
- C12 – Retail co-operative societies: accounting periods (Income/Corporation Tax)
Interested parties can comment on the proposed withdrawals until 7 March 2017. It is expected that the ESCs will be withdrawn from April 2018 and so provide anyone affected by the change with at least one year’s notice. No ESC will be withdrawn retrospectively.