Reform of the Substantial Shareholdings Exemption - CIOT comments
We welcome the proposed increased flexibility for the use of carried‚ forward losses arising after the proposed start date, which is 1 April 2017 as this will potentially benefit a large number of companies, predominantly those with profits of less than £5million. However we note that, for large companies, this increased flexibility comes with the cost of the restriction to 50% of the amount of annual profit that can be relieved, such restriction applying not just to losses arising after the start date, but also to historic losses, which themselves continue to be streamed.
We suggest that this is the wrong time to be making significant adverse changes to the UK corporate tax system, such as the proposed 50% restriction which will impact on larger companies and groups, including multinational groups. The result of the referendum on the UK‚ s membership of the EU casts doubt on the advisability of introducing new complex rules around the use of losses, particularly in the short term. Implementation of the new rules now could impact negatively on the UK‚ s competitiveness and whether the UK is regarded as a good place to undertake business. We say, however, that the impact on the UK‚ s global competitiveness must be weighed against the benefit for smaller companies and groups arising from increased flexibility in the use of losses going forward. We note that the Business Tax Road Map says that it is also a Government priority to ensure that small and medium sized businesses get the support they need. As a result of these potentially competing priorities, we suggest that these proposals could benefit from a review once the overall direction of the Government‚ s objectives and priorities in relation to corporation tax and the different sectors within that tax become clearer, perhaps after the Autumn Statement.