HMRC has published its eighth technical consultation as part of its ongoing review of extra-statutory concessions (ESCs), which focuses on draft legislation designed to enact four specific ESCs
They are: A37 – directors’ fees; EIM3002 – professional remuneration; EIM01120 – financial loss allowance (FLA); and EIM61030 – payments from medical committees to members.
The purpose of the consultation is to expose for comment draft legislation needed to enact the existing tax treatment of four ESCs. HMRC says that as the intention is to replicate the existing concessionary tax treatments in legislation, there should be no, or only a negligible, impact as a result of the proposed legislation.
The consultation, which is of a technical nature, is designed to ensure that the legislation as drafted will ensure that HMRC maintains the purpose and effect of the existing ESCs. HMRC would specifically welcome responses to a particular question in relation to the concessionary treatment provided by EIM501120 and a similar question in relation to EIM61030.
The consultation is looking at whether the definition of ‘relevant authorities’ is sufficient to capture all bodies who currently pay FLA to officeholders or volunteers. In particular, the definition excludes companies, which may have ramifications for some local medical committees. HMRC says it would like to hear whether the legislation will exclude any paying organisations who currently rely on the FLA concession (so companies established to perform some or all of the statutory functions of a public or other statutory body).
ESC A37 allows directors’ fees received by partnerships and companies to be treated as trading income for income tax purposes rather than employment income, subject to certain conditions. The concession also applies where a company A has the right to appoint a director to the board of another company B.
Where this is the case and the director is required to hand over to company A any fees received for the directorship of B, and does so, (and company A is subject to corporation tax), those fees are treated as the income of company A and not the director, and tax is not deducted under PAYE.
The deadline for written comments is 9 November.
Extra-statutory concessions – eighth technical consultation on draft legislation is here.
Report by Pat Sweet
