CIOT comments on reform of corporate exit charges

The Government have announced1 that companies will be able to move to other EU states without paying an immediate ‘exit charge’. The measure will appear in next year’s Finance Bill but will take effect from today. This comes in response to a recent verdict2 of the Court of Justice of the European Union that existing UK law is out of line with EU law.

Commenting, Jeremy Woolf, Chairman of the Chartered Institute of Taxation’s (CIOT) EU and Human Rights Sub-committee, said:

“The CIOT welcomes the proposals to reform corporate exit charges. Changes are clearly needed to make UK law compliant with European Union law. However, the changes that are currently proposed, while clearly an improvement, almost certainly do not go far enough to make UK law fully compliant.

“In particular, when the taxpayer elects for the tax to be allocated to specific assets, it is difficult to see how the requirements to pay the tax in instalments or that only enable the payment to be deferred for a maximum of ten years are compatible with the jurisprudence of the Court of Justice.

“Since the current law is clearly incompatible, it is disappointing that the legislation makes no provisions for deferment when the exit occurs in accounting periods ending before 10 March 2012. Since the exit charges on individuals and other persons are also potentially incompatible with European Union Law, it is also disappointing that the consultation does not address these charges.”

Notes to editors

1.       The summary of the Government’s announcement appears in the Overview of Legislation in Draft for the 2013 Finance Bill:
1.43 Corporation tax: deferring payment of exit charges – Legislation will be introduced to address the way in which HMRC collects corporation tax charges levied on unrealised profits or gains when a UK registered company transfers its place of effective management to another EU Member State (often described as an “exit charge”). The amendment will offer such companies the option to defer payment of the exit charge over a period of time, provided that certain conditions are met. The legislation will permit companies to submit claims for deferral of exit charges that fall due from 11 December 2012 onwards. A consultation document has also been published and is available on the HM Treasury website.

2.       The case was National Grid Indus BV v Inspecteur van de Belastingdienst Rijnmond / kantoor Rotterdam.

3.       The Chartered Institute of Taxation (CIOT) is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries.  The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 16,500 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.


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George Crozier
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