Statement of Practice 3 (1980)
Published 26 March 1980
© Crown copyright 1980
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SP 3/80 (26 March 1980) TA 1988 s 707: Cancellation of tax advantages from certain transactions in securities: procedure for clearance in advance
TA 1988 s 703 and the succeeding sections (which provide for the cancellation of tax advantages from certain transactions in securities) contain safeguards against counteraction being taken unwarrantably in respect of transactions which a taxpayer has carried out. In addition, TA 1988 s 707 provides a procedure for the taxpayer to be told in advance whether the Commissioners for HMRC are satisfied that proposed transactions as described to them, if carried out, would not invoke counteraction.
Reasons for refusing clearance
Where the Commissioners for HM Revenue and Customs (HMRC) cannot give clearance under TA 1988 s 707 they are not statutorily required to say why and at one time their practice was to decline to do so. With a view to removing misunderstanding in particular about the scope of TA 1988 s 703 in relation to transactions with a commercial element, they later modified that practice.
Where the applicant has given full reasons for his transactions and clearance has to be refused, the Commissioners for HMRC indicate, where possible, their main grounds for doing so. In appropriate cases where they do not think it right to give reasons the Commissioners for HMRC will invite the principals themselves as well as their advisers to an interview so that the Commissioners for HMRC can be certain they have fully appreciated the position.
Significance of refusing clearance
The rules of the clearance procedure require the Commissioners for HMRC to say whether in their view TA 1988 s 703 would not apply. They are not required to say whether in their view the section definitely would apply. It may not always be practicable to do so in advance of the transaction’s actually being carried out, eg where the motive for it is a relevant factor. Nonetheless, it is not the practice of the Commissioners for HMRC to withhold consent under TA 1988 s 707 unless they would, on the information available to them, expect to take counteraction under TA 1988 s 703. The then Financial Secretary to the Treasury stated this practice in the 1966 Finance Bill debates in the following words:
‘The Revenue’s approach is that it will not refuse a [Section 707] clearance unless, having considered the transaction fully and all the circumstances of it, it would itself take action under the section if the transaction were completed.
Hansard (13 July 1966) Vol 731 Col 1566
Revenue decision 6
Circumstances in which the Revenue may refuse clearance under TA 1988 s 707.