In the last few months, we have noticed that HM Revenue and Customs seem on occasion keen to take
a rather obscure technical point up with taxpayers (perhaps part of a wider policy adopted towards
any sort of tax planning) as a way of denying them tax relief.
The point relates to the Small Companies marginal rate of tax - you may hear the term 'Newfields'
used in this context as this was the case that HMRC won before the Lords in 2001 which provides
their authority on the point.
The situation affects individuals who have invested in a Limited Liability Partnership but who
are also majority shareholder of a company that claims Small Companies tax relief. HMR&C may seek to
deny that relief by arguing that the individual is 'associated' with his fellow LLP partners for the
purposes of claiming relief.
Our feeling as to the merits of the argument are mixed - technically HMRC have a point, but it
would seem an unlikely battle for them to fight as the net result seems an unintended outcome
of the relevant legislation. There is no definitive answer and the question may end up having
to be settled through the courts. Future Films has sought technical advice from PwC, KPMG, DLA
Piper and Grant Thornton on this issue - the overriding sentiment is that in the event that
HMR&C did decide to take the point, the
taxpayer would have robust counter argument and that it would be highly unusual practice for HMR&C
to attempt to win on this point.
If you have any queries relating to this point, please contact Iona Martin on 020 7009 6609.