The following is a summary of some of the main points discussed.

Loan Relationships

The Finance Bill includes the anti-avoidance rule announced by the Government on 27 February. The new rule targets arrangements which seek to avoid tax on discounted debt buy-backs by UK groups and discounted debt purchases as part of an acquisition of a UK debtor company. Historically, it has been possible to structure the acquisition of companies with distressed debts in such a way so as to ensure that a deemed release does not arise when the debt is restructured. Since the measure was announced in February there has been concern that it has been drafted so widely so as to catch genuine commercial restructuring. Those present at the meeting sought reassurance from HMRC that the rule would not apply in commercial situations where a company is acquired which has net assets less than its outstanding liabilities and its debt is restructured/released pre-sale.

HMRC confirmed that it was not their intention that the new section 363A CTA 2009 would affect normal commercial debt restructuring. HMRC emphasised that the rule would not override the other exceptions made available by the legislation. HMRC also confirmed that they had already received a number of applications for clearance from the new rule and implied that these had already been, or would be granted.

It should be reassuring to taxpayers to know that by making use of one of the available exceptions does not, of itself, trigger the anti-avoidance rule and that where there is uncertainty, a clearance may be available.

Stamp Duty Land Tax

The new higher rate of SDLT on residential property does not apply to property development companies. The legislation defines a "property development business" as a business that consists of, or includes buying and redeveloping for resale, residential property. It is unclear what is meant by "redeveloping". HMRC were asked if structural alterations are required or if painting and redecorating were sufficient.

HMRC advised that their view would depend on the facts. Unsurprisingly, they confirmed that merely acquiring property with a view to making a capital gain in the future without any activity would not constitute a redevelopment business. An active development business would be within the exclusion. Clearly some more detailed guidance would be helpful.

SDLT is paid on the purchase of a property and so it is the intention of the buyer at the date of the sale that determines the rate of tax. HMRC confirmed that where a property development company acquires a property with a view to undertaking a redevelopment but later on decides to only redecorate, the acquisition should fall within the exception. HMRC advised that in such a situation it would be very helpful to have a contemporaneous business plan to evidence the intentions of the buyer.

HMRC also confirmed that the definition of "property development business" did not exclude a business that buys and develops for re-sale but accepts short term lets of properties to generate income while attempting to sell, provided that the letting is incidental to the primary purpose of redevelopment.

Seed Enterprise Investment Scheme

The new Seed Enterprises Investment Scheme (SEIS) is a tax relief at an enhanced rate of 50 per cent. for investments into qualifying start-up companies. The rules are set out in the Finance Bill and include a provision that the shares must be subscribed for by an investor for genuine commercial reasons and not as part of a scheme or arrangement where the purpose is the avoidance of tax. ICAS suggested to HMRC that as the purpose of the SEIS is to attract investment that may not otherwise be forthcoming, the tax relief is effectively a sine qua non of the investment decision.

HMRC provided helpful clarification that the motive test would be interpreted in the same way as that for the Enterprise Investment Scheme and Corporate Venturing Scheme. Published guidance for those schemes states that:

"The reduction of an investor's tax liability which flows from the schemes in the circumstances intended by Parliament is obviously not a tax advantage at which this rule is aimed. We therefore do not have to judge whether a subscription for eligible shares would have been made if it had not attracted relief. The scope of the provision cannot be described precisely, but it may apply in any situation where there are grounds for thinking that the circumstances are not ones in which Parliament intended the relief to be available."

Controlled Foreign Companies

Since the draft CFC legislation was published in December, a new gateway test has been added to the regime. The gateway includes a motive test which asks if the main purpose or one of the main purposes, of the arrangement is to reduce or eliminate any liability of any person to UK tax or duty. The inclusion of a motive was criticised as it introduced a qualitative and subjective test into what was intended to be a simple exclusion from the regime.

HMRC advised that the new gateway test was designed to be a simple way for companies to determine whether or not they fell within the regime. Only if a company fails the gateway test does it have to undertake the more thorough analysis required by chapter 4.

Historically, taxpayers have been wary of relying on a motive test because it is subjective. HMRC's view is that they expect companies to rely on the motive test and understandably they expect companies to know what their purposes are in entering into arrangements. It is commercially unattractive to undertake the detailed analysis required by chapter 4 where it is not necessary to do so. With this in mind, companies and advisers will have to grasp the motive test and follow the courage of their convictions where a UK tax saving is not a main purpose of the arrangement in question.

The Patent Box

HMRC confirmed that for companies working on their first patent pending, the legislation does require a protective election to be made under section 357A in advance of that patent being granted. This enables the company to satisfy the test in section 357CQ(6)(a). The election applies before the company qualifies for the patent box and in that time the profits collect in the patent box. Following the grant of the patent, the profits from the pending period can be used as "Relevant IP profits" in the usual way.

HMRC also confirmed that any additional claim may not be made for any part of an accounting period falling before 1 April 2013, regardless of the date of the grant of the patent.