Many practitioners are concerned about the current and future status of Extra-Statutory Concession C16

At the time of writing this, ESC C16 is still available to be used

Following recent consultation by HM Revenue & Customs on the future of ESC C16, some ICAS members have been perplexed that draft legislation on this topic has not appeared in the current Finance Bill.

ESC C16 allows certain distributions to be made as capital rather than income distributions on the striking off of a company.  Government proposals brought forward in December 2010 suggested that the benefits of ESC C16 should be enshrined in legislation but only in a severely restricted way – limiting the capital distribution to no more than £4,000.  Draft legislation was published at that stage, and the proposed £4,000 limit raised widespread objections.

HMRC are currently considering the responses received to the consultation on ESCs, including ESC C16, and we understand that a summary of those responses, plus the Government’s plans in the light of those responses, will be published in due course.  It remains to be seen whether the proposed restriction to £4,000 will still apply or whether the Government will have listened to the objections.

Primary legislation will not be required to place ESC C16 on a statutory basis.  FA 2008 s 160 provides an enabling power which allows the tax treatment afforded by existing published concessions to be legislated by Treasury Order, which would be laid before the House of Commons which would then have the opportunity to debate it.

In the meantime ESC C16 remains in its existing extra-statutory format and may continue to be used until the Government announces otherwise.  We have received an assurance from HMRC that retrospective changes to ESCs will not be made.