CIOT Slams 'Unnecessary' Share Reporting Rule

by Jason Gorringe, Tax-News.com, London

28 July 2005

The Chartered Institute of Taxation (CIoT) has this week slammed HM Revenue and Customs for obliging hundreds of thousands of companies to file a tax form which does not apply to them, at a cost of around £80 million per year.

Form 42 was introduced in 2003, and was designed to gather information from relevant firms on "taxable employee share incentive schemes".

However, instead of the 6,000 businesses which the CIoT has estimated should be filing the form with HMRC, around 405,000 have been obliged to provide unecessary information on "founder shares, at a likely cost of between £40 and £200 per company" according to Anne Redston, chairman of the Institute's personal taxes sub-committee.

According to an Telegraph report on the matter published on Monday, Ms Redston went on to add that:

"(The legislation was) never intended to require the reporting of information relating to founder shares - it does not, as a question of fact, require it. The reporting of founder shares is a wholly unnecessary extension of the legislation and has no clear purpose."

She concluded by stating that:

"We do not know why [Revenue & Customs] need to collect information about the shares issued when a company starts up. We have asked this question too, but have never received a reply. One of the problems we have got is that the Revenue's interpretation is very broad, and almost everyone who sets up a company has to fill in this form."

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