Definition
Extra-Statutory Concession
An Extra-Statutory Concession (ESC) is a relaxation or leniency granted by HM Revenue and Customs (HMRC) to taxpayers which, although not formalized in tax law, is followed in practice. These concessions provide relief to taxpayers in situations where strict application of the law would result in unfairness or hardship.
Extra-statutory concessions are discretionary measures, meaning that their application by HMRC can vary based on individual circumstances. They serve the purpose of making the tax system fairer and more practical.
Examples
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ESC A19: This provides that HMRC may not collect tax arrears if it is due to their failure to make use of information provided by the taxpayer. For instance, if the taxpayer informed HMRC of an increase in income, but HMRC failed to adjust PAYE codes promptly, the taxpayer might not be required to pay the arrears.
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ESC C16: This allows distributions made to shareholders during the winding up of a company to be treated as capital rather than income, often resulting in a more favorable tax treatment for the shareholders.
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ESC D33: This concession allows taxpayers who spend a significant amount of time working abroad to be treated as non-resident for tax purposes, which may result in their overseas income being exempt from UK tax.
Frequently Asked Questions
Q1: How do I know if a particular extra-statutory concession applies to my circumstances? A1: You should check the details of the specific concession on the HMRC website or speak to a qualified tax advisor who can assess your circumstances and interpret the relevant concession for you.
Q2: Can HMRC withdraw an extra-statutory concession? A2: Yes, HMRC reserves the right to withdraw or modify extra-statutory concessions. Any changes or withdrawals are typically published in advance so taxpayers can be aware of imminent adjustments.
Q3: If a concession is not law, why does HMRC follow it? A3: Extra-statutory concessions originate from a practical perspective to address unforeseen anomalies or hardships resulting from the application of statutory rules. Following these concessions helps maintain fairness and practicality in the tax system.
Q4: Can I appeal HMRC’s decision if they do not apply an extra-statutory concession to my case? A4: Yes, if you feel that the concession should apply to your situation but HMRC disagrees, you have the right to appeal the decision, typically through HMRC’s own appeals process or tax tribunals.
Related Terms
- HM Revenue and Customs (HMRC): The UK government department responsible for the collection of taxes, the payment of some forms of state support, and the administration of other regulatory regimes, including the national minimum wage.
- Tax Legislation: Formal laws and regulations governing the collection, reporting, and management of taxes.
- Tax Relief: Reductions in the amount of tax owed, which can be obtained through various allowances, deductions, exemptions, and credits.
Online References
- HM Revenue and Customs (HMRC) Official Website - HMRC’s official website for the latest updates on extra-statutory concessions.
- UK Government Official Publications – Detailed list and introduction to extra-statutory concessions.
Suggested Books for Further Studies
- “Taxation: Policy and Practice” by Andrew Lymer and Lynne Oats - This book provides a comprehensive overview of tax policy and its practical application in the UK.
- “The Taxation Handbook” by Martin Mclachlan - A practical guide that explains various aspects of UK taxation, including discretionary measures like extra-statutory concessions.
- “Tolley’s Tax Planning” by Arnold Homer and David Smailes - A well-respected text that includes advanced tax planning techniques and updates on current tax issues, including concessions.
Accounting Basics: “Extra-Statutory Concession” Fundamentals Quiz
Thank you for exploring the concept of Extra-Statutory Concessions and taking our challenging quiz. Remember, understanding these nuances can optimize your tax affairs and ensure compliance with the ever-evolving tax landscape!
