Finance Bill

Written evidence submitted by Jonathan Bruneau (FB 11)

1. I am a director of a company, Bonnington House Nursery School Limited (‘the Company’) which is in the process of purchasing the goodwill of an established children’s nursery.

2. On 1 May 2015, the Company made an offer to purchase the goodwill and on 7 May 2015 that offer was accepted by the vendors of the business.

3. The Company’s offer was conditional upon obtaining the approval of the Care Inspectorate (the Scottish regulatory authority with comparable powers to Ofsted) of the transfer of the business to the Company -without which it would have been impossible for the Company to operate the nursery.

4. On 16 June 2015, I completed the preparation of the Care Inspectorate’s application papers on behalf of the Company and submitted them to the authority.

5. As of Budget Day (8 July 2015), I had only received a single email from the Care Inspectorate. This was received on that date itself and concerned the provision of references. The application was formally acknowledged in an email of 27 August 2015 from the Inspector appointed to consider the application but we are still awaiting the outcome. I am advised that the consideration of applications can sometimes take six months.

6. The Company’s offer for the goodwill was formulated on the basis of the tax legislation as it existed on 1 May 2015. It accordingly took account of the Corporation Tax relief that would over a period of years be available to the Company in respect of the purchase of goodwill.

7. I understand from my accountant that Clause 32 of the Finance Act (which introduces the proposal to deny Corporation Tax relief on the cost of acquiring goodwill) only disapplies that proposal in respect of acquisitions of goodwill that were either made before 8 July 2015 or were in pursuance of an unconditional obligation that existed before that date.

8. As noted in section 3 above, the Company’s offer was conditional upon the Care Inspectorate’s approval of the transfer of the business (‘the approval condition’). My accountant has, through their professional body (the ATT), sought clarification from HMRC as to whether despite the continuing existence of the approval conditional (not satisfied as of 8 July 2015) the Company’s obligation to purchase the goodwill can properly be treated as ‘unconditional’ as at that date within the meaning set out in Clause 32(13).

9. The HMRC specialist explained that they could not comment on the application of draft legislation but indicated that the situation where satisfaction of an open condition was (as in the Company’s case) wholly outside the control of both the contracting parties might be addressed in published departmental guidance.

10. My accountant advises me that the application of existing sub-clauses 32(10) and (13) in circumstances like those of the Company is unclear. Whilst clarification within HMRC’s departmental guidance might be helpful, it would be much more satisfactory for that clarity to be contained in the legislation or provided in a ministerial statement.

September 2015