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City lawyers warn over tax policy

Posted by: Laurence Simons 17/06/14

Reforms of tax legislation could have a seriously damaging impact on UK businesses, according to the City of London Law Society.

Its revenue law committee made the statement in response to government plans to alter the current regulatory environment.

The committee claimed that HM Revenue & Customs officials may have understated difficulties when briefing ministers.

"Whilst to some extent inevitable in a democracy, these phenomena are hugely damaging to the UK tax regime’s reputation for stability, and the creation of a constitutional check to limit the scope for them to occur would in our view be of real benefit," declared the report.

Worryingly, a great deal of policy appears to have been driven by political expediency rather than a pragmatic, cool-headed assessment of the current tax situation.

For City lawyers, major shifts in the legislature environment could mean not only a great deal of work but a demand to completely change their current approach.

Recent research has highlighted the issues facing general counsel with the global regulatory situation in flux, with this move from HMRC simply adding to the pressure they face if based in the UK.

Although policymakers have made great strides with corporation tax, too many decisions are being made hastily in order to plug into the public zeitgeist and more consideration needs to be shown, claimed the City of London Law Society.

"The sense of policy confusion, especially when contributed to by frequent significant change after announcement, is very damaging to the UK as it undermines the objectives of delivering predictability and certainty," they added.

It is not only lawyers that could be affected by these changes - one concern is that international investors may think twice about entering the British market until there is more clarity over the government's taxation plans.

Better communication from policymakers could resolve many of these issues and make it easier for GCs and business leaders to make their plans in advance, concluded the report.