The tax body says the ESC A37 should be put into law and not merely operated under HMRC guidance as more directors look to use the concession.

Under ESC A37, fees received in respect of directorships may be included as trading income in the accounts of professional partnerships or companies instead of being taxed as employment income.

In its response to a letter received from HMRC on 22 July about the review of ESC A37 and other administrative practices, CIOT says that ESC A37, which is widely used and mirrors regulation 27 of the Social Security (Contributions) Regulations 2001, is a very valuable administrative easement as it helps ‘align the tax treatment of the fees with the commercial reality of the situation’.

The CIOT expects that more companies with interests in another company will want the right to appoint an individual as a director of the other company as a result of the restriction on corporate directors of companies that has been included in the Small Business Enterprise and Employment Bill.

As the facility ‘remains very relevant’, CIOT says that the concession should be legislated.

The CIOT has also warned against the removal of the administrative easement provided by EIM 61030 (Tax treatment of payments from Local Medical Committees to part-time committee members).

This allows a GP, who is a member of a partnership and sits on a Local Medical Committee (LMC), to treat payments from the LMC as part of the trading profits of the partnership rather than as his or her employment income.

It says EIM 61030 should be removed only if a similar treatment can be provided by statute.

The CIOT’s response letter is available at http://www.tax.org.uk/Resources/CIOT/Documents/2014/08/140820%20Review%20of%20extra%20statutory%20concessions%20-%20CIOT%20comments.pdf