UK Budget

UK Royalties Withholding Tax – Consultation

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Source: HMRC Press Release, 1 December 2017

This consultation relates to the circumstances in which royalties and other types of payment made to connected persons not resident in the UK have a liability to income tax.

The UK government will introduce legislation in Finance Bill 2018-19 that broadens the circumstances in which certain payments made to non-UK residents have a liability to income tax.

These changes will have effect from April 2019. The consultation focuses on the design of that legislation.

The government welcomes comments from those who would be affected by these changes, including companies, advisors and representative bodies.

The consultation runs from 1 December 2017 to 23 February 2018.

Details of the Consultation here

 

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UK Budget 2017: Tech giants targeted over royalties

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Source: bbc.co.uk 23 November 2017

The UK government is taking steps to increase the tax it collects from firms doing business online. Rules to prevent online sellers avoiding VAT have also been tightened.

From April 2019, technology groups such as Google and Apple will pay a new withholding tax on the royalty payments they make to their subsidiaries in low-tax jurisdictions.

HMRC will also hold online marketplaces such as eBay and Amazon responsible if sellers using their platforms fail to pay Value Added Tax on their sales.

Chancellor Philip Hammond said: “Multinational digital businesses pay billions of pounds in royalties to jurisdictions where they are not taxed and some of those relate to UK sales.

“This does not solve the problem, but it does send a signal of our determination and we will continue work in the international arena to find a sustainable and fair long-term solution.”

Source article here

 

“Tax break could lead to rush of deals in North Sea”

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Source: Aberdeen Journals Ltd 23 November 2017

“A ground-breaking new tax break for the oil sector will revitalise the North Sea and pave the way for a flurry of deals, industry experts said yesterday.

They said the UK Government’s decision to let firms transfer tax credits would attract fresh investment to the basin and prolong production from mature fields.

Derek Leith, head of oil and gas tax at EY, said the changes had the potential to “revitalise” the UK oil and gas industry and Alex Kemp, professor of petroleum economics at Aberdeen University, said the reforms were to “everyone’s advantage”, including the Treasury, as “more transactions mean more oil will be recovered”.”

Source article here

 

UK Spring Budget 2017: Deductibility Of Corporate Interest Expense

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Source: Article by Deloitte LLP, 9th March 2017

“Following the publication of draft legislation to limit the UK tax deductions that companies can claim for their interest expenses (as announced at Budget 2016), the government have announced a small number of changes which will be reflected in Finance Bill 2017 to avoid certain unintended consequences or impose unnecessary compliance burdens.

These amendments will be beneficial to a number of groups including:

  • those with losses in some years, including start-ups, which move into profit;
  • infrastructure groups;
  • groups with inter-company guarantees;
  • banks; and
  • insurers.

The changes will be reflected in Finance Bill 2017, when it is released on 20 March 2017, and will come into force when the interest restriction legislation takes effect from 1 April 2017.

For more detail see the source article here

 

UK 2016 Autumn Statement – corporate interest expense restrictions

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In his Autumn Statement Chancellor Philip Hammond confirmed the implementation of the UK’s new restriction on tax relief for corporate interest expense. Most of the draft legislation has been published (here), with the remainder coming this month. The new interest restriction measures will apply from 01.04.2017.

The new rules are intended to ensure that businesses won’t be able to avoid UK tax by borrowing excessively in the UK to finance activities elsewhere.

Broadly, the proposals are unchanged from the consultation document released in 2016, but there is more detail on what will be included in EBITDA and the carry forward of unused capacity has been extended from 3 to 5 years.

The restrictions on the tax deductibility of corporate interest expense are based on BEPS Action 4 and apply a fixed ratio rule that limits deductions for net interest expense to 30% of a group’s UK EBITDA.

There is no avoidance or purpose condition for the rules to apply, but they apply after most other tax rules, including transfer pricing and anti-hybrid, so the arm’s length principle takes precedence.

The Group Ratio Rule and the Public Benefit Infrastructure Exclusion will allow a deduction of a greater amount of interest in appropriate circumstances and there are rules to deal with timing differences between interest expense and EBITDA.

Restricted interest is carried forward indefinitely and must be deducted in a later period if there’s sufficient interest allowance. Unused interest allowance can be carried forward for up to five years.

Businesses may submit comments to interest-restriction.mailbox@hmrc.gsi.gov.uk by 1 February 2017 and there is likely to be a further opportunity to comment on the legislation coming out this month.