Source: BBC.co.uk 12 December 2017
“Facebook is to overhaul its tax structure so that it pays tax in the country where profits are earned, instead of using an Irish subsidiary.
The online advertising giant is to make the change in every country outside the US where it has an office.
However, that does not necessarily mean it will start paying more tax in other countries as a result of the overhaul, Professor Prem Sikka of the universities of Sheffield and Essex told the BBC.
Taxes are paid on profits, and “the huge difficulty with large companies is trying to determine exactly what the profit is,” he said.
There are a number of ways firms can muddy the waters, including charging intra-group management fees, royalty fees, and profit-sharing, he said.”
The UK has an annual requirement (following BEPS13) for certain MNEs with consolidated group revenue of at least €750m to notify and electronically deliver to HMRC a report of revenue, pre-tax profit and taxes paid in each country in which they operate. Guidance on preparing and filing the reports has been published.
For groups planning to file a report with HMRC for the year ended 31 December 2016, the filing deadline is 31 December 2017 and notifications are also required for the year ending 31 December 2017 by 31 December 2017.
Your HMRC Customer Relationship Manager should be your first point of contact for any questions about notifications, the registration service, the reporting service or HMRC’s rules for completing the XML schema. If you don’t have a CRM, email email@example.com.
The ultimate group parent is primarily responsible for filing the report with HMRC although the UK entities are required to make a “local filing” where:
- the ultimate parent’s country of residence does not require it to file a CbC report,
- that country does not have specific exchange of information arrangements with the UK in respect of CbC reporting, or
- such arrangements do exist but are not operating effectively.
in which case the UK entity must request from its ultimate parent all the information it needs to complete a full CbC report and file it with HMRC unless another group member has filed the report with HMRC or where a report containing the necessary information has been filed in another country that has effective information exchange arrangements with the UK. If it does not receive the information in time, the UK entity must inform HMRC and must file a report in respect of the UK entities in the group only.
You must make your report using XML format and in the structure, called a schema, published by the OECD. You must follow HMRC’s rules to create a valid template as only reports in this approved format will be accepted for electronic filing.
In accordance with OECD guidance, UK partnerships that are parent entities of multinational groups must also file CbC reports (as well as other group entities that are required to file).
Until recently I was a Senior Transfer Pricing Specialist with HM Revenue & Customs. I have HMRC TP risk-assessing and case-working experience for most business sectors and transaction types and was a member of HMRC’s TP Governance Panel, which has the final say on most TP enquiries.
I have now decided to specialise in helping MNEs and their advisers prepare their “final” TP documentation for HMRC eyes.
You may think your TP Documentation is clear and complete; but HMRC may think otherwise. Many TP enquiries are opened or extended by HMRC because the full facts and circumstances of the business and its transfer pricing are absent from or not clearly presented in the documents provided. Ironically, on establishing the facts it often becomes clear to HMRC that the pricing is actually at arm’s length and the enquiry can be closed without adjustment. Unfortunately, considerable time and money will have been expended on the enquiry in the meantime.
Such enquiries can be avoided or cut short.
I can “sense-check” your TP documentation; issues that might otherwise trigger “TP risk” alarm bells within HMRC will be identified and can be corrected, clarified or expanded as required, before submission to HMRC, to better demonstrate your principled and objective approach to achieving the appropriate arm’s length pricing.
To find out how I can help you please use the “contact me” tab above or email me directly.
Gordon McLeman 08 December 2017
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.
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.”