United Kingdom

Facebook to overhaul Irish tax scheme

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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.”

source article here

 

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HMRC’s digital woes – as they say, “you couldn’t make it up”.

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Source: rsmuk.com, 5th April 2017 (aka Baker Tilly)

“Three critical HMRC digital projects are running into problems, the “Making Tax Digital project”, the “Customs Declaration System” and HMRC’s tax return filing software for 2016/17.

What can be done about this? Two immediate suggestions are desperately obvious.

First, give HMRC more money to do its job properly. Perversely, far from being increased, HMRC’s annual budget is being reduced from £3.6 billion in 2016/17 to £2.9 billion in 2019/20.

Second, ensure that HMRC has sufficient, experienced IT experts to deliver these projects. But here’s the rub. Because of HMRC’s approach to IR35, it’s reported that HMRC is about to tax contractors who use personal service companies as if they were permanent employees of HMRC. And guess what? The very IT experts on whom HMRC relies are quitting rather than take a cut in their after-tax pay.

As they say, you couldn’t make it up.”

Source article here

 

Ruling under Chile-UK double tax treaty on permanent establishment and entitlement to treaty benefits

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Source: by Montt y Cia SA via International Law Office 7 April 2017

“A taxpayer requested a ruling from the Chilean tax authorities on whether a branch of an entity resident in a third state should be considered a UK resident for the purpose of claiming the benefits provided under Article 7 of the Chile-UK double tax treaty.

The taxpayer explained that it was evaluating an investment through the purchase of shares abroad. In that context, to protect against future currency fluctuations, it had entered into a contract with a foreign entity resident in a third country (the United States) through its branch in the United Kingdom. According to the information provided by the taxpayer, the branch qualified as a permanent establishment in accordance with the US-UK double tax treaty and was subject to corporate tax in the United Kingdom on the income attributable to it.

However, the Chilean tax department considered that the branch did not qualify as a ‘resident person’ for the purposes of applying the Chile-UK double tax treaty as:

  • the person who had invoked the treaty’s benefits was a financial institution resident in the United States, with which Chile has no tax treaty, since its branch in the United Kingdom was only an extension of the activities of the US person in the United Kingdom; and
  • income attributable to the branch was taxed only in the United Kingdom on the basis of the link between the United Kingdom and the activity carried out there by a US resident, because such activity had exceeded a certain threshold established in the applicable tax treaty. The branch was not subject to worldwide taxation by reason of domicile, residence or place of management.”

Source article here

 

UK: High Court Releases First Edition Of “Company Law For Dummies” Handbook

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Source: Kemp Little LLP via Mondaq, 31 March 2017

“The recent case of Dickinson v NAL Realisations (Staffordshire) Ltd is a “101” guide to how not to run a small business, providing insight into the pitfalls that can await any director or shareholder that may wish to cut corners rather than ratifying decisions through the appropriate approval processes.

This judgment goes to show that directors and shareholders of companies have certain inescapable personal responsibilities that must be recognised and adhered to if decisions made by such directors or shareholders on behalf of the relevant company are to be lawful.”

Source article here

 

UK Building company’s tax avoidance scheme exposed & defeated

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Source: HMRC Press Release 11.03.2017

A tax tribunal has ruled against a Stamp Duty Land Tax (SDLT) avoidance scheme used by Crest Nicholson, one of the UK’s largest house builders, meaning it will have to pay the £1.3m it owes.

HM Revenue and Customs (HMRC) challenged the artificial and complex arrangements made by the FTSE 250-listed company to avoid paying SDLT on three purchases of development land near Rochester in Kent for a total of more than £32m.

The First-tier Tribunal decision is likely to have an impact on more than 700 other cases, potentially protecting £65m of taxpayers’ money.

HMRC Press Release here