Finance Bill 2015 – ACCA concerned multinationals will have less activity in the UK
Following last week’s Autumn Statement, the Finance Bill will announce new proposals for Multinationals regarding Diverted Profits Tax.
Chas Roy-Chowdhury, head of taxation at ACCA said: “Nobody wants to see profits which should be subject to UK tax escape the net; so we entirely agree that appropriate steps should be taken to capture all income artificially diverted from the UK.
“We know that the new measure will only target those MNCs which use a conduit structure through jurisdictions which have double tax treaties with so-called tax havens. These enable the MNCs to potentially escape UK Corporation Tax altogether on almost all its profits. The Treasury briefing actually quotes the double Irish structure. From this it is very clear which European Union Member States are being targeted.
“While we welcome the measure in principle, we need to ensure legislation does not drive away global companies from doing business and from making tax contributions to the UK exchequer through the basket of taxes they already pay – such as income tax on their employees, National Insurance, VAT and duties.
“We consider the UK proposals, effective from 1 April 2015, to be a highly aggressive piece of legislation. The process will be for the MNC to report itself to HMRC, a form of Disclosure of Tax Avoidance Schemes, and then somehow argue against that reporting once HMRC have imposed the 25% charge. We could understand if HMRC imposed a DPT charge against the MNC and the company had to then disprove this, but we find it reputationally damaging to the UK where the company has to effectively incriminate itself upfront, and then argue its way out of the situation.
“Additionally, just because the UK says the DPT is not Corporation Tax, this does not mean that other jurisdictions will accept it as such. We cannot see mutual agreement being obtained from all the UK’s double tax treaty partners, and hence subject to rules outside of the UK’s treaty obligations. We see these rules – which have been devised to bring into the UK around £1bn pounds of economic activity – being challenged by the MNCs it impacts as being extra-territorial and wrapping-up the UK in significant levels of litigation.
“It would perhaps have been more productive for the UK to have waited for the OECD to have completed its work on Base Erosion and Profit Shifting, which will be finalised by the end of next year, before producing this legislation. The UK has jumped the gun and might pay a high cost in realising even close to a billion pounds or so in extra revenue over a five year time horizon. Could this be a case of too much too soon?”
