Government announces changes putting the UK at the forefront in implementing the OECD’s work to reduce global tax avoidance

In the Autumn Statement the Chancellor announced several proposed changes flowing from the OECDs work to reduce global tax avoidance through base erosion and profit shifting (BEPS).  The Chartered Institute of Taxation (CIOT) supports the OECD’s work but thinks it is important that the timing of the changes is carefully planned to ensure they are implemented at the same times as other countries to ensure the UK is not placed at a competitive disadvantage.

Glyn Fullelove, Chairman of the CIOT’s International Taxes Sub-Committee says:

“The Chancellor announced today a consultation on how the UK will implement the new rules proposed by the OECD, with international agreement, in September 2014 to tackle tax avoidance by MNEs that exploit differences between countries’ tax rules, using hybrid mismatch arrangements to avoid tax through the use of certain cross border business structures or finance transactions.  We welcome this consultation, taking forward part of the OECD’s work on BEPS.  We agree with the Government that international cooperation and global solutions are required to challenge tax avoidance across today’s global economy. The consultation documents indicates that the rules will be introduced in 2017, which will give time for companies to adjust, and for co-ordinated introduction with other jurisdictions. 

“We look forward to seeing more detail on the Diverted Profits Tax announced by the Chancellor today as a new tax intended to counter the use of aggressive tax planning techniques used by MNEs to divert profits from the UK. We understand that these rules will cover both UK and foreign groups which have a physical presence in the UK; in regards to UK groups, when the latest version of the controlled foreign company (CFC) rules were introduced two years ago, these were aimed at precisely this area: that is taxing profits being diverted from the UK.  We wait to see, therefore, what further areas this new tax is intended to tackle.  We also look forward to seeing how this new tax will interact with other BEPS work currently being done by the OECD, in particular the actions looking at the definition of permanent establishments and preventing abuse of tax treaties.

“Finally, the Chancellor also announced that the Government will introduce legislation to give the UK the power to implement the OECD model for country-by-country reporting.  We support this new requirement on MNEs to provide high level information to HMRC on their global allocation of profits and taxes paid, as well as indicators of economic activity in a country.  Although this will be a significant new compliance burden for businesses, it is an important step forward in promoting transparency.”

Notes for editors:

1.       The Government announced today on Implementing the agreed G20 OECD approach for addressing hybrid mismatch arrangements

2.       The Government has said no detail will be provided on the Diverted Profits Tax before December 10th

3.       The Chartered Institute of Taxation

The Chartered Institute of Taxation (CIOT) is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries.  The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 17,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.