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HMRC are inviting comment on changes to the taxation of foreign profits of companies.
Following the announcement in the Pre-Budget Report of a package of reforms, draft clauses have been published at an earlier stage of development than is usual.
This premature move was welcomed by Rupert Shiers, a partner in the tax disputes and investigations team at law firm McGrigors.
He said he was pleased that the Revenue has recently become more sensitive to the challenges faced by business and as a result is now prepared to publish draft legislation ‘that doesn’t quite work’.
The taxman’s new consultation document is ‘definitely a good starting point’, said Mr Shiers. ‘I think there is a lot more to be done [but] I am very hopeful that we will get to an agreed position before the next Finance Act is published’.
Rupert’s remarks were echoed by James MacLachlan, tax partner with global law firm Baker & McKenzie, who acknowledged HMRC for ‘effectively giving businesses early opportunity to have their input into legislation’.
The consultation paper – which can be viewed in detail on the Revenue’s website’s dedicated page – covers plans to ‘support and enhance the UK’s competitive position’ through an examination of the controlled foreign companies (CFC) rules.
The central measure is ‘an exemption from tax of dividends received by large and medium groups regardless of the source’.
There is also a proposed introduction of a worldwide debt cap on interest, which Mr MacLachlan noted is covered in more detail than other area within the consultation document.
He suggested that the Government has so far given more thought to the cap than to any other related plan, and he added: ‘The practical implications to business [of the cap] need to be worked out, which is going to be challenging for everyone involved’.
Rupert Shiers remarked that the cap changes are ‘more complexly stated’ than other parts of the draft clauses, and it is important that they be ‘coherent as possible and not just a long list of rules without a single principal to hold them together’.
Mr Shiers will be chairing a LexisNexis Tolley conference on 16 December, which will focus on taxation of companies’ foreign profits. James MacLachlan will be among the speakers, a full list of whom can be found here, along other details including the agenda and booking opportunities.
‘We should expect lively debate at a time when people’s thoughts [on the matter] are still evolving,’ said Mr Shiers. ‘As the first public forum on the subject, it could inform thinking in the run up to the Budget’.
