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The Treasury has cancelled the consultation looking at how to combat tax avoidance arrangements that exploit the provisions of double taxation agreements.
Exchequer secretary David Gauke said the responses had made it clear the proposed legislation, as drafted, could cause significant uncertainty for compliant UK businesses and overseas investors about scope and practical effect.
The Treasury has therefore decided not to proceed with the consultation on the proposed legislation and will not include it in Finance Bill 2012.
Mr Gauke added that the government will continue to challenge specific arrangements that clearly seek to abuse provisions in a DTA.
This decision reaffirms ministers' commitment to open and transparent consultation and demonstrates the value of consultation, said the Exchequer secretary.
Chris Sanger, head of tax policy at Ernst & Young, welcomed the cancellation of the consultation.
He said, ‘Had the proposals gone ahead, UK competitiveness would have been eroded. It would have hit commercial transactions by restricting access to funding markets and hiked up the costs of investing into the UK.’
Mr Sanger claimed terminating the consultation before it reached the submission deadline showed that the new consultation process is working.
‘True consultation involves listening to responses and, in this case, it is clear the government has understood the concerns and acted accordingly.’
