• Building a tax manifesto for manufacturing

    The global re-shoring trend is creating new opportunities for the UK, but our report shows it has limited time to set itself up for future high quality manufacturing.

  • Tax Insights (previously T Magazine): future of tax

    Whether it’s the media, politicians or corporations, everyone is becoming increasingly focused on tax. Don’t miss our eleventh edition, which examines the journey ahead.

  • 2014 tax risk and controversy survey highlights

    Bridging the divide between current and future risk management frameworks can be a challenge. Our survey reveals actions to help you prepare.

  • Managing indirect tax in the digital age

    Multinational companies are handling large quantities of complex data about indirect taxes. We outline hands-on approaches that can help deal with all that information.

  • FATCA: Are you ready for 1 July?

    If you’re not prepared, you could suffer a 30% withholding tax on US-sourced payments. Know where you stand.

  • Budget 2014

    Read our analysis of Budget 2014, including Budget Alert, which gives insight on employment, personal, corporate and indirect tax measures, plus EY ITEM Club comment.

  • OECD provides update on the BEPS Action Plan

    On January 23, 2014, the Organization for Economic Cooperation and Development hosted a webcast on the base erosion and profit shifting project. Learn more.

  • Tax Policy and Controversy Briefing goes online

    The speed of change continues globally. Keep up-to-date on tax policy, legislative and regulatory developments with our new web-based Tax Policy and Controversy Briefing.

  • Tax Transparency

    The trust an organisation builds with its stakeholders is critical, and tax transparency is a key dimension in building that trust. Find out how we can help.

Tax Services

We’ll help you navigate the global tax landscape

The business and tax landscapes have changed dramatically, and the pace and complexity of change continues to increase. Governments are tempering the need for revenue with increased competition for labor and capital. Tax authorities are adapting their enforcement strategies, focus and policies in response to the changing dynamics of business. Companies are balancing competing priorities, ensuring they maintain compliance while adding value.

We can assist you with these critical issues in today's tax environment, including:


Building a tax manifesto for manufacturing 658K, August 2014



  • Midweek Tax News

    Archives...

    A weekly update on tax matters to 12 August 2014

    Midweek Tax News provides you with a succinct overview of the key tax developments that have occurred each week, to allow you to stay up-to-date on tax issues that may have an impact on your business. If you would like to discuss an article in more detail, please do speak to the relevant contact listed at the end of this issue or to your usual EY contact.

    HMRC has issued three sets of draft regulations (together with a technical note) amending the corporate tax rules applying to corporate debt and derivative contracts. The principal aim is to ease the impact for UK companies given the mandatory transition to IFRS/FRS 101 or FRS 102 from 1 January 2015.

    Draft regulations will amend the tax matching and hedging rules contained in the Disregard Regulations 2004 for accounting periods commencing on or after 1 January 2015. Currently the rules apply automatically (with an opt out) and result in companies being taxed on an ‘old UK GAAP’ basis for tax purposes in respect of their interest rate, currency and commodity contracts which are in appropriate hedging relationships. This removes any potential cash tax volatility which might otherwise arise from fair valuing these instruments. Under the proposed amendments, companies who wish to avoid such cash tax volatility must now elect for old UK GAAP treatment although transitional provisions will be introduced which would deem the company to make the new election from 1 January 2015 unless they have previously opted out. Therefore, it will be necessary to make an election in respect of any new items in order to benefit from old UK GAAP treatment.

    It is also proposed to make minor changes to regulations 3 (to remove the existing exclusion which prevents foreign exchange movements which arise on money debts from being within the scope of the tax matching rules) and 4A (to allow the election to be made at any point in time although any election will only have effect prospectively).

    Draft regulations making further amendments to the Disregard Regulations 2004 (and the Bringing into Account Regulations 2002) are intended to preserve the existing tax treatment for loan treated as ‘permanent-as-equity’ under previous accounting standards. These changes have retrospective effect for companies which changed to the new accounting framework from as early as 1 October 2012.

    Draft regulations amending the Change of Accounting Practice Regulations 2004 are intended to preserve the treatment of certain debt following a change in accounting practice where there has already been a corporate rescue. These changes would have effect in relation to periods of account beginning on or after 1 January 2015.

    There will be a short period of consultation which ends on 12 September 2014. The wider consultation on reform of the loan relationships and derivative contract rules has been in progress since Budget 2013 with legislation included in Finance Act 2014 and with further provisions to be included in Finance Bill 2015. Four working groups have been established by HMRC to consider various strands of the reform and EY continue to be represented on all of these.

    Given the number and complexity of these changes taxpayers may wish to consider whether any of these amendments have an impact on the treatment of corporate debt, foreign exchange or derivatives within their group.

    In the case of Heritage Oil and Gas Ltd & Anor v Tullow Uganda Ltd, the Court of Appeal has decided that compliance with a notice provision in a sale and purchase agreement was not a condition precedent to the right to an indemnity in respect of tax under the terms of the agreement.

    The background to the case is the assessment of the seller to Ugandan tax on capital gains it made on the sale of an interest in an oil field to the buyer. Ultimately the Ugandan tax authorities served tax demand notices on the buyer under secondary liabilities legislation for the tax unpaid by the seller. The buyer paid the liability and then made a claim under the indemnity in the sale and purchase agreement.

    At the High Court and then again at the Court of Appeal, the seller argued that the buyer was not entitled to rely on the indemnity as it had failed to give notice to the seller of the tax demands received from the Ugandan tax authorities. The seller argued that the requirement to give notice was a condition precedent to a claim under the indemnity.

    Upholding the decision of the High Court, the Court of Appeal found that the requirement to give notice of the tax demand was not a condition precedent to the right to an indemnity. The Court noted that, even if the words, “condition precedent” are not expressly used in a claims clause, other words could have the same effect, so long as the agreement makes it clear that such an effect was the intention of the parties. Here the Court found that such an intention was not apparent from the drafting of the agreement concerned. In particular, it noted that, while words appropriate to create a condition precedent had been used in another sub-clause of the indemnity, similar wording had not been used in the notice provision. The fact that the effects of a breach of the notice requirement might either be serious or might be minor was also a reason for not finding the notice requirement to be a condition precedent in the absence of clear language.

    The PAC has confirmed its plan to hold a conference with parliamentarians, business representatives, academics, campaigners and tax professionals on 30 October 2014 on the impact of globalisation on taxation. The conference is intended to influence the work that the PAC will do in this area for the remainder of the Parliament and the PAC plans to produce a conference report to feed back its views and ideas to key policy makers. EY will be attending.

    The Court of Appeal has considered a contractual dispute as to whether a buyer was liable to pay VAT on the purchase price of a commercial property. The seller had opted to tax the property but did not at any time notify this to the buyer and did not initially seek to charge VAT on the purchase price. A year after the transaction completed, HMRC raised a notice of assessment and the seller sought to pass this liability on to the buyer.

    The terms of the contract provided that the purchase price of the property was a specified cash sum (which did not include any amount in respect of VAT). However, the contract also incorporated the Law Society Standard Conditions of Sale (Fourth Edition), which appeared to state that sums payable were VAT exclusive.

    The Court held that the contract, properly construed in light of the circumstances of the transaction, indicated that the price was inclusive of VAT drawing a distinction with previous case law in this area which had given effect to VAT exclusive provisions contained in contracts for the sale of land. This was on the basis that, inter alia, the (VAT free) cash sum purchase price had been agreed a considerable time before completion; the seller had not communicated to the buyers that it had exercised the option to tax; and the buyers were individuals and seemed unaware that VAT might have been chargeable.

    The decision serves to emphasise the importance of clear, coherent and unambiguous drafting of sale contracts.

    In the case of Taylor Wimpey plc, the First-tier Tribunal considered the application of the ‘builders' (input tax) block’ and whether the taxpayer was entitled to make a substantial ‘Fleming’ claim seeking recovery of VAT incurred on white goods (ovens, washing machines, dishwashers etc) and carpets installed in newly built homes in the period between 1973 and 1997. The taxpayer argued that the builders' block did not apply to the claim items or, if it did apply, that it was contrary to EU law and should be disapplied, with the result that the VAT on related costs was recoverable as it was attributable to a zero-rated supply (the sale of the new houses).

    The Tribunal held that the builders' block did apply to the claim items. Whilst the Tribunal acknowledged that the builders' block may be ultra vires, it held that if the taxpayer chose to reject the (incorrect) VAT treatment of its supplies under UK law (exemption), the result was that it had to accept the VAT treatment conferred by EU law (standard-rating). The Tribunal held that if the taxpayer opted to rely on EU law it would be entitled to recover the input tax at stake in this appeal, but this raised the issue of whether the taxpayer would then be required to offset the resulting output tax against its input tax claim. However, as neither party was prepared to argue this ‘set off’ issue, the Tribunal decided to adjourn the case.

    Any housing developers who have submitted (or are considering submitting) similar claims may wish to stay abreast of developments in this litigation.

    Scottish independence debate

    The Scottish Government has published A Jobs Plan for an Independent Scotland which is intended to show how, with control of economic and tax policy, an independent Scotland would be able to design a policy framework to create more and better job opportunities. The paper repeats the policy conclusions set out in the June publication Reindustrialising Scotland for the 21st Century: A Sustainable Industrial Strategy for a Modern, Independent Nation. It identifies all the taxes that are currently outside Scotland's control and could, under independence, be more tailored to Scotland's needs.

    In particular, the more recent document highlights work undertaken in 2011 to estimate the positive impact to Scotland of a three percentage point cut in corporation tax. Although this model was based on reducing the then 23% to 20%, the current paper applies this finding to the current system and argues that such a rate rate cut would in part resist the ‘gravitational pull’ of London and could boost employment creating 27,000 jobs. It does, however, make it clear that this is just an illustration of one policy which an independent Scotland could choose and a range of other options are possible.

    Pensions flexibility

    The Government has published its draft Taxation of Pensions Bill together with accompanying draft guidance, which provides further details around how people will be able to access their defined contribution pension savings flexibly from April 2015.

    The Bill outlines how, from April 2015, individuals aged 55 and over will be able to access their pension pot without limitation in three ways. The option of purchasing an annuity remains but alternatively investors will be able to enter into unlimited flexible drawdown or take ad hoc lump sums without crystallising their pension pot.

    Office of Tax Simplification review of employee benefits and expenses: Termination payments

    On 31 July, the Office of Tax Simplification issued its third and final report on the review of employee benefits and expenses. This focuses on the tax and national insurance contribution (NIC) treatment of accommodation benefits and termination payments, with appropriate recommendations as to reform. The report provides a useful overview with regard to termination payments generally and highlights complexities in the current application of tax and NICs to these payments, which might mean that taxpayers unwittingly pay more tax and/or NICs than is necessary.

    VAT recovery on hire-purchase repossession costs

    In the case of British Credit Trust Ltd, the First-tier Tribunal held that VAT incurred by the taxpayer on the costs of repossessing motor vehicles on the termination of a hire-purchase agreement were directly attributable to taxable supplies (the subsequent sale of the repossessed vehicles at auction) and, therefore, recoverable in full.

    Whereas other recent VAT cases involving hire-purchase transactions have tended to focus on the recovery of residual input tax (ie what constitutes a fair and reasonable apportionment), that issue never arose in this case as the Tribunal held that the VAT on vehicle repossession costs was taxable input tax. Any taxpayers engaging in hire-purchase transactions who have previously treated the VAT on repossession costs as residual input tax may wish to consider whether a retrospective claim is now appropriate.

    US proposals targeting perceived tax benefits related to inversion activity

    The prospect of more inversions among large, high profile US corporations (whereby they move their headquarters to a lower tax country by acquiring or creating a new holding company located outside the US) has attracted increased attention in Congress over the last few months and has been the subject of significant press attention in the US and the UK.

    On 31 July 2014, Congressman Sander Levin, Ranking Member of the House Ways and Means Committee, released a discussion draft of legislation that would tighten the earnings stripping rules and expand the US controlled foreign corporations regime. However, the provisions in the discussion draft are not limited to companies that have engaged in inversion transactions. The discussion draft's proposals would affect foreign-owned US companies more generally and, thus, would have potential implications for all foreign companies investing into the US. The chances for legislative action on inversions remains uncertain and thus far no tax law has been enacted in this area. Our international tax alert provides further details.

    Spanish tax reform

    As part of its broad based tax reform package, the Spanish Government has now released a second draft of the bills (first published in June 2014) which will modify the legislation relating to Spanish corporate income tax and the non-residents income tax laws. These will be discussed and voted on by the Spanish Parliament and are intended to come into force in 2015.

    Amongst other measures, the proposals include a gradual reduction in the corporate income tax rate to 25%; a broadening of the tax base by limiting the deductibility of certain expenses; a limitation on the deductibility of interest on loans related to leveraged share acquisitions; and changes to the current participation exemption regime. The participation regime, currently only available in respect of foreign investments, will be extended to dividends and capital gains derived from Spanish subsidiaries substituting the current domestic tax credit to avoid double taxation.

    Our international tax alert provides further details regarding the key proposed changes and summarises the potential impact for Spanish taxpayers and on international investment structures into Spain.

    OECD Base Erosion and Profit Shifting (BEPS) Action Plan: Recent publications

    In Midweek Tax News to 5 August, we reported that the OECD has invited public comments on Action 11 (establish methodologies to collect and analyse data on BEPS) which is one of the 2015 deliverables. Comments are sought by 19 September 2014. Our international tax alert has further details.

    We also reported that the OECD has published part 1 of a report to the G20 Development Working Group on the impact of BEPS in developing/low-income countries. Our international tax alert contains further analysis.

    Other international tax alerts

    Please see links to a selection of our international tax alerts in respect of the following developments. Additional articles are available in our Global tax alert library.

    Malaysia: To monitor taxpayers' compliance with the new contemporaneous transfer pricing documentation requirement, Malaysian taxpayers will be required to confirm they have prepared such documentation in their tax returns for a taxable year beginning in 2014.

    Qatar: The Qatar Financial Centre (QFC) Authority has released an updated version of the QFC Tax Regulations which are designed to improve the overall attractiveness of the QFC fiscal environment.

    Nigeria: Non-resident companies operating through a Nigerian permanent establishment are now required to file tax returns with audited financial statements and tax computations for the 2014 tax year of assessment rather than simply including a schedule of turnover.

    Other publications

    Key Human Capital developments is our quarterly publication which provides a summary of the main human capital developments across the globe over the past quarter. In this issue we look at:

    • Switzerland: 2014 annual general meeting season – voting trends emerge as Swiss companies start implementing new executive pay rules

    • UK: Further announcement on proposed reform of the law applying to share scheme income for internationally mobile employees

    • India: High Court rules seconded employees create service permanent establishment in India

    • United Arab Emirates: Citizens from all EU Member States exempted from the need to acquire a pre-entry visa

    Please speak to your usual EY contact, or email us at eytaxnews@uk.ey.com, if you would like to receive a copy of our regular indirect tax newsletter, or information about our other publications.

    Further information

    If you would like to discuss any of the articles in this week's edition of Midweek Tax News, please contact the individuals listed below, Claire Hooper (+ 44 20 7951 2486), or your usual EY contact.

    Consultation on the modernisation of the corporate debt and derivative contract regimes

    Email Fiona Thomson

    + 44 20 7951 3913

    Clear language required to introduce a ‘condition precedent’

    Email Tom Passingham

    + 44 20 7951 2846

    Public Accounts Committee conference: Effect of globalisation on taxation

    Email Chris Sanger

    + 44 20 7951 0150

    VAT exclusive clause

    Email Tom Passingham

    + 44 20 7951 2846

    VAT recovery on white goods and carpets installed in newly built homes

    Email Ali Anderson

    + 44 20 7951 5248

    For other queries or comments please email eytaxnews@uk.ey.com.

    Back to the top

  • Operating in a shifting tax landscape

    The global tax landscape continues to change in a dramatic fashion, with near-constant news hitting the headlines regarding shifting tax policy, increasing levels of enforcement and the growing potential of reputational risk.

    Competing priorities

    Multinational companies now have to balance more competing priorities than ever before, ensuring they protect their business by monitoring and responding to changes in policy, legislation and tax enforcement, while at the same time ensuring they not only maintain the highest levels of compliance but also add value from the tax function.

    Governments work to secure each tax dollar they're due

    From a policy perspective, all governments want their country to be viewed as an attractive place to do business, to attract jobs and capital in an increasingly competitive globalized arena.

    At the same time, they want to increase the amount of revenue they bring in. Governments are treading a fine line, constantly assessing how to secure the tax revenues they see as rightly theirs, while at the same time being in direct competition with other nations, making sure they do not scare off mobile capital.

    Tax administrations for their part are adapting their enforcement strategies, focus and policies in response to the changing dynamics of business. They are working to ensure that their resources are being applied to the right issues and taxpayers. They share more leading practices and taxpayer information with their foreign counterparts, to help them collect every dollar due.

    Disputes are on the rise

    The result has been more  frequent, complex and higher value disputes between taxpayers and taxing authorities — a trend that is only increasing as countries collaborate together and as emerging markets gain in stature and influence, taking a more sophisticated approach to taxation. Penalties are becoming more stringent and the threat of reputational risk has risen significantly in recent months.

    We can help you to navigate a route through this complex landscape.

    We can help you monitor and react to quickly-changing tax policy and assess the economic and fiscal impact.

    Where tax policies might create an impediment to your business that is unintended by policy makers, we can help you to collaborate – either solely, or as part of a broader grouping of companies who share a common objective – with government to:

    • Explain the impediment
    • Develop alternative policy choices which are logical and well thought out
    • Model the potential outcomes
    • Deliver an alternative choice to the government in a form with which policy makers can comfortably work

    We also help you address your global tax controversy, enforcement and disclosure needs.

    We focus on pre-filing controversy management to help you properly and consistently file your returns and prepare the relevant back-up documentation.

    Where a controversy has already occurred, our professionals leverage the network's collective knowledge of how tax authorities operate, and increasingly work together, to help resolve difficult or sensitive tax disputes. To ensure that continuous performance improvements are instigated after a controversy, we work with EY's other tax professionals to ensure that similar events are less likely to occur.

    Below you can access our views and analysis of some of the substantial policy and enforcement trends and issues at play today.

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  • Seizing the opportunity in Global Compliance and Reporting

    Global Compliance and Reporting (GCR) is at a tipping point, with risks on the rise. Many companies distribute responsibility for GCR processes throughout their organization, creating a patchwork. Local jurisdictions are rewriting regulations, focusing more intently on the collection of tax revenues and sharing more taxpayer information across borders.

    Due to the combination of evolving business models, transforming finance functions and an increasingly complex regulatory landscape, there are new opportunities to better optimize efficiency, control and value, to help mitigate risk and improve performance.

    What is Global Compliance and Reporting?

    GCR comprises the key elements of a company's finance and tax processes that prepare statutory financial and tax filings as required in countries around the world. These duties include:

    • Statutory accounting and reporting
    • Tax accounting and provisions
    • Income tax compliance
    • Indirect tax compliance
    • Governance and control of the above processes

    GCR activities reside in the middle of a broader set of record-to-report (R2R) processes. R2R is the intersection between any company's finance and tax departments and is used to capture, process and store information that is essential to statutory accounting, tax compliance and reporting. Any change to R2R processes, information, finance systems, roles and responsibilities will have a direct impact on GCR processes.

    Helping you meet the new GCR demands

    Fast changing compliance and reporting requirements are more demanding on tax and finance functions today than ever before. So how do you improve control and quality, manage risk, create efficiency and drive value?

    Our market-leading approach combines standard and efficient processes, highly effective tools and an extensive network of local tax and accounting subject matter professionals.

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  • Building effective supply chains

    As multinational companies seek to reach new markets and compete more effectively in mature markets, they are adapting and differentiating their supply chains. Companies’ operating models need to cater for efficiency and scale in mature markets, while having the flexibility and local ability to support growth in emerging markets. Consequently, driving true shareholder value requires an operating model that combines global and regionally differentiated processes, and integrates these with local striking power and operational excellence.

    Leading companies recognize the need for integrating tax in their business planning and decision processes

    Whether companies seek to enter new markets or drive efficiencies in mature markets, leading companies understand the complexities of the international tax systems. The impact of both direct taxes and indirect taxes needs to be carefully considered and integrated to drive the effectiveness of the operating model while complying with all applicable local and international tax laws and effectively manage all tax risks. Operating model effectiveness is becoming one of the cornerstones of successful competition and differentiation.

    Our approach

    The EY TESCM offering helps ensure you do just that. Our advisory and tax professionals operate as one team to assist our clients with developing and implementing operating model optimization where business needs and requirements are the driver while making sure that tax is an integrated part of the design of the operating model architecture.

  • Managing mobile workforce risk

    In today's globally integrated, tightly regulated and increasingly competitive business environment, one critical success factor stands out: people. It’s no wonder that leading companies are focusing their efforts on:

    • Attracting and retaining the right people
    • Global talent deployment and mobility
    • HR and payroll effectiveness
    • Risk, governance and compliance

    Managing the risks of mobile employees

    While optimizing the competitive advantage of your people has long been a core objective, a more recent set of trends in the tax landscape means that large companies with an internationally mobile workforce are at a higher risk of tax noncompliance and resulting controversy than ever before.

    Fortunately, an increasing number of organizations are currently either planning or embracing a wider process of change for their mobility teams.

    Unintended tax compliance obligations

    These travelers are increasingly creating unintended tax compliance obligations, and the resulting risks are not just personal. They are felt at the corporate level, with the corporate tax function often unaware of the extent of the spreading problem. Tax administrations are becoming increasingly aware of the issue, however, and are very effectively using new technology to identify where a tax obligation has arisen. In a rising tax enforcement landscape, this issue has significant potential to grow.

    Managing these risks should be a burning platform issue for multinational companies.

    Will your tax risks prompt a tax audit?

    What may start as a relatively simple personal income tax compliance issue can quickly create a ripple effect, with risks such as the creation of a permanent establishment, an employment tax audit or the payment of a significant related penalty all occurring at the corporate level.

    Companies, recognizing the spectrum of reputational, personal and financial risks related to tax, are making strong efforts to be compliant. There is an increasing acceptance that such issues are becoming increasingly urgent from both a reputational and a financial perspective.

    How we are helping companies

    Our Human Capital network embeds processes and technology that will help companies to identify and manage short-term business traveler-related risks before they occur. Where controversy has already arisen, our global Tax Controversy network can use our insights into the culture and processes and relationships with each key tax administration to remediate issues. With prior year issues being rapidly unearthed, and with tax administrations focusing on this issue more than ever before, the time to act is now.

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EY - Building a tax manifesto for manufacturing

Building a tax manifesto for manufacturing

The global re-shoring trend is creating new opportunities for the UK, but our report shows it has limited time to set itself up for future high quality manufacturing (658K, August 2014).