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:


Improving large business tax compliance: Engaging with HMRC
255K, July 2015


Corporate Governance Code meets Tax Code of Practice
203K, July 2015


Building a tax manifesto for manufacturing
658K, August 2014



  • Midweek Tax News

    Archives...

    A weekly update on tax matters to 4 August 2015

    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 speak to the relevant contact listed at the end of this issue or to your usual EY contact.

    HMRC held an open day on Monday, 3 August to discuss the recent consultation document on large business compliance. As we reported on 22 July, the consultation document proposes a mandatory requirement for large businesses to publish their tax strategy; a voluntary tax code of practice; and, for businesses representing a high risk to the exchequer, a special measures regime. HMRC is consulting on the scope of the new rules, with one possibility being to use the senior accounting officer (SAO) thresholds, but including companies incorporated outside the UK.

    HMRC wants the published tax strategy to be an informative statement and to cover certain prescribed matters. These may include indicators of how the business is applying the strategy in practice. Among matters that the consultation suggests might be included in the tax strategy is the business's target effective tax rate, defined in the consultation document as “the rate of taxation which the business actually pays”, which could have commercial and regulatory implications if published.

    The consultation document proposes that businesses could be required to state publically whether they have signed up to the code of practice. Although HMRC will comment if a business misstates that it is a signatory to the code, it will not comment on whether the business is compliant, irrespective of whether or not it has signed up. Accordingly, unlike under the banking code of practice, HMRC will not be issuing opinions to businesses on whether it considers that a proposed transaction is compliant with the code. However, compliance with the code will feed into HMRC's internal risk ratings.

    Special measures are only intended to apply to a handful of businesses and represent an escalation of matters where HMRC has exhausted other methods of getting a change in approach from the business in question.

    Sanctions could be imposed on the individual named for being responsible for the tax strategy (as is currently the case with the SAO regime) or the business itself. These could be financial and/or include naming of the business or the individual responsible. However, HMRC's aim is to obtain an improvement in behaviour rather than collecting additional revenue through sanctions. HMRC expects the proposed provisions to come into force in 2016.

    Businesses will need to consider carefully how to respond to these proposals. This will include to what extent they already have an up-to-date tax strategy in a form suitable for publication, whether it contains all of the elements HMRC want included, how this fits into their wider tax transparency strategy and whether they want to sign up to the code of practice. Some groups already comply with most of the requirements and could easily adapt whereas for others, more work would be required. For example, many inbound groups and UK branches of foreign companies do not have a specific tax strategy in place for their UK operations and might consider the global policy inappropriate and not sufficiently specific to the UK.

    We will be having further meetings with HMRC on these proposals and will be responding to the consultation document in due course.

    Allowing the taxpayer's appeal by a 3:2 majority, the Supreme Court has decided in the case of John Mander Pension Trustees that tax resulting from the loss of the approved status of a pension fund must be assessed from the date the lost status has effect rather than the date that the notice is given. In this case, that meant the assessment was out of time.

    In 2001, HMRC gave notice that it was withdrawing the approved status of the pension fund in question with effect from 1996. It issued an assessment in respect of the tax that resulted from the withdrawal in 2007. This was within the six year limit if the assessment was treated as in respect of 2001, but out of time if treated as in respect of 1996.

    The main issue was whether allowing the withdrawal of approved status in 2001 to give rise to a tax assessment in 1996 was retrospection of a kind that Parliament could not have intended. In the leading judgment for the majority, Lord Sumption opined that the notice in 2001 recognised the facts that existed in 1996. Thus, assessing the resulting tax in respect of 1996 rather than 2001 was not unacceptably retrospective. The effect of the decision was that the assessment made by HMRC in 2007 was out of time so no tax in respect of 1996 was actually due. Lord Sumption suggested HMRC should use its information gathering powers to ensure that they had the facts they needed to determine approved status within the applicable time limit.

    This is a lead case the result of which will affect several other cases currently before the First-tier Tribunal.

    The High Court has found for HMRC in a judicial review of APNs issued by HMRC requiring upfront payment of disputed tax. The APNs had been issued to taxpayers involved in a film production partnership which had been disclosed under the disclosure of tax avoidance schemes rules. The High Court decided that:

      The APNs were lawfully issued, and that the principles of natural justice were adhered to both by the statutory scheme and by HMRC in its exercise of its statutory discretion

      The statutory conditions for the issue of the APNs were satisfied

      There was no breach of the taxpayers' legitimate expectations

      By issuing the APNs, HMRC was not acting in a way that was unreasonable or irrational

      There was no abuse of the taxpayers' rights under the European Convention on Human Rights to a fair trial or protection of property

    The case did not deal with the taxation of the film partnership itself, which is the subject of a separate appeal. However, the judge did need to consider the procedural point as to whether a successful HMRC challenge to a partnership tax loss in a partnership return can be used to deny individual partners relief for their share of that loss by carry back, without the need for separate HMRC enquiries into partners' carry back loss claims. She noted she was bound by the current Upper Tribunal decision on this point unless she was convinced it was wrong. Far from finding that to be the case, she expressed her agreement with the Upper Tribunal. This point is to be heard by the Court of Appeal in October 2015.

    It is expected that HMRC, which anticipates issuing 64,000 APNs by the end of 2016, will now press forward with its APN programme.

    In the case of Woolway v Mazars, the Supreme Court has unanimously held that the occupation by a business of the second and sixth floors of a building under separate leases should be treated as separate hereditaments (or units of assessment) for business rates purposes. As a result, business rates are payable on each floor separately.

    The business had successfully applied to the Valuation Tribunal for England to have the two floors treated as a single hereditament for business rates purposes with the decision being upheld by both the Upper Tribunal and Court of Appeal. On appeal, however, the Supreme Court held that the two floors should be treated as separate hereditaments on the basis that they failed both a geographical and a functional test to be treated as a unit.

    The Court stated that the geographical test, being the primary test, was based on visual or cartographic unity. Contiguous spaces will normally possess this characteristic, but unity is not simply a question of contiguity. If contiguous units do not intercommunicate and can be accessed via other property of which the common occupier is not in exclusive possession, this will be a strong indication that they are separate hereditaments. Where two spaces are geographically distinct, a functional test may enable them to be treated as a single hereditament, but only where the use of the one is necessary to the effectual enjoyment of the other. In the case in question, the Court found that neither the geographical nor the functional test was met.

    HM Treasury consults on pension transfers and exit charges

    On 29 July, HM Treasury published Pension transfers and early exit charges, a consultation which looks at some of the potential barriers to the new pension freedoms which were introduced by the Government with effect from 6 April 2015. This follows on from the consultation of 8 July on the need for strategic reform to pension provision entitled, Strengthening the incentive to save: a consultation on pensions tax relief. Rather than putting forward a specific proposal for reform, the Government is approaching the consultation with an open mind and is interested in a lasting system that is in effect, futureproof.

    The latest consultation considers issues around early exit charges imposed by pension providers to ensure that individuals are not facing unjustifiable charges when moving schemes or accessing their pensions savings flexibility. It also seeks views on how the process for transferring pensions can be improved and looks at concerns in relation to the provision and need for financial advice when making transfers.

    The deadline for comments is 21 October.

    EY National VAT Workshops: 2015 programme

    Details have now been released of our VAT workshop training programme running across our UK office network during the latter part of 2015, between the months of September and December. The VAT workshop programme has been developed as a direct response to requests for practical training. The topics covered include basic VAT, international VAT, property VAT and partial exemption. We are also offering VAT workshops aimed specifically at local authorities. Further details on these VAT workshops, as well as information on bespoke training sessions, can be found in our National VAT Workshops 2015 Brochure.

    Reduced rate of VAT for the supply and installation of energy-saving materials

    On 31 July, the Government set out its position following the judgment of the Court of Justice of the European Union (CJEU) in infringement proceedings against the UK for applying a reduced (5%) rate of VAT to the supply and installation of energy-saving materials in residential accommodation.

    The CJEU held that the UK's application of the reduced rate of VAT was wider than permitted by EU law. The reduced rate should be introduced as part of a social policy and should be targeted at those whom the policy is designed to help. A social policy cannot apply equally to everyone. In addition, the supplies must amount to a renovation or alteration of housing in order to be consistent with EU law, potentially casting doubt on some of the installed goods currently subject to VAT relief.

    The Government is currently considering the implications of the judgment. No legislative changes (if any are required) will be implemented before Finance Act 2016. Until then, the reduced rate of VAT will continue to apply to the supply and installation of energy-saving materials in residential accommodation.

    US Congressmen propose ‘innovation box’ preferential tax regime

    Two members of the Ways and Means Committee have released an ‘innovation box’ discussion draft that proposes a 10.15% effective rate of corporate tax on corporate profits derived from qualifying intellectual property (IP). Qualifying IP can include patents, inventions, formulas, processes, designs, patterns, software and knowhow. Additionally, US corporations would be able to repatriate IP from foreign subsidiaries back to the US without being taxed.

    Under the proposal, the profits subject to the 10.15% rate would depend on the extent a corporation incurs qualifying expenses on research and development activities performed in the US. Also, income derived from the qualifying IP would have to be identified. The innovation box, as proposed, would not be available to limited liability corporations, partnerships or ‘S corporations’, which together make up the majority of US businesses.

    The proposal is similar to the OECD's modified-nexus approach in that the amount of income qualifying for the lower tax rate is dependent on the taxpayer's local research and development expenditure. However, the modified-nexus approach limits the amount of qualifying expenditure performed by third-party service providers, whereas the proposed innovation box appears to include for all such expenditure paid to third-party service providers.

    Please see our global tax alert for more details.

    European Parliament committee makes wide-ranging recommendations after investigation into tax rulings

    The European Parliament's Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect (the TAXE committee) has published an interim report following its investigation into the tax ruling practices of EU Member States. The scope of the report is wider than the practice of tax rulings and includes various recommendations for reforming EU rules on tax. The report is separate from the European Commission's investigations into whether certain tax rulings constitute unlawful State Aid.

    The interim report concludes that not all Member States complied with EU rules in respect of tax rulings and calls for urgent political action to deal with the situation. Specific recommendations include the adoption of mandatory exchange of information and for this to be extended to encompass both cross-border and domestic tax rulings. To tackle harmful tax practices, the TAXE committee recommends a common EU framework for tax rulings and urgent reform of the Code of Conduct on business taxation. It also suggests guidelines for tax advisors and sanctions for those firms engaged in “tax dodging or aggressive tax planning”. The committee supports public country-by-country reporting and for tax authorities to share more detailed information, including tax returns.

    On the OECD's base erosion and profit shifting agenda, for which we expect final reports in early October, the TAXE committee recommends that binding EU rules should reinforce the ‘soft law’ promulgated by the OECD. The committee also urges the European Commission to accelerate its work on a mandatory and EU-wide common consolidated tax base and calls for a common approach to tax havens.

    In general, action on direct tax issues requires unanimity at EU level and some Member States may not agree with all the report's recommendations. Nonetheless, the European Parliament seems determined to play its part in this debate.

    Please see our global tax alert for more details.

    Other global tax alerts

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

    Saudi Arabia: The Department of Zakat and Income Tax has introduced the concept of a virtual service permanent establishment which may result in the denial of withholding tax relief for non-residents.

    Chile: The Internal Revenue Service has published seven new circulars on recent tax reforms covering anti-avoidance, capital gains and other matters.

    Ecuador: New guidelines explain how to prepare and submit transfer pricing documentation.

    Other publications

    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.

    HMRC open day on the consultation on large business compliance

    Email Mandy Pachol

    + 44 121 535 7092

    The Supreme Court allows taxpayer appeal that assessment on a pension fund is out of time

    Email Elaine Shiels

    + 44 121 535 2110

    Taxpayers fail in judicial review of accelerated payment notices

    Email Yvette Adams

    + 44 20 7951 2601

    The Supreme Court decides premises on different floors separate for business rates purposes

    Email Matt Corkery

    + 44 20 7951 6121

    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.

    Related content

    TAX-RC-tdr_tl_sm

    Alternative Dispute Resolution: a new chapter emerges

    As tax authorities adapt their enforcement in response to changing business dynamics, so must taxpayers. One key is the knowledge of alternative dispute resolution tools.

  • 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.

    Related content

  • 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.

    Related content

    EY-Building a new talent management model

    Building a new talent management model

    Businesses are on the brink of a talent crisis. Only a major shift in thinking can help tackle the global talent shortfall.

    TAX-RC-tpc_tl_sm

    Business travelers: assessing tax and immigration risks

    Immigration and tax laws are increasingly aggressive toward business travelers and their companies. Leading companies actively mitigate business travel risks. Do you?


Related content

EY - Practice guide: witness evidence in tax disputes

Practice guide: witness evidence in tax disputes

Good evidence preparation starts long before a First-tier Tribunal hearing is in contemplation and has a part to play in all aspects of engagement with HMRC. Read our thoughts on a best practice approach .

EY - Our Guide to UK year end tax planning 2014-15

Our Guide to UK year end tax planning 2014/15

Our Guide to UK year end tax planning 2014/15 highlights some of the major issues and areas we think it prudent for taxpayers to consider as the end of the tax year approaches.

EY - A Guide to year end tax planning for non-domiciliaries 2014-15

A Guide to year end tax planning for non-domiciliaries 2014/15

A Guide to year end tax planning for non-domiciliaries 2014/15 is also available.

EY - 2014 Global Transfer Pricing Tax Authority Survey

2014 Global Transfer Pricing Tax Authority Survey

Our survey of 50 jurisdictions across the Americas, Asia-Pacific and Europe, confirms that transfer pricing continues to be front of mind for tax authorities and multinationals.

EY - Global Mobility Effectiveness Survey 2013

Global Mobility Effectiveness Survey 2013

Your talent is in motion. Are you ready to join the conversation?


Contact us

Find your nearest Tax contact:


Law

Find out about our Law services.


 

Connect with us

Stay connected with us through social media, email alerts or webcasts. Or download our EY Insights app for mobile devices.

EY - Summer Budget 2015

Summer Budget 2015

Read all our commentary, thought leadership and insight into Summer Budget 2015 and the Finance Bill.

EY - The Finance Act 2014 training modules

The Finance Act 2014 training modules

Watch our Finance Act webcasts for insight and interpretation around the impact of this year's UK Finance Act from some of our leading tax professionals.