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.
Building a tax manifesto for manufacturing
Tax Insights (previously T Magazine): future of tax
2014 tax risk and controversy survey highlights
Managing indirect tax in the digital age
FATCA: Are you ready for 1 July?
OECD provides update on the BEPS Action Plan
Tax Policy and Controversy Briefing goes online
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
A weekly update on tax matters to 19 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.
Withdrawal of the Employee Benefit Trust Settlement Opportunity (EBTSO)
HMRC has announced that it is withdrawing the EBTSO. The EBTSO facility was launched by HMRC in April 2011 following the introduction of the disguised remuneration rules in Finance Act 2011. It allows employers, trustees and beneficiaries to reach an agreement regarding any potential historical UK tax liabilities, and also clarify the future UK tax position, associated with an employee benefit trust (EBT) arrangement.
The HMRC announcement confirms that unless employers (who have used EBTs) notify their intention to settle the liabilities in dispute by 31 March 2015 they will no longer be able to settle within the terms of the EBTSO. Additionally, all settlements under the EBTSO will need to be finalised by 31 July 2015. Employers may wish to consider the advantages of the EBTSO which can often provide an opportunity to significantly reduce the overall UK tax liabilities of the employer and beneficiaries of an EBT arrangement. Our tax alert provides further details regarding the benefits of reaching a settlement.
Changes to the Liechtenstein Disclosure Facility (LDF)
Separately, HMRC has also announced that it is changing the way in which the LDF operates in relation to liabilities that HMRC is already aware of, or are not connected to offshore assets. The LDF was signed in August 2009 between the UK and Liechtenstein. Its aim is to allow those with undisclosed UK tax liabilities relating to offshore income, assets and investments to declare and settle their tax liabilities with HMRC on pre-defined terms, and to ensure they are tax compliant for the future. However, HMRC has become aware that a number of taxpayers who have already disclosed liabilities have registered for the LDF in order to take advantage of potentially favourable terms, notably taxpayers with liabilities linked to existing enquiries into EBTs.
There are no changes to the categories of people that are prevented from participating in the LDF, but access to some of the favourable terms offered by the LDF, notably those that can lead to a reduction in the amount paid to HMRC, will now be restricted where:
• No disclosure of new information is made, or
• The issue being disclosed is already subject to an intervention that began more than three months before the application to enter the LDF, or
• There is no substantial connection between the liabilities being disclosed and the offshore asset held by the taxpayer on 1 September 2009
The new procedures have effect from 14 August 2014 for anyone seeking to register to participate in the LDF, but HMRC has stated that the changes would not be applied to any case where the taxpayer's application to register has already been accepted (ie, where a registration number has been issued).
HMRC has confirmed that no attempt would be made to re-open any settled cases because of these changes.
Tackling offshore tax evasion
The Government has published a consultation paper regarding its plans to introduce a new strict liability criminal offence of failing to declare taxable offshore income and gains, and seeks views on the design of the new offence. The offence will be limited to individuals' conduct in relation to their personal tax affairs. This follows the publication in April 2014 of No safe havens, HMRC's strategy for tackling offshore tax evasion.
The use of a strict liability offense means that the prosecution would need only demonstrate that a person failed to correctly declare the income or gains, and not that they did so with the intention of defrauding the Exchequer. This consultation sets out the proposals for a new criminal offence in more detail and asks a number of questions about: the scope of the offence; measures to ensure the proportionality of the offence, including a de minimis threshold; the level of sanction which should be attached to the offence; the legal and operational safeguards; and statutory defences.
A parallel consultation, also launched yesterday, looks at extending the scope of offshore penalties and other civil sanctions to increase the deterrent against offshore non-compliance. It examines three options: extending the scope of the existing penalty regime for offshore non-compliance; deterring taxpayers from deliberately moving offshore assets to continue evading tax; and updating the existing offshore penalties regime to reflect the new global standard in tax information exchange.
Update on lead cases at the First-tier Tribunal
Where two or more cases give rise to common or related issues of fact or law, Tribunal Procedure Rule 18 permits the First-tier Tribunal to specify one (or more) case as a lead case and stay the other cases. On 14 August 2014, the Tribunal published details of four cases that have been designated as lead cases:
• Biffa (Jersey) Limited and Biffa Holdings Limited (treatment of an intra-group sale and repurchase ‘repo’ transaction)
• Mr Nicholas Trigg (whether bonds are qualifying corporate bonds if a particular clause is included in the bonds at the time of issue)
• Yorkshire Water Services Limited (availability of land remediation relief)
• LCC Support Services Ltd (a number of questions in relation to an employee benefit trust)
The notice does not specify when the cases will be heard by the Tribunal.
Business Incentives in ASEAN webcast – Understanding Singapore, Malaysia, Vietnam and Myanmar
In 2013, foreign direct investments into ASEAN (Association of South East Asian Nations) countries reached US$125bn; which is comparable with China's US$124bn investment in the region.
To date, all ASEAN countries provide business incentives to attract foreign direct investments into their respective countries. The large number of available incentives poses significant challenges for companies looking to make the best investment decision, navigate the cultural and regulatory intricacies, and secure the optimal outcome in their incentive discussions with the authorities.
Our global webcast on Thursday, 4 September 2014 will bring together EY regional professionals, to provide insights on the available incentives and incentive application processes in their respective countries. The webcast is likely to be of interest to those from companies that are planning to expand or re-structure their operations in the ASEAN region, and will also be beneficial to decision-makers and finance and tax executives who would like to gain a better appreciation of regional government incentives.
Please click here to register for the live webcast.
Other UK developments
Real Time Information overpayment notices error
HMRC has advised that a batch of Real Time Information letters (RTI 201) has been sent to employers and agents in error, containing incorrect information about possible overpayments of PAYE. HMRC has stated that any employer or agent receiving one of these letters in August should ignore it and notes that those wishing to check their tax position can do so on the Business Tax Dashboard.
Directors' remuneration reporting in the UK
As a result of a perceived disconnect between the performance of quoted companies and levels of executive compensation, the Government introduced new directors' remuneration reporting regulations with effect from 1 October 2013. Quoted companies now have to report directors' remuneration in a new format, put directors' remuneration policy to a binding shareholder vote and provide enhanced levels of disclosure.
As the reporting season draws to an end we can now assess the success of the new regulations in terms of addressing the issues that prompted their implementation by analysing reporting trends. Our alert provides an analysis of companies reporting a 31 December year end and has identified a number of general themes in terms of the reporting of directors' remuneration and contrasting approaches taken with regard to the disclosure required by the new regulations.
The tax impact of these changing remuneration practices will continue to need careful consideration.
Domestic VAT reverse charge for wholesale supplies of gas and electricity
The domestic VAT reverse charge for wholesale supplies of gas and electricity was introduced in the UK with effect from 1 July. HMRC Brief 28/14, published on 15 August, seeks to further clarify the scope of the domestic reverse charge (in particular, in relation to Power Purchase Agreements) and other related issues (including the VAT treatment of incidental supplies, invoicing requirements and the correction of errors) following the earlier publication of HMRC Brief 23/14.
Introduction of new Alcohol Wholesaler Registration Scheme
Following the Government's previous announcement that it intended to introduce a new scheme to tackle alcohol duty fraud, HMRC has published initial details of the Alcohol Wholesaler Registration Scheme that is expected to be legislated for in Finance Bill 2015 and will start to take effect in 2016.
The scheme will make the wholesale of illicit alcohol more difficult and reduce the opportunity for its sale through to legitimate retailers. All alcohol wholesalers will need to demonstrate that they are ‘fit and proper’ and have their supply chains tested to make sure they are legitimate before being approved to operate in the sector, and entered onto a register. Retailers will be required to purchase alcohol only from registered wholesalers and will be able to check online whether their suppliers are registered. Unregistered wholesalers and any retailers purchasing from such businesses will be liable to penalties. HMRC will start accepting applications for registration for the scheme from October 2015. More information about the scheme will be available once the draft legislation is published later in 2014.
Automatic exchange of information
As covered in Midweek Tax News to 22 July 2014, the OECD has published the first edition of the Standard for Automatic Exchange of Financial Account Information in Tax Matters. It calls on jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. It sets out the financial account information to be exchanged, the financial institutions that are required to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions. Our international tax alert analyses the standard in detail, and discusses the key issues for affected financial institutions.
French ‘anti-hybrid financing’ regulations
The French tax authorities have released final regulations on the ‘anti-hybrid financing’ interest limitation provisions enacted as part of the 2014 Finance Bill. Draft regulations were released in April 2014 as part of a public consultation process.
The new rule provides that interest paid by a French borrower to a related enterprise is not tax deductible for French corporate income tax purposes if the interest paid is not subject to tax, at the level of the beneficiary company, at a rate of at least 25% of the French corporate income tax that would have been due under the standard French rules.
The draft regulations are binding on the tax authorities (though not French taxpayers as the regulations only represent the tax authorities' view of the law) for fiscal years closed between 31 December 2013 and 4 August 2014, but are superseded by the final regulations for fiscal years ending on or after 5 August 2014.
Our international tax alert describes the main changes to the draft regulations.
Spanish Supreme Court rules on validity of certain transfer pricing regulations
The Spanish Supreme Court has issued its final judgment in respect of a challenge to the constitutionality of certain provisions of the transfer pricing regulations. The Supreme Court's decision addresses the secondary adjustment; transfer pricing documentation requirements; the specific procedure for assessing the arm's length remuneration; and the transfer pricing penalty regime. Some provisions have been struck out in whole or in part leaving a number of areas of uncertainty. Our international tax alert provides further details.
New Mexican fiscal regime for oil and gas industry
The President of Mexico has signed a package of secondary legislation relating to the landmark energy reforms which will significantly affect the oil and gas industry. Our international tax alert provides further details.
Additional articles are available in our Global tax alert library.
Please speak to your usual EY contact, or email us at email@example.com, if you would like to receive a copy of our regular indirect tax newsletter, or information about our other publications.
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.
Changes to the Liechtenstein Disclosure Facility
+ 44 20 7951 5912
Tackling offshore tax evasion
+ 44 20 7951 0150
Update on lead cases at the First-tier Tribunal
+ 44 20 7951 0568
Business Incentives in ASEAN webcast – Understanding Singapore, Malaysia, Vietnam and Myanmar
+ 44 20 7951 2850
For other queries or comments please email firstname.lastname@example.org.
- 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.
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.
- 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.
- 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.
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.
Connect with us
Stay connected with us through social media, email alerts or webcasts. Or download our EY Insights app for mobile devices.
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).
Is your tax risk management model up-to-speed?