EY can help you understand the implications of the EU referendum decision on your tax position.
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 business tax blueprint for the UK post-Brexit
We asked over 175 tax and finance professionals headquartered in the UK and overseas for their views on how the tax system affects the UK’s attractiveness post-Brexit. Read more 1.4Mb, September 2016
Improving large business tax compliance:
Building the balance: Cooperative compliance in practice
The administration of our tax regime is a key factor in the attractiveness of the UK as a place to live and do business. Our report outlines the proposed agreement and offers a view on the most effective way to take it forward. Read more 2.1Mb, March 2016
Engaging with HMRC
255K, July 2015
New measures applicable from April or July 2016
494K, December 2015
Corporate Governance Code meets Tax Code of Practice
203K, July 2015
- Midweek Tax News
A weekly update on tax matters to 27 September 2016
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.
OECD update webcast 22 September 2016
On 22 September 2016 the OECD held the latest in its series of update webcasts. The webcast covered the following areas:
• Multilateral instrument progress update: The working group has reached agreement in principle on the English text of the instrument, but fine tuning is still required. Translation into French is due to be completed by November. The instrument contains provisions to implement each BEPS tax treaty related measure. It will contain flexibility, with opt in provisions (eg. on arbitration and alternatives) and opt outs (except for minimum standards agreed for certain action points). The instrument will include notifications intended to ensure clarity with existing treaty provisions and will be accompanied by explanatory statements. The final meeting of the group is expected in late November to formally adopt the English and French texts and approve the explanatory statement text. It is expected that there will be a signing ceremony scheduled for the first half of 2017.
• G20 leaders' summit in Hangzhou: The G20 leaders identified the link between world growth, tax and the need to address BEPS. The move to automatic exchange of information and the implementation of anti-BEPS measures and the inclusive framework to achieve this was welcomed. A tax policy symposium covered the G20 work relating to tax policy, including tax certainty, which was agreed as important to encourage trade and investment. Work will aim to increase tax certainty and a business questionnaire will be launched in early October, where stakeholders will be able to feed in views on the areas that create certainty or uncertainty.
• State Aid: The OECD is concerned that State Aid decisions only deal with the past and that for the future there is a need for a common standard on transfer pricing. The OECD is in talks with the European Commission to ensure that it does not impose its own standard on transfer pricing, but instead implements the OECD guidelines.
• Automatic exchange of information: The OECD has concluded a contract with a service provider for a common transmission system for automatic exchange of information with effect from 1 July 2017.
Shadow Chancellor's speech at the Labour party conference
On 26 September, John McDonnell, the Shadow Chancellor, set out his plans for Labour's fiscal policy. While the subsequent headlines have focused largely on the suggestion of a national living wage of £10 an hour if Labour was elected in 2020, Mr McDonnell did outline proposals in a number of other key areas:
• Brexit: Mr McDonnell promised that Labour “will seek to preserve access to the single market for goods and services”. He specifically referred to Labour's support for access to European markets for financial services. He did recognise that access to the single market requires freedom of movement of labour but said that Labour would address the concerns that people have raised in the undercutting of wages and conditions, and the pressure on local public services. He said that Labour would not support the transatlantic trade and investment partnership (between the US and Europe) or any other trade deal that “promotes deregulation and privatisation, here or across Europe”.
• Tax: Labour will be developing the policies that will “shift the tax burden more fairly, away from those who earn wages and salaries and onto those who hold wealth”.
• Tax avoidance: HMRC will be given the staffing, the resources and the legal powers to “close down the tax avoidance industry that has grown up in this country”. A new Tax Enforcement Unit will be created at HMRC, doubling the number of staff investigating wealthy tax avoiders. Mr McDonnell promised that “tax-dodging companies” would be banned from winning public sector contracts and that all British Crown Dependencies and Overseas Territories would introduce a full, public register of company owners and beneficiaries. It is not yet clear how the first of these pledges would differ from the procurement provisions already in place nor how a Labour government would ensure that the second was achieved.
• Corporate regulation: Mr McDonnell promised to introduce legislation to ban companies taking on excessive debt to pay out dividends to shareholders. He also promised that the Takeover Code would be amended to “make sure every takeover proposal has a clear plan in place to pay workers and pensioners”.
Tax Focus web seminar ‘Where are we now and what's next’ on Monday, 17 October 2016
Our next Tax Focus web seminar will be at 10:00 am on Monday, 17 October 2016 when we will take stock of where we are currently, including a look at key measures recently enacted, the many consultations recently issued and a look forward to what we expect to see in the Autumn Statement.
The web seminar will cover:
• A reminder of the main measures in this year's Finance Act (which received Royal Assent on 15 September) and what action you might like to take as a result;
• Consideration of likely Government responses to recently closed consultations in areas such as loss relief, interest deductibility and Substantial Shareholding Exemption reform;
• A brief summary of the more significant new consultations announced over the summer (there have been nearly 40 since the beginning of August);
• Our predictions of the measures that might be in this year's Autumn Statement and Finance Bill 2017;
• he state of play of various BEPS and EU initiatives with a look forward to next steps.
Register now to hear Claire Hooper and Andrew Drysch discuss these issues.
Other UK developments
Northern Ireland corporation tax regime – draft guidance published
On 26 September 2016 HMRC issued draft guidance on the operation of the Northern Ireland corporation tax regime. HMRC has invited comments on the draft guidance by 1 January 2017.
The Corporation Tax (Northern Ireland) Act 2015 allows for devolution of power to the Northern Ireland Assembly to set a Northern Ireland rate of corporation tax to apply to certain trading income. The Northern Ireland Executive has committed to setting a rate of 12.5% from 1 April 2018, subject to it demonstrating that its finances are on a sustainable footing.
Global Trade Brexit event in London
On Tuesday, 18 October 2016, in partnership with the London Chamber of Commerce and Industry (LCCI), our Global Trade team will be holding a Brexit event at our More London offices.
After the UK voted to leave the EU, the spotlight has fallen on the country's trade position and the indirect tax consequences. When Article 50 is finally triggered, the UK's trading relationship with the EU and the rest of the world is likely to change. This event will cover the potential UK policy changes for Brexit, the expected impact for business and trade and how and when to plan for the key challenges and opportunities that may arise.
Please click here for more information or to register for the event.
First-tier Tribunal stays SDLT anti-avoidance case
In the First-tier Tribunal case of Milltown Ltd & Anor, the Tribunal has agreed to stay the taxpayer's appeal pending HMRC's application to the Supreme Court for leave to appeal in the separate Project Blue case. That case concerns the liability to stamp duty land tax (SDLT) arising on the sale of the Chelsea Barracks by the Ministry of Defence to the taxpayer. The acquisition was financed by a Qatari bank and involved a sale and subsequent leaseback of the property, with the taxpayer claiming a combination of sub-sale relief and alternative finance relief.
In Project Blue, the Court of Appeal found that, applying the relevant sub-sale relief provisions, the taxpayer did not acquire a chargeable interest in land and could not, therefore, be the ‘vendor’ for the purposes of alternative finance relief. The effect of this was that the alternative finance relief was not available to the Qatari bank, such that SDLT was chargeable on the Qatari bank's acquisition of the property based on the full purchase price given by the bank. The taxpayer had no liability to SDLT as it did not acquire any chargeable interest in land.
Although the Milltown case is not designated as a lead case, it is understood that there are around 700 other taxpayers in a similar position. In the event permission to appeal is not granted to HMRC by the Supreme Court in the Project Blue case, the Milltown case will then proceed before the First-tier Tribunal.
Dutch Government publishes 2017 budget proposals
On 20 September 2016, the Dutch Ministry of Finance issued its tax budget proposals for fiscal year 2017 and beyond.
The proposals contain several anticipated tax law changes to be effective as of 1 January 2017, including changes to further align the innovation box regime with the recommendations of the OECD, as well as certain changes in the provisions regarding the deductibility of interest for corporate income tax purposes (anti-base erosion rules and leveraged buy-out rules) to counter specific situations that are considered to be abusive or to counter unintended consequences of the current legislation.
The proposals also include a structural extension of the first corporate income tax bracket of 20% up to the first €250,000 of taxable income as from 2018, with gradual further extensions up to the first €350,000 of taxable income, as from 2021.
In addition, a separate letter was published on 20 September by the Dutch Secretary of Finance in which an announcement was made regarding the proposed alignment of the Dutch dividend withholding tax treatment of profit distributions made by Dutch Cooperatives and limited liability companies (Dutch BVs/NVs). The announcement states that the domestic dividend withholding tax exemption will be expanded to include dividends distributed by a Dutch company to any shareholders with a qualifying interest that are residents of treaty countries, irrespective of the treaty rate. Furthermore, it was announced that cooperatives that act as holding companies should no longer fall within a separate general exemption for Co-ops, but will be treated the same as limited liability companies (including the expanded domestic exemption discussed above). The proposal will be subject to an internet consultation before it is submitted to Parliament, with the aim of enacting the new legislation ultimately by 1 January 2018. The announcement only consists of a legal framework and no draft legislation has actually been published yet.
Upcoming Global webcast on CBCR
At 3:00 pm on Thursday, 29 September 2016, we will be holding a webcast entitled ‘Adjust your aperture: Preparing for CbC reporting’.
With more than 30 countries having already finalised or drafted legislation in line with the recommendations made in Action 13 of the OECD's BEPS action plan, most multinationals will be required to submit full country reports with this year's data in the next 15 months.
Country-by-country reporting will provide tax authorities with a breakdown of where a multinational realises profits and revenues, the amount of taxes paid on those profits and certain other indicators, the interpretation of which may potentially result in increased controversy.
Join our global panel as we discuss the latest global developments, notification and filing requirements, issues in interpreting terminology and practical issues encountered.
To register for the webcast, please click here.
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.
Germany: The German Government has proposed legislation to allow companies with losses to retain and use these following changes in ownership, as well as publishing recommendations on the draft legislation to implement country-by-country reporting.
Canada: The Canadian Department of Finance has released a new package of draft legislative proposals relating to technical amendments to the Income Tax Act and associated regulations.
Switzerland: The Swiss Parliament has adopted changes to Swiss dividend notification procedure in favour of taxpayers.
Please speak to your usual EY contact, or email us at firstname.lastname@example.org, if you would like to receive a copy of our regular indirect tax newsletter or our employment, reward and mobility newsletter, as well as 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.
OECD update webcast 22 September 2016
+ 44 20 7951 2486
Shadow Chancellor's speech at the Labour party conference
+ 44 20 795 10568
Tax Focus web seminar ‘Where are we now and what's next’ on Monday, 17 October 2016
+ 44 23 8038 2255
For other queries or comments please email email@example.com.
- 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.
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Chris Sanger, UK&I Head of Tax Policy and Tim Steel, UK&I Tax Markets Leader, highlight the key findings from our recent survey of over 175 tax and finance professionals on how the tax system affects the UK’s attractiveness post-Brexit.
What Brexit means for businesses
We explore the implications of the UK’s decision to leave the European Union.