Whilst no further tax rate changes were contained in the Chancellor’s Spring Statement, we did see further traction in the UK corporate road tax for innovators. Consultations were announced to enhance capital funding for RD and innovation with probable tax breaks for business angels and investors in ‘enterprise’. Read more details here…
TaxInsight.SpringStatement.2018Month: March 2018
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Google Tax Update Spring 2018
Anyone who has spoken personally to me about this topic, will recall, depending upon their interest levels, a discussion around the volume of legislation open to HMRC and other international tax authorities to counteract profit erosion (polite term), profit shifting, dividend shifting and premium payments for intellectual property assets, rights and similar. There are both very broad and very narrow avenues of counteractive legislation HMRC may invoke where, simply, a tax ‘advantage’ is perceived (rather than established). This ‘advantage’ may be open to a corporate, individual or unincorporated entity and there are countless tax cases where HMRC have invoked anti-avoidance legislation. Not only that but the enhancement of State Aid anti-competitiveness powers, penalties, advance payment notices et.al give real bite to the proper administration of these laws, long featured in UK tax law.
So I was surprised to read that the Financial Secretary to the Treasury has come up with the idea, aired in an interview with the BBC that a tax on revenue for large multinationals is currently a strongly preferred option. Rt Hon. Mel Stride MP explained that companies operating with large digital platforms should pay their ‘fair share’ of tax. Mr Stride accepted that although the share currently being paid was not perceived to be fair, this did not mean that the companies were not complying with current rules. He agreed that this would mean taxes for such companies would increase. He also recognised that there would have to be special provision for start-up loss-making companies with large turnovers. Although this is a useful insight into Government thinking and a clear indication of the direction of travel, it was not clear how this basis of taxation would dovetail either into existing international arrangements or more broadly would create a level playing field with the taxation of profits for other companies.
To me, a tax on turnover go completely against the base principle of taxation as a tax on ‘profits’ and returns us firmly back into almost Medieval times where various commodity taxes, because lets face it this is sector specific, were legislated by King John introduced an export tax on wool in 1203 and King Edward I introduced taxes on wine in 1275.
Why are we here? It seems clear to me that if HMRC has adequate taxing powers at their disposal, the complexity should be swept away and UK authorities should be given the proper resource to enforce the law. But clearly, witness the Luxembourg government / Amazon cases (still ongoing from 2006), this is timeous and open to frustration and delay.
Reason number two is of course that In June 1628, England’s Parliament passed the ‘Petition of Right’, which among other measures, prohibited the use of taxes without its agreement. This prevented the Crown from creating arbitrary taxes and imposing them upon subjects without consultation, but also means that when civil servants and Ministers ‘come up with an idea’ they are free to roll this out, rather than read and work with the existing legislation and regulations with care and resource the agencies enforcing them. -
2017/18 Budget Changes
The ‘Science Budget’ of December 2017 made a number of improvements to the tax regime for innovative companies. Headlines include a reduced corporate tax rate (19%) and an uplift in the RDEC R & D tax credit for large companies performing R & D with effect from 01 January 2018.
These changes are now passing through Parliament and the Finance (No.2) Bill 2017-19 is substantially enacted The House of Commons has approved the Third Reading of the Finance (No.2) Bill. It now passes to the House of Lords, which is due to consider the Bill on 6 March. Although full enactment will not take place until Royal Assent has been given, being a money bill, the bill cannot be amended by the House of Lords. It is now treated as substantially enacted, which means it will need to be taken into account in certain deferred tax calculations.
Further information can be found here…….https://services.parliament.uk/bills/2017-19/financeno2.html