An updated ‘Gateway’ features in HM Treasury’s latest update on CFC reform, published yesterday.
In Controlled Foreign Companies (CFC) reform: a Gateway update, the Treasury and HMRC have invited views on proposed ‘improvements’ to the operation of the Gateway and have set out how the government proposes to respond to feedback on the finance company rules and targeted anti-avoidance rules.
The Gateway has been ‘improved to include an introductory chapter which provides conditions which work on a qualitative basis to allow groups and their foreign subsidiaries to identify more easily whether or not they are within the scope of the rules,’ the Treasury said.
‘This will in most cases enable a company to assess whether its foreign subsidiary’s business profits fall within the scope of the rules or not, without the need for companies to carry out the analysis based on “significant people functions”.’
Stella Amiss, tax partner at PwC, said the CFC rules were now ‘back on track to deliver as promised’.
The inclusion of a new ‘purpose based test’ would allow taxpayers ‘to prove more easily if foreign subsidiaries have been established for commercial reasons, and not for tax advantages’.
She added: ‘There's still an element of subjectivity, and there's no guidance yet on how HMRC will apply the test or what evidence they expect to see from taxpayers to defend their self assessments. There is likely to be much discussion on this in the coming weeks.’
This week’s issue of Tax Journal includes detailed analysis of the CFC reform proposals as they stood before yesterday’s update. The latest version of the draft legislation runs to 76 pages – the previous version had 72 pages.
An updated ‘Gateway’ features in HM Treasury’s latest update on CFC reform, published yesterday.
In Controlled Foreign Companies (CFC) reform: a Gateway update, the Treasury and HMRC have invited views on proposed ‘improvements’ to the operation of the Gateway and have set out how the government proposes to respond to feedback on the finance company rules and targeted anti-avoidance rules.
The Gateway has been ‘improved to include an introductory chapter which provides conditions which work on a qualitative basis to allow groups and their foreign subsidiaries to identify more easily whether or not they are within the scope of the rules,’ the Treasury said.
‘This will in most cases enable a company to assess whether its foreign subsidiary’s business profits fall within the scope of the rules or not, without the need for companies to carry out the analysis based on “significant people functions”.’
Stella Amiss, tax partner at PwC, said the CFC rules were now ‘back on track to deliver as promised’.
The inclusion of a new ‘purpose based test’ would allow taxpayers ‘to prove more easily if foreign subsidiaries have been established for commercial reasons, and not for tax advantages’.
She added: ‘There's still an element of subjectivity, and there's no guidance yet on how HMRC will apply the test or what evidence they expect to see from taxpayers to defend their self assessments. There is likely to be much discussion on this in the coming weeks.’
This week’s issue of Tax Journal includes detailed analysis of the CFC reform proposals as they stood before yesterday’s update. The latest version of the draft legislation runs to 76 pages – the previous version had 72 pages.
