HMRC has invited substantive comments by the end of October on further draft guidance on the new rules for controlled foreign companies (CFCs) and foreign permanent establishments.
A new TIOPA 2010 Part 9A, inserted by FA 2012 Sch 20 with effect for accounting periods of CFCs beginning on or after 1 January 2013 (subject to transitional rules), comprises 22 chapters. The draft guidance published last week relates to chapters 6, 8, 11-19 and 22.
Last week the CIOT welcomed draft guidance published earlier this year but raised a number of concerns. The tax body asked HMRC to look again at one example, in which a non-UK business with non-UK intellectual property (IP) is acquired by a UK parented group. Certain of the IP acquired is transferred to an existing non-UK company that holds similar IP.
The CIOT said the example suggested that HMRC believed that ‘the mere involvement of UK staff in deciding to place foreign [intellectual property] IP in a foreign IP company amounts to a “main purpose” of that decision being to reduce or eliminate a UK tax liability; notwithstanding that the IP has never given rise to any UK tax liability’.
It added: ‘All the decision has done has meant that a UK tax liability has not been created where none previously existed. It surely cannot be the case that this amounts to an arrangement to “reduce or eliminate” a UK tax liability.’
HMRC has invited substantive comments by the end of October on further draft guidance on the new rules for controlled foreign companies (CFCs) and foreign permanent establishments.
A new TIOPA 2010 Part 9A, inserted by FA 2012 Sch 20 with effect for accounting periods of CFCs beginning on or after 1 January 2013 (subject to transitional rules), comprises 22 chapters. The draft guidance published last week relates to chapters 6, 8, 11-19 and 22.
Last week the CIOT welcomed draft guidance published earlier this year but raised a number of concerns. The tax body asked HMRC to look again at one example, in which a non-UK business with non-UK intellectual property (IP) is acquired by a UK parented group. Certain of the IP acquired is transferred to an existing non-UK company that holds similar IP.
The CIOT said the example suggested that HMRC believed that ‘the mere involvement of UK staff in deciding to place foreign [intellectual property] IP in a foreign IP company amounts to a “main purpose” of that decision being to reduce or eliminate a UK tax liability; notwithstanding that the IP has never given rise to any UK tax liability’.
It added: ‘All the decision has done has meant that a UK tax liability has not been created where none previously existed. It surely cannot be the case that this amounts to an arrangement to “reduce or eliminate” a UK tax liability.’
