UK

UK signs MLI to prevent tax avoidance

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On 7 June 2017, United Kingdom has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”) in Paris. Total 68 countries, including United Kingdom, signed the Convention, while another 8 jurisdictions have expressed their intent to sign shortly.

The Convention is a key outcome of the OECD Base Erosion and Profit Shifting (BEPS) project, which aims to ensure that multinationals pay tax in the jurisdiction where economic value is created or added.

Angel Gurría, OECD secretary-general, said: “The signing of this multilateral convention marks a turning point in tax treaty history. We are moving towards rapid implementation of the far-reaching reforms agreed under the BEPS Project in more than 1,100 tax treaties worldwide, and radically transforming the way that tax treaties are modified”.

“Beyond saving signatories from the burden of re-negotiating these treaties bilaterally, the new convention will result in more certainty and predictability for businesses, and a better functioning international tax system for the benefit of our citizens” he added.

UK: Draft legislation – Corporate Interest Restriction

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The Corporate Interest Restriction (CIR) legislation was included in Schedule 10 of Finance Bill 2017 but has now been removed. There has been no policy change and the government has announced it will legislate for the provisions at the earliest opportunity in the next Parliament.

A consultation on how the CIR rules should operate was opened in May 2016 and the government’s response to this was published in December 2016.

Regulations are needed to ensure the interaction of the rules with accounting standards does not give an unwarranted restriction on commencement of the CIR. In particular, they deal with timing differences between the group and entity accounts when applying the fixed ratio debt cap and also for the group ratio method for highly leveraged groups.

HM Revenue and Customs has published draft regulations, together with a draft explanatory memorandum, for a period of consultation which will close on 26 May 2017.

UK: Criminal Finances Act 2017

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On 27 April 2017, the Criminal Finances Bill 2017 received Royal Assent. The bill to amend the Proceeds of Crime Act 2002, make provision in connection with terrorist property, create corporate offences for cases where a person associated with a body corporate or partnership facilitates the commission by another person of a tax evasion offence and for connected purposes.

UK: Major tax changes coming into effect in April 2017

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Millions of businesses across the UK will benefit from new tax measures coming into effect in April 2017, including a £9 billion cut in business rates, a further reduction in corporation tax to 19% and a continued fuel duty freeze.

“We’re committed to a business tax regime that supports enterprise and allows our entrepreneurs to take advantage of new and exciting opportunities to grow and create jobs” Financial Secretary to the Treasury, Jane Ellison said. She added that from April 600,000 small businesses will be removed from paying business rates altogether and the new reduced rate of corporation tax will free businesses to invest, grow and create jobs.

Corporation Tax will be reduced from 20% to 19% from 1 April 2017

To support investment, growth and job creation the main rate of corporation tax will be cut again to 17% by 2020, by far the lowest in the G20 and benefiting over 1 million businesses.

Business rates: permanently doubling the Small Business Rate Relief and extending thresholds

From 1 April 2017 properties with a rateable value of £12,000 or less are not required to pay business rates. This means that 600,000 properties will be taken out of business rates. To make sure there’s not a cliff edge, for properties with a rateable value of £12,001 to £15,000, the rate of relief will go down gradually from 100% to 0%.

£435 million to support businesses affected by the business rates relief revaluation

The revaluation of business rates will improve fairness by making sure bills reflect today’s rents and three out of four businesses will see their rates go down or stay the same. Those coming out of Small Business Rates Relief will have their bill increase capped at £600. Funding will enable Local authorities to provide £300 million of discretionary relief to help businesses most affected by the revaluation. From 1 April 2017, pubs with a rateable value up to £100,000 will be able to claim a £1,000 business rates discount for one year.

Rural Rate Relief will increase to 100%

To support businesses critical to rural communities, Rural Rate Relief will increase from 50% to 100% from April 2017, saving businesses up to £2,900 a year. The relief is available to businesses in rural areas with a population under 3,000, where that business is:

  • the only village shop or post office with a rateable value of up to £8,500; or
  • the only public house or petrol station with a rateable value of up to £12,500.

Fuel duty will remain frozen for a 7 year

The fuel duty freeze will provide certainty for businesses and help boost economic growth. A small business with a van can expect to save around £350.

New corporation tax relief for museums and galleries

This relief will encourage museums and galleries to develop creative exhibitions and to display their collections to a wider audience. The rates of relief will be set at 20% for non-touring exhibitions and 25% for touring exhibitions. The relief will be capped at £500,000 of qualifying expenditure per exhibition.

Social Investment Tax Relief limit will increase

Investments raised by a social enterprise through Social Investment Tax Relief will increase to a maximum of £1.5 million over the lifetime of the business for social enterprises aged up to 7 years, from 6 April 2017. This will encourage individuals to support social enterprises and help ensure they have access to new sources of finance. Social investment tax relief encourages individuals to support social enterprises by giving income tax relief for certain types of financial support to those enterprises.

UK: Tax-Free Childcare launches

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From 21 April 2017, working parents in UK can start applying for 2 new childcare schemes launching this year – Tax-Free Childcare which begins immediately and 30 hours free childcare which starts in September. Hence working parents of children, who will be aged below 4 on 31 August 2017, can apply through the new digital childcare service for Tax-Free Childcare and receive a government top-up of £2 for every £8 that they pay into their Tax-Free Childcare account. All parents of disabled children (under 17 years old) will also be able to apply for Tax-Free Childcare from 21 April 2017.

In addition, parents of 2-3 year olds, who will be eligible for a 30 hours free childcare place in September, can apply through the childcare service and start arranging a place with their childcare provider.

The Childcare Choices website provides information on the government’s childcare schemes and explains how parents can pre-register or apply. It also includes a childcare calculator to show eligible families how much they could receive.

For parents across the UK, Tax-Free Childcare will cut childcare costs by up to £2,000 per year for each child under 12 years old, or £4,000 per year for disabled children under 17 years old. The programme will be rolled out through the year, with all eligible parents able to receive it by the end of 2017.

From September, working parents of three and four-year-olds living in England will also be entitled to the new 30 hours free childcare offer, worth around £5,000 per child. Parents will only need to make a single application for both schemes when their children become eligible.

UK: Economic relationship with GCC through PPP

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On 19 April 2017, Dr Liam Fox, the International Trade Secretary of UK opened the UK-GCC Public Private Partnership (PPP) conference to show how UK expertise can maximize the innovation of both public and private sectors to transform their societies.

The conference will bring together ministers and senior representatives from Gulf Cooperation Council (GCC) member states, led by H.E Dr Abdulatif bin Rashid Al Zayani, Secretary-General of the GCC, to look at how PPPs can be used to inform national diversification plans.

From the Qatar National Vision to Saudi Vision 2030, the Gulf is looking for opportunities to diversify and shape their economies to face the challenges of the future, from infrastructure to healthcare and education.

The UK has considerable experience in the area of public private partnerships, which enable the public sector to access the discipline, skills and expertise of the private sector and for many years has been home to one of the world’s largest and most experienced PPP markets. UK companies with a proven track record across a range of sectors will share their expertise at the conference.

The conference also presents the national transformation programs, and the economic diversification plans adopted by the GCC. It also presents the laws enacted by the GCC countries to increase opportunities for foreign investors in the sectors of infrastructure, health, telecommunications, energy, information technology and other sectors. This is in pursuit of strengthening their economies and diversifying their resources.

The conference will also provide a further opportunity to expand and deepen the trading relationship between the UK and the GCC. UK companies export over £30 billion worth of goods and services to the GCC nations every year and thousands of British companies are active across the Gulf, creating jobs and helping to deliver projects from energy expansion, to helping Qatar prepare to host the 2022 World Cup.

UK: New type of limited partnership

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On 6 April 2017, new legislation came into force that introduces a new type of limited partnership. The Order introduces private fund limited partnerships (PFLPs) and amends the 1907 Act, which applies to PFLPs and partners in PFLPs.

New and existing private investment schemes can be structured as limited partnerships. To register as a new PFLP, use Form LP7. An existing limited partnership applying for designation as a PFLP should use Form LP8. Some changes have also been made to the existing forms LP5 and LP6. All new and amended LP forms are available to download.