Question:
New UK tax to hit non-UK companies and groups
Answer:
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
Commencing from 1 April 2015, HM Revenue & Customs (the UK Tax Office, referred to as HMRC) will levy a Diverted Profits Tax (DPT). This is intended to counteract diversion of profits from the UK. It will be levied on companies that seek to avoid setting up a permanent establishment in the UK or that use arrangements or entities which lack economic substance.
Hence:
- If:
- a non-UK company arranges for a company to carry on an activity in the UK for the supply of goods, services or other property, and
- doesn’t create a permanent establishment in the UK, and
- this is done under an arrangement where the tax paid to HMRC is significantly reduced; or
- A UK company uses transactions or entities lacking economic substance in order to exploit the different rates of tax levied by different countries; or
- A non-UK company which does have a UK permanent establishment uses transactions or entities lacking economic substance in order to exploit those different tax rates;
Then the DPT may be levied to recoup the reduced tax collected.
There are exemptions for small to medium entities, companies with limited UK sales and where arrangements are loan transactions only.
The normal rate of DPT is 25% of the diverted profit plus interest whereas the UK corporate tax rate is 20%. While DPT is not self-assessed, companies must notify HMRC within three months of the end of an accounting period if they are potentially liable and don’t meet the exemption conditions.
As expected, these new rules are extremely complicated and you should seek advice if you have extensive dealings with the UK involving the export of goods or services to that country. Complex legislation such as this often catches people unawares.
HMRC is part of a Joint International Tax Shelter Information Collaboration (JITSIC). This is a group of more than 20 tax administrations (including Australia) that collaborate and exchange information on international tax avoidance schemes and structures.
Andrew and Tony Lovett
16 April 2015
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Disclaimer: The information contained in this publication is for guidance only and we believe it is correct at the time of publishing. It should not be relied upon without obtaining professional advice regarding your circumstances. No responsibility for loss occasioned directly or indirectly to any person acting or refraining from acting wholly or partially upon or as a result of the material in this.
