Comparative Guides
Welcome to Mondaq Comparative Guides - your comparative global Q&A guide.
Our Comparative Guides provide an overview of some of the key points of law and practice and allow you to compare regulatory environments and laws across multiple jurisdictions.
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Results: 4 Answers
Corporate Tax
5.
Anti-avoidance
5.1
Are there anti-avoidance rules applicable to corporate taxpayers – if so, are these case law (jurisprudence) or statutory, or both?
 
UK
The United Kingdom’s primary source of anti-avoidance rules has derived from case law, but increasingly new tax statutes include wide-ranging anti-avoidance provisions.

For more information about this answer please contact: James Anderson from Skadden, Arps, Slate, Meagher & Flom (UK) LLP
5.2
What are the main ‘general purpose’ anti-avoidance rules or regimes, based on either statute or cases?
 
UK
The United Kingdom has a general anti-abuse rule, which allows Her Majesty’s Revenue and Customs (HMRC) to counter abusive arrangements where it is reasonable, in all the circumstances, to conclude that the obtaining of a tax advantage was (one of) the main purpose(s) of the arrangements. Arrangements are abusive if they cannot reasonably be regarded, in all the circumstances, as a reasonable course of action in relation to the tax provision at issue.

A number of the United Kingdom’s specific corporate tax regimes, such as that applying to loan relationships, contain anti-avoidance provisions that disapply deductions and reliefs where arrangements are entered into with the main purpose of obtaining the deduction or relief in question.

For more information about this answer please contact: James Anderson from Skadden, Arps, Slate, Meagher & Flom (UK) LLP
5.3
What are the major anti-avoidance tax rules (eg, controlled foreign companies, transfer pricing (including thin capitalisation), anti-hybrid rules, limitations on losses or interest deductions)?
 
UK
The United Kingdom has various anti-avoidance rules, including:

  • controlled foreign company rules;
  • diverted profits tax, which applies a tax rate of 25% to diverted profits relating to activity in the United Kingdom, with the aim of taxing entities that are considered to have created tax advantages by using arrangements that lack economic substance or to have exploited gaps in the legislation applicable to permanent establishments in the United Kingdom;
  • an interest barrier regime that limits the deductibility of interest above a de minimis threshold of £2 million to a default ratio of 30% of a group’s earnings before interest, tax, depreciation and amortisation taxable in the United Kingdom, subject to a cap to ensure that the group’s net UK interest expense does not exceed its worldwide net external interest expense. Various elections may be made by a group to maximise the level of available deductions;
  • anti-hybrid rules that seek to counteract the effect of mismatches that involve double deductions for the same expense or deductions for an expense without any corresponding taxable receipt. The rules target mismatches arising from arrangements involving hybrid instruments, hybrid entities and dual-resident entities;
  • limitations on the use of losses (see question 1.6); and
  • a transfer pricing regime (see question 5.5), which is also used to challenge thin capitalisation arrangements.
For more information about this answer please contact: James Anderson from Skadden, Arps, Slate, Meagher & Flom (UK) LLP
5.4
Is a ruling process available for specific corporate tax issues or desired domestic or cross-border tax treatments?
 
UK
Taxpayers and their advisers can apply to HMRC for statutory clearances on the tax treatment of certain specified transactions. HMRC also allows taxpayers to ask for non-statutory clearances in areas where tax legislation does not provide for a statutory clearance application. HMRC will provide non-statutory clearances only where it considers that there is genuine uncertainty in the application of the legislation. Generally, taxpayers can rely on both statutory and non-statutory clearances, provided that the transaction is actually carried out as described in the application and the taxpayer has given full and comprehensive disclosure in its description of the issue.

For more information about this answer please contact: James Anderson from Skadden, Arps, Slate, Meagher & Flom (UK) LLP
5.5
Is there a transfer pricing regime?
 
UK
Yes. Where applicable, the UK system requires companies to include transfer pricing adjustments as part of their self-assessment returns, with penalties for non-compliance.

For more information about this answer please contact: James Anderson from Skadden, Arps, Slate, Meagher & Flom (UK) LLP
5.6
Are there statutory limitation periods?
 
UK
If a compliant tax return including full disclosure of all relevant tax issues is filed by a corporate taxpayer, HMRC may only issue a notice of enquiry into the return within 12 months of the filing.

HMRC is entitled to open a ‘discovery assessment’ after the end of the standard 12-month limitation period if it discovers that additional tax is due from a taxpayer and either:

  • that tax loss resulted from careless or deliberate action by the taxpayer (six-year limitation); or
  • a tax inspector could not have reasonably been expected to be aware of the facts giving rise to the loss of tax at the end of the default 12-month enquiry period (four-year limitation).
For more information about this answer please contact: James Anderson from Skadden, Arps, Slate, Meagher & Flom (UK) LLP